<PAGE>
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-39416
Prospectus
Alloy Online, Inc.
4,581,494 Shares of Common Stock
----------------
This prospectus relates to the resale, from time to time, by the selling
stockholders named in this prospectus, of up to 4,581,494 shares of our common
stock. We issued or will issue these shares to the selling stockholders in
connection with (i) our acquisition of certain interests in businesses owned,
wholly or in part, by certain of the selling stockholders named in this
prospectus, (ii) pursuant to warrants issued to certain of the selling
stockholders in connection with the issuance of our promissory notes in May,
1998, (iii) in connection with our sale of a 19.9% interest in our company to
LDIG ALOY, Inc., a wholly-owned subsidiary of Liberty Digital, Inc. in April
2000, and (iv) the sale of shares of our convertible preferred stock in
November 1998 and February 1999 to certain other of the selling stockholders.
We will not receive any of the proceeds from the sale of the shares sold
pursuant to this prospectus and we will bear certain expenses incident to their
registration. The selling stockholders may sell the shares of common stock
described in this prospectus in a number of different ways and at varying
prices. The price to the public for the shares and the proceeds to the selling
stockholders will depend upon the market price of the securities when sold. See
"Selling Stockholders" and "Plan of Distribution."
Our common stock is traded on the Nasdaq National Market under the trading
symbol "ALOY." On July 27, 2000, the last reported sale price for the common
stock on the Nasdaq National Market was $11.00 per share.
----------------
Investing in our common stock involves risks.
See "Risk Factors" beginning on page 4.
----------------
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement to this prospectus. We have not
authorized anyone else to provide you with different information. Neither the
delivery of this prospectus nor any distribution of the shares of common stock
shall, under any circumstances, create any implication that there has been no
change in our affairs since the date of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
regulator has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. It is a criminal offense to make any
representation to the contrary.
This prospectus is dated July 28, 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PROSPECTUS SUMMARY......................................................... 1
THE OFFERING............................................................... 3
RISK FACTORS............................................................... 4
USE OF PROCEEDS............................................................ 11
SELLING STOCKHOLDERS....................................................... 11
PLAN OF DISTRIBUTION....................................................... 14
LEGAL MATTERS.............................................................. 15
EXPERTS.................................................................... 15
WHERE YOU CAN FIND MORE INFORMATION........................................ 15
</TABLE>
<PAGE>
PROSPECTUS SUMMARY
You must also consult the more detailed financial statements, and notes to
financial statements, incorporated by reference in this prospectus. This
prospectus contains forward-looking statements and actual results could differ
materially from those projected in the forward-looking statements as a result
of certain of the risk factors as outlined in this prospectus.
Our Company
Alloy Online is a leading Web site providing community, content and commerce
to Generation Y, the 56 million boys and girls between the ages of 10 and 24.
Alloy is a leading brand for this influential generation, which the Census
Bureau estimates will grow 19.5% faster than the overall U.S. population and
accounts for more than $250 billion of annual disposable income. Our Web site,
www.alloy.com, is a destination where Generation Y boys and girls can interact,
share information, explore compelling and relevant content and shop. We believe
we have created one of the largest and most vibrant Generation Y communities on
the Internet. This growing community drives merchandise sales, our principal
source of revenues, and positions us to be a leading channel for marketers that
are increasingly looking to the Internet to reach the boys and girls of
Generation Y.
We created our Web site to meet the unique interests and tastes of
Generation Y. Features of our Web site include:
-- Community--we present an appealing environment for Generation Y boys
and girls to share their ideas, express their opinions and develop
their interests through a variety of free interactive services such as
e-mail accounts, instant messaging, personal homepages, chat rooms,
interactive advice forums and message boards;
-- Content--we deliver regularly updated Generation Y-focused content on
subjects such as music, relationships, celebrities, horoscopes,
fashion, entertainment, astrology, gossip and sports; and
-- Commerce--we market products and services in the major Generation Y
categories such as apparel, outerwear, accessories, footwear,
cosmetics, and room furnishings.
Since inception, we have experienced rapid growth. Our revenues, primarily
merchandise sales, have grown from $1.8 million in fiscal 1997 to $31.2 million
in fiscal 1999 and our net losses have increased from $1.9 million to $14.9
million for the same periods. Revenues for the three months ended April 30,
2000 were $7.7 million. We incurred additional net losses of $6.3 million for
the three months ended April 30, 2000. Due to our unique blend of online and
catalog services, in April 2000 our Web site generated approximately 1.3
million unique visitors, according to Media Metrix, Inc., up from approximately
263,000 in April 1999, and approximately 1.7 million users have registered to
receive our weekly electronic magazine, Alloy E-Zine. In August 1997, we
introduced our Alloy direct mail catalog to attract additional visitors to our
Web site, increase revenues and build recognition for the Alloy brand. During
2000, we expect to mail approximately 35 million catalogs to boys and girls of
Generation Y. Through our Web site and catalog distribution, we have developed
a database of approximately 3.5 million Generation Y boys and girls, enabling
us to effectively market to specific segments of our audience.
In addition to our sales of Generation Y-focused merchandise, our community
of Generation Y boys and girls presents an important opportunity for marketers.
Marketers are focusing on Generation Y because of their significant and growing
spending power and tendency to carry brand loyalties established at a young age
into adulthood. As a result, we intend to pursue sponsorship and other revenue
opportunities to connect these marketers and our Generation Y community.
Our objective is to become the leading Generation Y online destination. In
order to achieve this objective, we intend to pursue the following strategies:
1
<PAGE>
-- Maintain Single Brand Focus. We will continue to build Alloy as a
Generation Y lifestyle brand for both boys and girls known for
compelling community, content and commerce. By promoting our single,
unified brand, we maximize the impact of our marketing efforts.
-- Pursue Additional Revenue Opportunities. We intend to generate
sponsorship and other revenues by capitalizing on our growing
Generation Y community.
-- Strengthen Co-ed Community. We will continue to foster dynamic boy-
girl interaction on our Web site. We believe that a strong co-ed focus
is critical to creating a successful Generation Y community and
provides us an important competitive advantage.
-- Expand Internationally. We intend to pursue the significant
opportunities to serve the large and growing international Generation
Y population.
RECENT DEVELOPMENTS
On July 18, 2000, we acquired all of the outstanding capital stock of Kubic
Marketing, Inc. ("Kubic") which, through a subsidiary, operates CCS which has a
print catalog and Web site that reaches over one million teenagers each month.
CCS markets a complete line of action sports (skate and snowboarding) and
inspired clothing, shoes and hard goods from the leading brands in the industry
such as DC, eS, World Industries, Independent, Shorty's and Forum. To fund the
acquisition, we issued 3,267,981 shares of our common stock and a warrant to
purchase additional shares of our common stock in an aggregate amount, if any,
as determined pursuant to the warrant. The warrant will be exercisable, if at
all, for a three month period beginning on July 18, 2001. In addition, we paid
$10,000,000 out of our existing cash reserves to certain lenders of Kubic and
certain of its subsidiaries. We agreed to file a registration statement with
the Securities and Exchange Commission within 30 days of July 18, 2000 with
respect to the shares of common stock that we issued to fund the acquisition.
----------------
Our principal executive offices are located at 151 West 26th Street, 11th
Floor, New York, New York 10001. Our telephone number at that location is (212)
244-4307.
2
<PAGE>
The Offering
<TABLE>
<S> <C>
Common stock offered ................. 4,581,494 shares
Common stock to be outstanding after
the offering......................... 20,896,135 shares
Use of proceeds....................... We will not receive any proceeds from the sale by
the selling holders of our common stock.
Nasdaq National Market symbol for our
common stock......................... Our common stock is traded on the Nasdaq National
Market under the symbol "ALOY"
</TABLE>
The number of shares of common stock to be outstanding after this offering
does not include, as of July 24, 2000, a total of 3,603,865 shares of common
stock, consisting of the following:
. 3,028,552 shares of common stock underlying options outstanding as of
June 8, 2000 at a weighted average exercise price of $15.48 per share;
and
. 575,313 shares of common stock available for issuance under our Restated
1997 Employee, Director and Consultant Stock Plan.
3
<PAGE>
RISK FACTORS
An investment in our common stock involves a high degree of risk. You should
consider the risks and uncertainties and other information in this prospectus
carefully before deciding to buy our common stock. Our business, financial
condition and results of operations could be harmed by any of the following
risks. The trading price of our common stock could decline due to any of the
following risks, and you might lose all or part of your investment. The risks
and uncertainties described below are not the only ones facing our company.
Risk Factors That May Affect Future Results
The following risk factors and other information included in this report
should be carefully considered. The risks and uncertainties described below are
not the only ones we face. Additional risks and uncertainties not presently
known to us or that we deem immaterial may also impair our business operations.
If any of the following risks actually occur, our business, financial condition
or results of operations could be materially and adversely affected.
Risks Related to Our Business
We have a limited operating history upon which to evaluate our potential for
future success. We were incorporated in January 1996 and did not begin to
generate meaningful revenues until August 1997. Accordingly, we have only a
limited operating history upon which you can evaluate our business and
prospects. You must consider the risks and uncertainties frequently encountered
by early stage companies in new and rapidly evolving markets, such as
electronic commerce. If we are unsuccessful in addressing these risks and
uncertainties, our business, results of operations and financial condition will
be materially and adversely affected.
We have a history of losses, and we expect losses for the foreseeable
future. Since our inception in January 1996, we have incurred significant net
losses, resulting primarily from costs related to developing our Web site and
database of Generation Y names, attracting users to our Web site, establishing
the Alloy brand, hiring employees, making strategic acquisitions and becoming a
public company. At January 31, 2000, we had an accumulated deficit of
approximately $23.2 million. Because of our plans to continue to invest heavily
in marketing and promotion, to hire additional employees, to enhance our Web
site and operating infrastructure, and making additional strategic
acquisitions, we expect to incur significant net losses for the foreseeable
future. If our revenue growth is slower than we anticipate or our operating
expenses exceed our expectations, our losses will be significantly greater. We
may never achieve profitability.
Our stock price may be adversely affected by significant fluctuations in our
quarterly operating results. Our revenues for the foreseeable future will
remain primarily dependent on sales of merchandise appearing in our catalogs
and on our Web site, and secondarily on sponsorship and advertising revenues.
We cannot forecast with any degree of certainty the number of visitors to our
Web site, the extent of our merchandise sales or the amount of sponsorship and
advertising revenues.
We expect our operating results to fluctuate significantly from quarter to
quarter. We have already experienced the effects of seasonality on our
merchandise sales, which are generally lower in the first half of each year. We
believe that sponsorship and advertising sales in traditional media, such as
television and radio, generally are lower in the first and third calendar
quarters of each year. If similar seasonal and cyclical patterns emerge in
Internet sponsorship and advertising spending, these revenues may vary
significantly based on these patterns.
Other factors which may cause our operating results to fluctuate
significantly from quarter to quarter include:
. our ability to attract new and repeat visitors to our Web site and
convert them into customers;
. price competition;
4
<PAGE>
. the level of merchandise returns we experience;
. unanticipated cost increases or delays in shipping, transaction
processing and catalog production;
. unanticipated delays or cost increases with respect to product
introductions; and
. the costs, timing and impact of our sales and marketing initiatives.
Because of these and other factors, we believe that quarter-to-quarter
comparisons of our results of operations are not good indicators of our future
performance. If our operating results fall below the expectations of securities
analysts and investors in some future periods, then our stock price may
decline.
Our business will suffer if we fail to keep current with Generation Y
fashion and lifestyle trends. Our continued success will depend on our ability
to keep current with the changing fashion tastes and interests of our
Generation Y customers. If we fail to anticipate, identify or respond to
changes in styles, trends or brand preferences of our customers, we are likely
to experience reduced revenues from merchandise sales. Moreover, the Alloy
brand could be eroded by misjudgments in merchandise selection or a failure to
keep our community and content current with the evolving preferences of our
audience. These events would likely reduce the number of visitors to our Web
site and limit opportunities for sponsorship and advertising sales. As a
consequence of these developments, our business would suffer.
Our planned online and traditional marketing campaigns may not attract
sufficient additional visitors to our Web site or may detract from our image.
We plan to continue to pursue aggressive marketing campaigns online and in
traditional media to promote the Alloy brand and attract an increasing number
of visitors to our Web site. We believe that maintaining and strengthening the
Alloy brand will be critical to the success of our business. This investment in
increased marketing carries with it significant risks, including the following:
. Our advertisements may not properly convey the Alloy brand image, or may
even detract from our image. Unlike advertising on our Web site which
gives us immediate feedback and allows us promptly to adjust our
messages, advertising in print and broadcast media is less flexible.
These advertisements typically take longer and cost more to produce and
consequently have longer run times. If we fail to convey the optimal
message in these advertising campaigns, the impact may be more lasting
and more costly to correct.
. Even if we succeed in creating the right messages for our promotional
campaigns, these advertisements may fail to attract new visitors to our
Web site at levels commensurate with their costs. We may fail to choose
the optimal mix of television, radio, print and other media to cost-
effectively deliver our message. Moreover, if these efforts are
unsuccessful, we will face difficult and costly choices in deciding
whether and how to redirect our marketing dollars.
We rely heavily on third parties for essential business operations and
disruptions or failures in service may adversely affect our ability to deliver
goods and services to our customers.
General. We depend on third parties for important aspects of our business,
including:
. Internet access;
. development of software for new Web site features;
. content; and
. telecommunications.
We have limited control over these third parties, and we are not their only
client. We may not be able to maintain satisfactory relationships with any of
them on acceptable commercial terms. Further, we cannot be certain that the
quality of products and services that they provide may remain at the levels
needed to enable us to conduct our business effectively. Many of our agreements
with technology and content providers are on very favorable terms that do not
include license fees, but instead provide for revenue sharing. We may not be
able to renew these agreements on similar terms.
5
<PAGE>
Reliance on OneSoft Corporation. We rely heavily on OneSoft Corporation to
maintain and operate our Web site in its facilities in Annandale, Virginia.
This system's continuing and uninterrupted performance is critical to our
success. Growth in the number of users accessing our Web site may strain its
capacity, and we rely on OneSoft to upgrade our system's capacity in the face
of this growth. OneSoft also provides our connection to the Internet. Sustained
or repeated system failures or interruptions of our Web site connection
services would reduce the attractiveness of our Web site to customers and
advertisers and could therefore have a material and adverse effect on our
business.
Reliance on Fulfillment Services Providers. We switched our fulfillment
services provider in May, 2000. We rely heavily on our third party fulfillment
services provider for the performance of order processing, order fulfillment,
customer service and shipping. Disruptions or delays in these services could
discourage customers from ordering from us in the future and could therefore
have a material and adverse effect on our business. Service provision from our
new fulfillment service provider is untested and there is no assurance that
such service will be satisfactory. If our new fulfillment service provider does
not perform as expected, results of our business operations and financial
condition will be materially and adversely affected.
Our management is new and may have difficulty managing our expected growth.
In order to execute our business plan, we must continue to grow significantly.
This growth will strain our personnel, management systems and resources. To
manage our growth, we must implement operational and financial systems and
controls and recruit, train and manage new employees. Some key members of our
management have only recently been hired. These individuals have had little
experience working with our management team. We cannot be certain that we will
be able to integrate new executives and other employees into our organization
effectively. If we do not manage growth effectively, our business, results of
operations and financial condition will be materially and adversely affected.
We depend on our key personnel to operate our business, and we may not be
able to hire enough additional management and other personnel as our business
grows. Our performance is substantially dependent on the continued services and
on the performance of our executive officers and other key employees,
particularly Matthew C. Diamond, our Chief Executive Officer, James K. Johnson,
Jr., our Chief Operating Officer and Samuel A. Gradess, our Chief Financial
Officer. The loss of the services of any of our executive officers could
materially and adversely affect our business. Additionally, we believe we will
need to attract, retain and motivate talented management and other highly
skilled employees to be successful. Competition for employees that possess
knowledge of both the Internet industry and the Generation Y market is intense.
We may be unable to retain our key employees or attract, assimilate and retain
other highly qualified employees in the future.
Intense competition from Internet- and catalog-based businesses may decrease
our market share, revenues and gross margins and cause our stock price to
decline. We face intense competition in electronic commerce, catalog sales and
online services. Our Web site and Alloy catalog compete for Generation Y
customers with traditional department store retailers, catalog retailers,
direct marketers, specialty apparel and accessory retailers and discount
retailers. This competition is likely to increase because it is not difficult
to enter the online commerce market, and current and new competitors can launch
Web sites at relatively low cost. Competition could result in price reductions
for our products and services, reduced margins or loss of market share.
Consolidation within the online commerce industry may also increase
competition.
The market for Internet users and community services is highly competitive
and rapidly evolving. Competition for users and advertisers is intense and is
expected to increase significantly. There are no substantial barriers to entry
in these markets. Competition could result in fewer visitors to our Web site
and reduced sponsorship and advertising revenues.
Many of our existing competitors, as well as potential new competitors, have
longer operating histories, greater brand recognition, larger customer user
bases and significantly greater financial, technical and marketing resources
than we do. If we fail to compete effectively, our business will be materially
and adversely affected and our stock price will decline.
6
<PAGE>
We may fail to successfully manage and use our databases of Web site users
and customers. An important component of our business model involves the use of
our lists of catalog requesters and Web site registrants to more effectively
target direct marketing messages. We depend upon personal information we
collect from our Web site users for data we need to create direct mailing and
e-mailing lists, tailor our Web site offerings to the tastes of our Generation
Y users and attract marketers to our Web site. We must continuously expand and
update our lists to identify new, prospective Generation Y customers. Names
derived from purchased or rented lists may generate lower response rates and,
therefore, a lower return on our investment in these lists. We must also
continually develop and refine our techniques for segmenting these lists to
maximize their usefulness to us and our marketing partners. If we fail to
capitalize on these important business assets, our business model will be less
successful. In addition, laws or regulations that could impair our ability to
collect user names and other information on our Web site may adversely affect
our business. For example, a recently enacted federal law limits our ability to
collect personal information from Web site visitors who may be under age 13.
We must effectively manage our vendors to minimize inventory risk and
maintain our margins. In order to fulfill our orders, we depend upon our
vendors to produce sufficient quantities of products according to schedule. We
may maintain high inventory levels in some categories of merchandise in an
effort to maintain satisfactory fulfillment rates for our customers. This may
expose us to risk of excess inventories and outdated merchandise, which could
have a material and adverse effect on our business. If we underestimate
quantities and vendors cannot restock, then we may disappoint customers who may
turn to our competitors. We also negotiate with our vendors to get the best
quality available at the best prices and increase our profit margins. Our
failure to be able to manage our vendors effectively would adversely affect our
operating results.
We may fail to establish and maintain strategic relationships with other Web
sites to increase numbers of web site users and increase our revenues. We
intend to establish numerous strategic alliances with popular Web sites to
increase the number of visitors to our Web site. There is intense competition
for placements on these sites, and we may not be able to enter into these
relationships on commercially reasonable terms or at all. Even if we enter into
strategic alliances with other Web sites, they themselves may not attract
significant numbers of users. Therefore, our site may not receive additional
users from these relationships. Moreover, we may have to pay significant fees
to establish these relationships. Our inability to enter into new distribution
relationships or strategic alliances and expand our existing ones could have a
material and adverse effect on our business.
We may not be able to adapt as Internet technologies and customer demands
continue to evolve. To be successful, we must adapt to rapidly changing
Internet technologies and continually enhance the features and services
provided on our Web site. We could incur substantial, unanticipated costs if we
need to modify our Web site, software and infrastructure to incorporate new
technologies demanded by our audience. We may use new technologies
ineffectively or we may fail to adapt our Web site, transaction-processing
systems and network infrastructure to user requirements or emerging industry
standards. If we fail to keep pace with the technological demands of our Web-
savvy audience for new services, products and enhancements, our users may not
use our Web site and instead use those of our competitors.
We may not be able to protect and enforce our trademarks, Web addresses and
intellectual property rights. Our Alloy brand and our Web address,
www.alloy.com, are critical to our success. We have registered the "Alloy"
name, along with other trademarks with the U.S. Patent and Trademark Office.
Applications for the registration of our other trademarks and service marks are
currently pending. We cannot guarantee that any of these trademark applications
will be granted. In addition, we may not be able to prevent third parties from
acquiring Web addresses that are confusingly similar to our addresses, which
could harm our business.
We may experience fluctuations in postage and paper expenses. Catalog
production and distribution expenses represented approximately 47% of our total
revenues in the fiscal years ended January 31, 1998 and 1999, and approximately
37% of our total revenues in the fiscal year ended January 31, 2000. A
substantial portion of these expenses have been attributable to paper and
postage costs. Material increases in paper or catalog delivery costs could have
a material and adverse effect on our business.
7
<PAGE>
We may be unable to identify and successfully integrate potential
acquisitions and investments. We have acquired three businesses and we may
acquire or make investments in other complementary businesses, products,
services or technologies on an opportunistic basis when we believe they will
assist us in carrying out our business strategy. We could have difficulty in
assimilating personnel and operations of the three businesses we have acquired
and may have similar problems in future acquisitions. In addition, the key
personnel of the acquired company may decide not to work for us. If we acquire
products, services or technologies, we could have difficulty in assimilating
them into our operations. These difficulties could disrupt our ongoing
business, distract our management and employees and increase our expenses.
Furthermore, we may have to incur debt or issue equity securities to pay for
any future acquisitions, the issuance of which could be dilutive to our
existing shareholders.
We are vulnerable to new tax obligations that could be imposed on online
commerce transactions. We do not expect to collect sales or other similar taxes
in respect of shipments of goods into most states. However, various states or
foreign countries may seek to impose sales tax obligations on us and other
online commerce and direct marketing companies. A number of proposals have been
made at the state and local levels that would impose additional taxes on the
sale of goods and services through the Internet. These proposals, if adopted,
could substantially impair the growth of online commerce and cause purchasing
through our Web site to be less attractive to customers as compared to
traditional retail purchasing. The United States Congress has passed
legislation limiting for three years the ability of the states to impose taxes
on Internet-based transactions. Failure to renew this legislation could result
in the imposition by various states of taxes on online commerce. Further,
states have attempted to impose sales taxes on catalog sales from businesses
such as ours. A successful assertion by one or more states that we should have
collected or be collecting sales taxes on the sale of products could have a
material and adverse effect on our business.
Risks Related to the Internet Industry
We are dependent on the continued development of the Internet
infrastructure. Our industry is new and rapidly evolving. Our business would be
adversely affected if Internet usage and online commerce does not continue to
grow. Internet usage may be inhibited for a number of reasons, including:
. inadequate Internet infrastructure;
. inconsistent quality of service; or
. unavailability of cost-effective, high-speed service.
If Internet usage grows, the Internet infrastructure may not be able to
support the demands placed on it by this growth, or its performance and
reliability may decline. In addition, Web sites, including ours, have
experienced a variety of interruptions in their service as a result of outages
and other delays occurring throughout the Internet network infrastructure. If
these outages or delays frequently occur in the future, Web usage, including
usage of our Web site, could grow slowly or decline.
Our long-term success depends on the development of the online commerce
market, and on the increased online purchasing by Generation Y, both of which
are uncertain. Our future revenues and profits substantially depend upon the
widespread acceptance and use of the Internet as an effective medium of
commerce by consumers. Demand for recently introduced services and products
over the Internet and online services is subject to a high level of
uncertainty. The development of the Internet and online services as a viable
commercial marketplace is subject to a number of factors, including the
following:
. online commerce is at an early stage and buyers may be unwilling to
shift their purchasing from traditional vendors to online vendors;
. insufficient availability of telecommunications services or changes in
telecommunications services could result in slower response times; and
8
<PAGE>
. the inability of our target demographic group to have regular access to
a credit card could cause a slower growth in online commerce for us
than for companies targeting consumers in general.
Adoption of the Internet as an advertising medium is uncertain. The growth
of Internet sponsorships and advertising requires validation of the Internet
as an effective advertising medium. This validation has yet to fully occur. In
order for us to generate sponsorship and advertising revenues, marketers must
direct a significant portion of their budgets to the Internet and,
specifically, to our Web site. To date, sales of Internet sponsorships and
advertising represent only a small percentage of total advertising sales.
Also, technological developments could slow the growth of sponsorships and
advertising on the Internet. For example, widespread use of filter software
programs that limit access to advertising on our Web site from the Internet
user's browser could reduce advertising on the Internet. Our business,
financial condition and operating results would be adversely affected if the
market for Internet advertising fails to develop or develops slower than
expected.
Breaches of security on the Internet may slow the growth of online commerce
and Web advertising and subject us to liability. The need to securely transmit
confidential information (such as credit card and other personal information)
over the Internet has been a significant barrier to online commerce and
communications over the Web. Any well-publicized compromise of security could
deter more people from using the Web or from using it to conduct transactions
that involve transmitting confidential information, such as purchases of goods
or services. Furthermore, decreased traffic and online sales as a result of
general security concerns could cause advertisers to reduce their amount of
online spending. To the extent that our activities or the activities of third-
party contractors involve the storage and transmission of information, such as
credit card numbers, security breaches could disrupt our business, damage our
reputation and expose us to a risk of loss or litigation and possible
liability. We could be liable for claims based on unauthorized purchases with
credit card information, impersonation or other similar fraud claims. Claims
could also be based on other misuses of personal information, such as for
unauthorized marketing purposes. We may need to spend a great deal of money
and use other resources to protect against the threat of security breaches or
to alleviate problems caused by security breaches.
We could face liability for information displayed on and communications
through our Web site. We may be subjected to claims for defamation,
negligence, copyright or trademark infringement or based on other theories
relating to the information we publish on our Web site. These types of claims
have been brought, sometimes successfully, against Internet companies as well
as print publications in the past. Based on links we provide to other Web
sites, we could also be subjected to claims based upon online content we do
not control that is accessible from our Web site. Claims may also be based on
statements made and actions taken as a result of participation in our chat
rooms or as a result of materials posted by members on bulletin boards at our
Web site. We also offer e-mail services, which may subject us to potential
risks, such as:
. liabilities or claims resulting from unsolicited e-mail;
. lost or misdirected messages;
. illegal or fraudulent use of e-mail; or
. interruptions or delays in e-mail service.
These claims could result in substantial costs and a diversion of our
management's attention and resources.
Efforts to regulate or eliminate the use of mechanisms which automatically
collect information on users of our Web site may interfere with our ability to
target our marketing efforts and tailor our Web site offerings to the tastes
of our users. Web sites typically place a tracking program on a user's hard
drive without the user's knowledge or consent. These programs automatically
collect data on anyone visiting a Web site. Web site operators use these
mechanisms for a variety of purposes, including the collection of data derived
from users' Internet activity. Most currently available Web browsers allow
users to elect to remove these mechanisms at any time or to prevent this
information from being stored on their hard drive. In addition, some
commentators,
9
<PAGE>
privacy advocates and governmental bodies have suggested limiting or
eliminating the use of these tracking mechanisms. Any reduction or limitation
in the use of this software could limit the effectiveness of our sales and
marketing efforts.
We could face additional burdens associated with government regulation of
and legal uncertainties surrounding the Internet. Any new law or regulation
pertaining to the Internet, or the application or interpretation of existing
laws, could increase our cost of doing business or otherwise have a material
and adverse effect on our business, results of operations and financial
condition. Laws and regulations directly applicable to Internet communications,
commerce and advertising are becoming more prevalent. The law governing the
Internet, however, remains largely unsettled, even in areas where there has
been some legislative action. It may take years to determine whether and how
existing laws governing intellectual property, copyright, privacy, obscenity,
libel and taxation apply to the Internet. In addition, the growth and
development of online commerce may prompt calls for more stringent consumer
protection laws, both in the United States and abroad. We also may be subject
to future regulation not specifically related to the Internet, including laws
affecting direct marketers.
Risks relating to our common stock
We do not anticipate declaring and paying cash dividends on our common stock
at any time in the foreseeable future.
We have never declared cash dividends on our common stock and we do not
anticipate declaring and paying cash dividends on our common stock at any time
in the foreseeable future. The decision whether to apply legally available
funds to the payment of dividends on our common stock will be made by our board
from time to time in the exercise of its business judgment, taking into
account, among other things, results of operations and financial condition, any
then existing or proposed commitments by us for the use of available funds, and
our obligations with respect to the holders of any then outstanding
indebtedness or preferred stock. In addition, we may in the future issue debt
securities or preferred stock or enter into loan agreements or other agreements
that restrict the payment of dividends on, and repurchases of, our common
stock.
Safe Harbor Provision
Statements in this prospectus expressing our expectations and beliefs
regarding our future results or performance are forward-looking statements that
involve a number of substantial risks and uncertainties. When used in this
prospectus, the words "anticipate," "believe," "estimate," "expect" and
"intend" and similar expressions as they relate to the Company or its
management are intended to identify such forward-looking statements. Our actual
future results may differ significantly from those stated in any forward-
looking statements. These statements include statements regarding our ability
to increase revenues, generate multiple revenue streams, increase visitors to
our Web Site and build customer loyalty; our ability to develop our sales and
marketing teams; our ability to capitalize on our sales and marketing efforts;
our ability to capitalize on our promotions, sponsorship, advertising and other
revenue opportunities; our ability to build the Alloy and CCS brand names and
develop our on-line community; our ability to develop commercial relationships
with advertisers; our and CCS' Web sites appeal to marketers and users; our
ability to meet anticipated cash needs for working capital and capital
expenditures for the next 24 months; our ability to enhance our infrastructure
technology, transaction-processing and automation capabilities of our Web Site;
our ability to increase the efficiency of our supply chain and fulfillment
system; and our ability to expand into international markets.
Such statements are based upon management's current expectations that are
subject to risks and uncertainties that could cause actual results to differ
materially from those set forth in or implied by the forward-looking
statements. We caution that there can be no assurance that actual results or
business conditions will not differ materially from those projected or
suggested in such forward-looking statements as a result of various factors,
including but not limited to the following: our expected future losses; our
planned sales and marketing campaigns may not attract sufficient additional
visitors to our Web site; our planned sales and
10
<PAGE>
marketing campaigns may not increase our revenues or generate additional
revenue streams; we lack experienced management and personnel; we may fail to
further develop our internal sales and marketing organization to attract
promotions, sponsorship, advertising and other revenues; we may not be able to
adapt as internet technologies and customer demands continue to evolve;
increased competition in the online commerce market would reduce our revenues;
and we may experience business disruptions with third parties that provide us
with essential business operations.
As a result of the foregoing and other factors, we may experience material
fluctuations in future operating results on a quarterly or annual basis which
could materially and adversely affect our business, financial condition,
operating results and stock price. We are not under any duty to update any of
the forward-looking statements in this report to conform these statements to
actual results, unless required by law. For further information, refer to the
more specific risks and uncertainities discussed above and throughout this
prospectus.
USE OF PROCEEDS
This prospectus relates to shares of our common stock being offered and sold
for the accounts of the selling stockholders named in this prospectus. We will
not receive any proceeds from the sale of common stock by the selling
stockholders in this offering, but will pay certain expenses related to the
registration of the shares of the Common stock. See "Plan of Distribution."
SELLING STOCKHOLDERS
Based upon information available to us as of July 21, 2000, the following
table sets forth the name of each selling stockholder, and with respect to each
selling stockholder, the number of shares owned, the number of shares
registered by this prospectus and the number and percent of outstanding shares
that will be owned after the sale of the registered shares, assuming all of the
shares are sold. The information provided in the table and discussions below
with respect to each selling stockholder has been obtained from that selling
stockholder. Except as otherwise disclosed below, none of the selling
stockholders has, or within the past three years has had, any position, office
or other material relationship with us. Because the selling stockholders may
sell all or some portion of the shares of common stock owned by them, we cannot
estimate the number of shares of common stock that will be beneficially owned
by the selling stockholders after this Offering. In addition, the selling
stockholders may have sold, transferred or otherwise disposed of, or may sell,
transfer or otherwise dispose of, at any time or from time to time since the
date on which they provided the information regarding the shares beneficially
owned by them, all or a portion of the shares of common stock beneficially
owned by them in transactions exempt from the registration requirements of the
Securities Act of 1933.
Beneficial ownership is determined in accordance with Rule 13d-3(d)
promulgated by the Commission under the Securities Exchange Act of 1934. Unless
otherwise noted, each person or group identified possesses sole voting and
investment power with respect to the shares, subject to community property laws
where applicable.
<TABLE>
<CAPTION>
Shares Beneficially % of Class after
Owned Prior to the Shares Being Completion of this
Name Offering Offered (1) Offering (2)
---- ------------------- ------------ ------------------
<S> <C> <C> <C>
LDIG ALOY, Inc.(3)........ 2,922,694 2,922,694 14.0%
Ann Easton Brashares (4).. 107,589 107,589 *
Altman Buckeye Company II
(5)...................... 6,308 6,308 *
Sylvia Altman Irrevocable
Trust (5)................ 6,308 6,308 *
Bayview Partners (5)...... 88,316 88,316 *
Joel Berman............... 840 840 *
Johathan E. Biel.......... 2,057 2,057 *
Brand Equity Ventures I,
L.P. (6)................. 794,159 794,159 3.8%
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially % of Class after
Owned Prior to the Shares Being Completion of this
Name Offering Offered (1) Offering (2)
---- ------------------- ------------ ------------------
<S> <C> <C> <C>
John Keith Bright............ 887 887 *
Barry David Burchell (7)..... 2,003 2,003 *
Candace Cameron Bure......... 2,571 2,571 *
Amy Kathleen Diamond (5)(7).. 6,412 630 *
David M. Diamond (5)......... 20,480 4,416 *
J. Edward Diamond............ 215,000 14,968 1.0%
Joseph Edward Diamond (5).... 21,366 1,366 *
Joy Elizabeth Diamond (5).... 630 630 *
Michael Kramer Diamond (5)... 6,412 630 *
Robert David Diamond (5)..... 630 630 *
Stephen A. Ehrlich........... 688 688 *
Elle Productions, Inc........ 720 720 *
Rick Fishel and Jennifer
Fishel...................... 411 411 *
Peter M. Graham (8).......... 161,466 63,084 *
Guiness Flight Trustees as
Trustees of the
Pompano Trust (5) .......... 12,616 12,616 *
Andrew Joseph Hadel.......... 3,014 3,014 *
Steven R. & Lynn M. Kanner
(5)......................... 18,925 18,925 *
Susanna L. Kim (9)........... 18,023 18,023 *
Jonathan Furth Koch.......... 18,506 18,506 *
Stewart A. Kohl.............. 1,376 1,376 *
Ronald J. Kramer (5)......... 3,153 3,153 *
Ladenburg Thalmann & Co.,
Inc. (5)(10)................... 25,299 25,299 *
Barbara L. Landes............ 841 841 *
Robert H. Landes............. 64,953 64,953 *
Wendy R. Landes.............. 2,558 2,558 *
Seth E. Lemler............... 1,119 1,119 *
David and Amy Levere......... 2,845 2,845 *
Michael S. Liss.............. 3,416 3,416 *
The LLZ 1997 Trust (5)(11)...... 63,083 63,083 *
Marina Corporate LLC......... 56,198 14,049 *
Paul M. Millman.............. 247 247 *
Leslie N. Morgenstein (4).... 107,589 107,589 *
Barry Newburger.............. 5,900 5,900 *
Roman Joseph Oleynik &
Lorraine Allen
Oleynik as Trustees for the
Oleynik Trust............... 865 865 *
James Richard Palczynski
(5)......................... 2,237 2,237 *
Kevin J. Rigby (5)........... 99,985 12,616 *
Michael E. Rosen............. 688 688 *
Philip Rosen................. 3,864 3,864 *
Michael Edward Rothbard (5).. 212,616 12,616 1.0%
Richard J. Rudolph (5)....... 12,616 12,616 *
William Edward Shisler (5)... 103,351 12,616 *
Gary David Sirak (5)......... 34,170 5,046 *
Stanford L. Sirak (5)........ 31,170 5,046 *
Stonebridge International
Investments Ltd. (5) ....... 50,466 50,466 *
Jonathan Taylor Thomas....... 5,142 5,142 *
Neil I. Vogel (5)(7)(12)..... 59,573 3,173 *
Maureen Whelan (7)........... 2,003 2,003 *
Daniel Michael Zilkha Trust
(5)......................... 63,083 63,083 *
</TABLE>
12
<PAGE>
--------
* Less than 1%
(1) Sales of such shares may also be restricted pursuant to agreements entered
into by us with each such holder.
(2) Based on 20,896,135 shares of our common stock outstanding on July 24,
2000.
(3) Lee Masters, a member of our board of directors, is the President and
Chief Executive Officer of LDIG ALOY, Inc. and its sole stockholder,
Liberty Digital, Inc. Mr. Masters disclaims beneficial ownership of the
shares held by LDIG ALOY, Inc., except to the extent of his pecuniary
interest therein.
(4) Current employee of 17th Street Productions, Inc., an indirect, wholly-
owned subsidiary of the Company.
(5) Consists of shares of common stock issuable upon exercise of warrants.
(6) David Yarnell, a member of our board of directors, is a managing member of
Brand Equity Partners I, LLC, which is the sole general partner of Brand
Equity Ventures I, L.P. Mr. Yarnell disclaims beneficial ownership of
shares held by or through Brand Equity Ventures I, L.P. except to the
extent of his pecuniary interest arising from his interest as a managing
member of the general partner of Brand Equity Ventures I, LP. David
Yarnell has 10,000 shares subject to current exercisable options in
connection with his role as director.
(7) Current employee of the Company.
(8) Consists of (a) 63,084 shares subject to currently exercisable warrants
held by Mr. Graham, (b) 63,083 shares subject to a currently exercisable
warrant held by The LLZ 1997 Trust, (c) 25,299 shares subject to a
currently exercisable warrant held by Ladenburg Thalmann & Co. Inc.; and
(e) 10,000 shares subject to currently exercisable options held by Mr.
Graham individually. Mr. Graham is a trustee of The LLZ 1997 Trust and
shares voting and investment power over its shares. However, Mr. Graham
has no pecuniary interest in the trust's shares and therefore expressly
disclaims beneficial ownership of these shares. Mr. Graham is a principal
of Ladenburg Thalmann & Co. Inc. Mr. Graham expressly disclaims beneficial
ownership of the shares held by Ladenburg Thalmann & Co. Inc., except to
the extent of his pecuniary interest therein.
(9) Former employee of the Company.
(10) Peter Graham, a member of our board of directors, is a principal of
Ladenburg Thalmann & Co. Inc. Mr. Graham expressly disclaims beneficial
ownership of the shares held by Ladenburg Thalmann & Co. Inc., except to
the extent of his pecuniary interest therein.
(11) Peter Graham, a member of our board of directors, is a trustee of the LLZ
1997 Trust and shares voting and investment power over its shares.
However, Mr. Graham has no pecuniary in the Trust's shares and therefore
expressly disclaims beneficial ownership of these shares.
(12) Includes 56,400 shares subject to currently exercisable options.
13
<PAGE>
PLAN OF DISTRIBUTION
We are registering the shares offered under this prospectus on behalf of the
selling stockholders. As used in this prospectus, "selling stockholder"
includes donees, pledgees, transferees or other successors-in-interest selling
shares received after the date of this prospectus from the named selling
stockholders as a gift, pledge, partnership distribution or other non-sale
related transfer. All costs, expenses and fees in connection with the
registration of the shares offered hereby will be borne by us. Brokerage
commissions and similar selling expenses, if any, attributable to the sale of
shares will be borne by the selling stockholders, subject to reimbursement as
described below.
Sales of shares may be effected by the selling stockholders from time to
time in one or more types of transactions (which may include block
transactions) on the Nasdaq National Market, in the over-the-counter market, in
negotiated transactions otherwise than on the Nasdaq National Market or in the
over-the-counter market, through put or call options transactions relating to
the shares, through short sales of shares, or a combination of such methods of
sale, at market prices prevailing at the time of sale or at negotiated prices.
Such transactions may or may not involve brokers or dealers. Each of the
selling stockholders has advised us that they have not, as of the date of this
Prospectus, entered into any agreements, understandings or arrangements with
any underwriters or broker-dealers regarding the sale of their shares and that
no underwriter or coordinating broker is acting in connection with the proposed
sale of shares by the selling stockholder.
In connection with the sale of shares, each selling stockholder may: enter
into hedging transactions with brokers, dealers or others, who in turn may
engage in short sales of the shares in the course of hedging the positions they
assume; sell short or deliver shares to close out positions; or loan shares to
brokers, dealers or others that may in turn sell such shares.
The selling stockholders may effect transactions by selling shares directly
to purchasers or to or through broker-dealers, which may act as agents or
principals. Those broker-dealers may receive compensation in the form of
discounts, concessions, or commissions from the selling stockholders and/or the
purchasers of shares for whom such broker-dealers may act as agents or to whom
they sell as principal, or both (that compensation as to a particular broker-
dealer might be in excess of customary commissions).
Each selling stockholder and any broker-dealers that act in connection with
the sale of shares may be deemed to be an "underwriter" within the meaning of
Section 2(11) of the Securities Act, and any commissions received by those
broker-dealers and any profit on the resale of the shares sold by them while
acting as principals might be deemed to be underwriting discounts or
commissions under the Securities Act.
Because each selling stockholder may be deemed to be an "underwriter" within
the meaning of Section 2(11) of the Securities Act, each selling stockholder
will be subject to the prospectus delivery requirements of the Securities Act.
We have informed the selling stockholders that the anti-manipulative provisions
of Regulation M promulgated under the Exchange Act may apply to their sales in
the market.
Each selling stockholder also may resell all or a portion of the shares in
open market transactions in reliance upon Rule 144 under the Securities Act,
provided he meets the criteria and conforms to the requirements of Rule 144.
Upon notification to us by a selling stockholder that any material
arrangement has been entered into with a broker-dealer for the sale of shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act. That supplement will disclose
. the name of the selling stockholder and of the participating broker-
dealer(s),
. the number of shares involved,
. the price at which such shares were sold,
14
<PAGE>
. the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable,
. that such broker-dealer(s) did not conduct any investigation to verify
the information set out or incorporated by reference in this
prospectus, and
. other facts material to the transaction.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
Alloy Online, Inc. by Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Certain attorneys at Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
beneficially own an aggregate of 3,200 shares of our common stock.
EXPERTS
The financial statements of Alloy Online, Inc. and subsidiaries as of
January 31, 2000 and 1999, have been incorporated by reference herein in
reliance upon the report of Arthur Andersen LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
Firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's Web site at http://www.sec.gov. You may also read and
copy any document we file at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. You may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
Our Common stock is listed and traded on the Nasdaq National Market under the
symbol "ALOY."
This prospectus, which constitutes a part of a registration statement on
Form S-3 filed by us with the SEC under the Securities Act of 1933, omits
certain of the information set forth in the registration statement.
Accordingly, you should refer to the registration statement and its exhibits
for further information with respect to us and our Common stock. Copies of the
registration statement and its exhibits are on file at the offices of the SEC.
Furthermore, statements contained in this prospectus concerning any document
filed as an exhibit are not necessarily complete and, in each instance, we
refer you to the copy of the document filed as an exhibit to the registration
statement.
The SEC allows us to "incorporate by reference" the information we file with
the SEC, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we file later
with the SEC will automatically update and supersede the information in this
prospectus. We incorporate by reference the documents listed below and any
future filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934 until the selling stockholders sell all of
the shares offered by this prospectus:
. Quarterly Report on Form 10-Q for the fiscal quarter ended April 30,
2000, filed on June 14, 2000;
. Annual Report on Form 10-K for the fiscal year ended January 31, 2000,
filed on May 1, 2000;
. Definitive Proxy Statement, filed on May 30, 2000; and
. the description of the our Common stock contained in the Registration
Statement on Form S-1 declared effective by the Commission on May 13,
1999, including any amendment or report filed for the purpose of
updating such description.
15
<PAGE>
You may request a copy of any of these filings at no cost, by writing or
telephoning us at the following address:
Alloy Online, Inc.
151 West 26th Street, 11th Floor
New York, NY 10001
(212) 244-4307
Attention: Tim Reusing, Esq.
16
