<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------ ------
Commission file number: 0-26023
ALLOY ONLINE, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-3310676
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
151 West 26th Street, 11th floor, New York, NY 10001
(Address of Principal Executive Offices)
(Zip Code)
Registrant's telephone number, including area code: (212) 244-4307
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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of September 8, 2000, the registrant had 20,901,110 shares of common
stock, $.01 par value per share, outstanding. All share numbers referenced in
this quarterly report reflect a 1.128-for-1 stock split of all outstanding
shares of Common Stock effected by Alloy Online, Inc. on May 13, 1999.
<PAGE>
ALLOY ONLINE, INC.
CONTENTS
PART I - FINANCIAL INFORMATION PAGE NO.
--------
Item 1. Financial Statements
Consolidated Condensed Balance Sheets, July 31, 2000 (unaudited)
and January 31, 2000.............................................. 3
Consolidated Condensed Statements of Operations, Three Months Ended
July 31, 2000 (unaudited) and July 31, 1999 (unaudited)........... 4
Consolidated Condensed Statements of Comprehensive Loss,
Three Months Ended July 31, 2000 (unaudited) and July 31, 1999
(unaudited)....................................................... 5
Consolidated Condensed Statements of Operations, Six Months Ended
July 31, 2000 (unaudited) and July 31, 1999 (unaudited)........... 6
Consolidated Condensed Statements of Comprehensive Loss,
Six Months Ended July 31, 2000 (unaudited) and July 31, 1999
(unaudited)....................................................... 7
Consolidated Condensed Statements of Cash Flows, Six Months Ended
July 31, 2000 (unaudited) and July 31, 1999 (unaudited)........... 8
Consolidated Condensed Statement of Changes in Stockholders' Equity,
Six Months Ended July 31, 2000 (unaudited)........................ 9
Notes to Consolidated Condensed Financial Statements (unaudited)... 10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 13
Item 3. Quantitative and Qualitative Disclosures About Market Risk.. 19
PART II-OTHER INFORMATION
Item 1. Legal Proceedings........................................... 20
Item 2. Changes in Securities and Use of Proceeds................... 20
Item 3 Defaults Upon Senior Securities............................. 20
Item 4. Submission of Matters to a Vote of Security Holders......... 20
Item 5 Other Information........................................... 21
Item 6. Exhibits and Reports on Form 8-K............................ 22
SIGNATURES........................................................... 23
EXHIBIT INDEX........................................................ 24
EXHIBIT 27 - Financial Data Schedule................................. 25
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
ALLOY ONLINE, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
------
January 31, July 31,
2000 2000
----------- --------
(audited) (unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 12,702 $ 5,862
Available-for-sale marketable securities 20,971 31,389
Accounts receivable, net 2,693 3,031
Inventories, net 3,981 13,270
Prepaid catalog costs 1,011 3,090
Other current assets 1,281 2,067
----------- ----------
TOTAL CURRENT ASSETS 42,639 58,709
Property and equipment, net 2,187 5,332
Goodwill, net of amortization 12,349 59,118
Other assets 493 1,622
----------- ----------
TOTAL ASSETS $ 57,668 $124,781
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable, accrued expenses and other
current liabilities $ 12,460 $ 19,793
---------- ----------
TOTAL CURRENT LIABILITIES 12,460 19,793
STOCKHOLDERS' EQUITY:
Common Stock; $.01 par value; 50,000,000 shares
authorized; 14,686,437 and 20,897,509 shares
issued and outstanding, respectively 147 209
Additional paid-in capital 68,948 138,224
Accumulated deficit (23,216) (36,417)
Deferred compensation (593) (903)
Accumulated other comprehensive (loss) income (78) 3,875
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 45,208 104,988
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 57,668 $124,781
========== ==========
The accompanying notes are an integral part of these financial statements.
3
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ALLOY ONLINE, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(unaudited)
For the three months
ended July 31,
1999 2000
----------- ----------
NET MERCHANDISE REVENUES $ 3,596 $ 8,538
SPONSORSHIP AND OTHER REVENUES 219 2,571
----------- ----------
TOTAL REVENUES 3,815 11,109
COST OF GOODS SOLD 1,899 4,462
----------- ----------
GROSS PROFIT 1,916 6,647
----------- ----------
OPERATING EXPENSES:
Selling and marketing 4,320 9,759
General and administrative 1,146 2,966
Goodwill amortization -- 1,204
----------- ----------
TOTAL OPERATING EXPENSES 5,466 13,929
----------- ----------
LOSS FROM OPERATIONS (3,550) (7,282)
INTEREST INCOME, NET 472 386
----------- ----------
LOSS BEFORE EXTRAORDINARY ITEM (3,078) (6,896)
EXTRAORDINARY ITEM:
Charge for early retirement of debt 235 --
----------- ----------
NET LOSS $ (3,313) $ (6,896)
=========== ===========
BASIC AND DILUTED LOSS PER SHARE OF
COMMON STOCK (Note 3):
Before Extraordinary Item $ (0.23) $ (0.38)
Extraordinary Item (0.02) --
----------- ----------
Net Loss $ (0.25) $ (0.38)
=========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING: 13,411,623 18,125,679
=========== ===========
The accompanying notes are an integral part of these financial statements.
4
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ALLOY ONLINE, INC.
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE LOSS
(AMOUNTS IN THOUSANDS)
(unaudited)
For the three months
ended July 31,
1999 2000
--------- ----------
Net Loss $ (3,313) $ (6,896)
Other comprehensive loss, net of tax:
Net unrealized loss on available-for-sale securities -- (3,324)
--------- ----------
Comprehensive Loss $ (3,313) $(10,220)
========= ==========
The accompanying notes are an integral part of these financial statements.
5
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ALLOY ONLINE, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(unaudited)
For the six months
ended July 31,
1999 2000
----------- ----------
NET MERCHANDISE REVENUES $ 5,988 $ 13,989
SPONSORSHIP AND OTHER REVENUES 382 4,780
----------- ---------
TOTAL REVENUES 6,370 18,769
COST OF GOODS SOLD 3,148 7,463
----------- ---------
GROSS PROFIT 3,222 11,306
----------- ---------
OPERATING EXPENSES:
Selling and marketing 6,930 18,256
General and administrative 2,065 5,055
Goodwill amortization -- 2,015
----------- ---------
TOTAL OPERATING EXPENSES 8,995 25,326
----------- ---------
LOSS FROM OPERATIONS (5,773) (14,020)
INTEREST INCOME, NET 393 819
----------- ---------
LOSS BEFORE EXTRAORDINARY ITEM (5,380) (13,201)
EXTRAORDINARY ITEM:
Charge for early retirement of debt 235 --
----------- ---------
NET LOSS $ (5,615) $ (13,201)
=========== =========
BASIC AND DILUTED LOSS PER SHARE
OF COMMON STOCK (Note 3):
Before Extraordinary Item $ (0.49) $ (0.79)
Extraordinary Item (0.02) --
----------- ---------
Net Loss $ (0.51) $ (0.79)
=========== =========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
11,100,952 16,701,246
=========== ==========
The accompanying notes are an integral part of these financial statements.
6
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ALLOY ONLINE, INC.
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE LOSS
(AMOUNTS IN THOUSANDS)
(unaudited)
For the six months
ended July 31,
1999 2000
---------- ---------
Net Loss $ (5,615) $ (13,201)
Other comprehensive income, net of tax:
Net unrealized gain on available-for-sale securities -- 3,953
---------- ---------
Comprehensive Loss $ (5,615) $ (9,248)
========== =========
The accompanying notes are an integral part of these financial statements.
7
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ALLOY ONLINE, INC.
Consolidated Condensed Statements of Cash Flows (Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the six months
ended July 31,
1999 2000
-----------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (5,615) $ (13,201)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 105 2,481
Extraordinary charge for early retirement of debt 235 --
Compensation charge for issuance of stock options 350 267
Accrued interest on promissory notes 124 --
Changes in operating assets and liabilities - net of effect of
business acquisitions -
(Increase) decrease in:
Accounts receivable (99) (306)
Inventories, net (1,652) (2,942)
Other current assets (2,504) (2,489)
Other assets 44 (93)
Increase in:
Accounts payable and accrued expenses 4,198 524
-------- ---------
Net cash used in operating activities (4,814) (15,759)
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (purchases) sales of marketable securities (22,431) 13,066
Capital expenditures (274) (1,767)
Cash paid in connection with acquisition of business,
net of cash acquired -- (10,531)
Purchase of non-marketable securities -- (1,000)
Purchase of domain name and mailing list (250) --
-------- ---------
Net cash used in investing activities (22,955) (232)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of common stock 50,149 9,189
Net proceeds from stock subscription receivable 2,497 --
Exercise of stock options and warrants 30 9
Payments of promissory notes (4,212) --
Payments of capital lease obligation (36) (47)
-------- ---------
Net cash provided by financing activities 48,428 9,151
-------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 20,659 (6,840)
CASH AND CASH EQUIVALENTS, beginning of period 2,983 12,702
-------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 23,642 5,862
======== =========
Supplemental disclosure of non-cash investing and financing
activity:
Purchase of computer equipment under capital lease $ 6 $ --
Exercise of stock options $ 4 $ --
Deferred compensation $ 857 $ 120
Fair value of Liberty Digital, Inc. common stock received in
connection with exchange transaction $ -- $ 19,530
Fair value of common stock issued in connection with purchase of
Kubic Marketing, Inc. (Note 4) $ -- $ 40,033
Accumulated other comprehensive (loss) income $ (80) $ 3,953
Conversion of preferred stock into common stock $ 4,846 $ --
</TABLE>
8
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ALLOY ONLINE, INC.
Consolidated Condensed Statement of Changes in Stockholders' Equity (unaudited)
(Amounts in thousands, except share data)
For the Six Months Ended July 31, 2000
<TABLE>
<CAPTION>
Common Stock Accumulated Other
--------------- Additional Accumulated Deferred Comprehensive
Shares Amount Paid-in Capital Deficit Compensation (Loss) Income Total
------ ------ --------------- ----------- ------------ ----------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, February 1, 2000 14,686,437 $ 147 $ 68,948 ($23,216) ($593) ($78) $ 45,208
Issuance of common stock for
purchase of Kubic Marketing, Inc. 3,267,981 33 40,000 -- -- -- 40,033
Proceeds from issuance of common stock
in connection with the Liberty
Digital, Inc. transaction,
net of issuance costs 2,922,694 29 28,690 -- -- -- 28,719
Issuance of stock options to
consultants for services rendered -- -- 577 -- (577) -- --
Amortization of deferred compensation -- -- -- -- 267 -- 267
Issuance of common stock pursuant
to the exercise of options and
warrants and the employee stock
purchase plan 20,397 -- 9 -- -- -- 9
Net loss -- -- -- (13,201) -- -- (13,201)
Net unrealized gain on
available-for-sale
marketable securities -- -- -- -- -- 3,953 3,953
---------- ----- --------------- ----------- ------------ ----------------- ----------
Balance, July 31, 2000 20,897,509 $ 209 $ 138,224 ($36,417) ($903) $3,875 $104,988
========== ====== =============== =========== ============ ================= ==========
</TABLE>
9
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ALLOY ONLINE, INC.
------------------
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
1. FINANCIAL STATEMENT PRESENTATION
The accompanying financial statements have been prepared by Alloy Online,
Inc. ("Alloy"), without audit. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present fairly
the financial position, results of operations, comprehensive losses and cash
flows at July 31, 2000 and for all periods presented have been made. The
results of operations for the periods ended July 31, 2000 and 1999 are not
necessarily indicative of the operating results for a full year.
Certain information and footnote disclosures prepared in accordance with
generally accepted accounting principles and normally included in the
financial statements have been condensed or omitted. It is suggested that
these financial statements and notes be read in conjunction with the
financial statements and notes related to the Company's fiscal year ended
January 31, 2000 included in Alloy's Annual Report on Form 10-K for the
fiscal year ended January 31, 2000 filed with the Securities and Exchange
Commission on May 1, 2000.
2. BUSINESS
Alloy was incorporated in the State of Delaware on January 22, 1996 and is a
leading Web-centric direct marketing company serving the unique interests and
tastes of the high growth Generation Y (10 to 24 year olds) marketplace.
Through our Web sites, www.alloy.com and www.ccs.com, Generation Y boys and
girls can interact, share information, explore compelling and relevant
content and shop. Through our Web sites and our Alloy and CCS direct mail
catalogs, we offer Generation Y boys and girls a variety of merchandise,
including boys and girls apparel, accessories, footwear, cosmetics, room
furnishings and action sports equipment.
3. NET LOSS PER SHARE
The following table sets forth the computation of net loss per share. Alloy
has applied the provisions of SFAS No. 128, "Earnings Per Share" in the
calculations below. Amounts in thousands, except share and per share data:
<TABLE>
<CAPTION>
Three Months Six Months
Ended July 31, Ended July 31,
------------------- -------------------
1999 2000 1999 2000
---------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Numerator:
Loss before extraordinary $ (3,078) $ (6,896) $ (5,380) $ (13,201)
item
Accretion of preferred stock (2) -- (13) --
------------ ----------- ----------- ------------
Loss before extraordinary
item available to common (3,080) (6,896) (5,393) (13,201)
stockholders
Extraordinary item (235) -- (235) --
------------ ----------- ----------- ------------
Net loss $ (3,315) $ (6,896) $ (5,628) $ (13,201)
============ =========== =========== ===========
Denominator:
Weighted average shares
outstanding 13,411,623 18,125,679 11,100,952 16,701,246
============ =========== =========== ===========
Basic and Diluted:
Loss per share before $ (0.23) $ (0.38) $ (0.49) $ (0.79)
extraordinary item
Extraordinary item $ (0.02) $ -- $ (0.02) $ --
------------ ----------- ----------- ------------
Net loss per share $ (0.25) $ (0.38) $ (0.51) $ (0.79)
============ =========== =========== ===========
</TABLE>
10
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4. KUBIC MARKETING ACQUISITION
On July 18, 2000, Alloy Online, Inc. ("Alloy") completed an acquisition of
all of the outstanding capital stock of Kubic Marketing, Inc. ("Kubic"), a
Delaware corporation with a principal place of business in San Luis Obispo,
California. The acquisition was effected pursuant to an Agreement and Plan of
Reorganization dated as of July 17, 2000, (the "Reorganization Agreement") by
and between Alloy, Alloy Acquisition Sub, Inc., a Delaware corporation
("Acquisition Sub") and a wholly owned subsidiary of Alloy, Kubic and SWI
Holdings LLC, a Delaware limited liability company and the sole stockholder
of Kubic (the "Stockholder"), pursuant to which Acquisition Sub was merged
with and into Kubic (the "Merger") with Kubic continuing as the surviving
corporation and a wholly-owned subsidiary of Alloy. Kubic is the holding
company for its wholly-owned subsidiary, Phase Three, Inc. (which does
business as CCS), which is one of the largest mail order catalog and Internet
marketers in the United States of skateboards, snowboards and related
apparel, equipment and accessories. CCS is also one of the largest mail order
catalogs serving the Generation Y skate and snowboard market with a database
of over one million buyers and requesters. In addition, CCS reaches the
extreme-sport oriented Generation Y boys through its website which it
promotes in its catalogs. The Merger is intended to qualify as a tax-free
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended, and will be accounted for under the purchase method
of accounting for business combinations.
In connection with the Merger, Alloy issued to the Stockholder (i) 3,267,981
shares of Alloy's common stock, $.01 par value per share, having a value of
$40.0 million on the date of the acquisition, and (ii) a warrant to purchase
shares of Alloy's restricted common stock, $.01 par value per share, in an
aggregate amount, if any, as determined pursuant to the provisions of the
warrant. The warrant is exercisable only during the period beginning 12
months and ending 15 months following the closing of the Merger. The warrant
has an exercise price equal to the par value of the underlying shares. The
number of shares, if any, that may be purchased pursuant to the warrant will
be determined by the monthly average price of Alloy's common stock for each
of the 12 months following the closing of the Merger. The value of the
warrant, if any, will be determined upon resolution of the contingent
conditions cited in the warrant agreement and could result in a change to the
purchase price allocation and future amortization of goodwill. In addition,
in connection with obtaining the consent to the Merger of certain of the
lenders to Kubic and the Stockholder's other subsidiaries, Alloy paid $10.0
million in cash from its existing cash reserves to such lenders to retire
certain debt obligations of Kubic.
In connection with the acquisition, Alloy has recorded approximately
$48.8 million of goodwill representing the net excess of purchase price
over the fair value of the net assets acquired, based upon a preliminary
purchase price allocation. The goodwill is being amortized over a period
of five years.
Summarized unaudited pro forma information reflecting the impact of the
acquisition on Alloy's results of operations for the six month periods ended
July 31, assuming the acquisition had occurred at the beginning of the
periods, is as follows (amounts in thousands, except per share data):
SIX MONTHS ENDED
July 31, 1999 July 31, 2000
------------- -------------
Revenues $18,900 $35,600
Loss before extraordinary item (9,661) (16,974)
Net loss (9,895) (16,974)
Net loss per share of common stock before
extraordinary item $(0.67) $(0.85)
Net loss per share of common stock $(0.69) $(0.85)
11
<PAGE>
5. DERIVATIVE FINANCIAL INSTRUMENTS
In July 2000, Alloy purchased put options and sold call options on a total of
600,000 shares of Liberty Digital, Inc. ("LDIG") common stock, representing a
portion of LDIG common stock already owned by Alloy as available-for-sale
marketable securities. The options allow Alloy to sell LDIG common stock at
various prices and have been designated as a hedge against potential declines
in the fair value of LDIG common stock. The options expire on various dates
beginning January 2003 through July 2003. The net fair value of the options
was $635,000 on July 31, 2000 and they have been classified as available-for-
sale marketable securities with a corresponding amount included in
accumulated other comprehensive income in the accompanying consolidated
condensed balance sheet.
Alloy is required to adopt the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities" as of February 1, 2001. The options referred to above
have been designated as fair value hedges pursuant to SFAS No. 133. Upon
adoption of SFAS No. 133, Alloy will be required to continue to reflect the
fair value of the options outstanding on the balance sheet and will adjust
changes in fair value of the options through the statement of operations.
Additionally, the change in fair value of the underlying LDIG shares will
also be recorded through the statement of operations to the extent of the
number of shares covered by the options. The remainder of the LDIG shares
owned and not covered by hedging instruments will continue to be accounted
for as available-for-sale securities, with changes in fair value reflected in
comprehensive income. Had Alloy adopted the provisions of SFAS No. 133 prior
to the effective date, the net impact on the results of operations from the
purchase date of the options through July 31, 2000 would have been an
increase in net loss of approximately $1.2 million.
Alloy is continuing to evaluate the impact of the future adoption of SFAS No.
133 on its existing financial instruments and contracts and will reflect any
required changes as of February 1, 2001.
6. RECENTLY ISSUED ACCOUNTING STANDARDS
In July 2000, the Emerging Issues Task Force ("EITF") reached a consensus
with respect to EITF Issue No. 00-10, "Accounting for Shipping and Handling
Revenues and Costs". The purpose of this issue discussion was to clarify the
classification of shipping and handling revenues and costs. The consensus
reached was that all shipping and handling billed to customers is revenue. No
consensus was reached on the classification of shipping and handling costs.
This standard will require a restatement of prior periods for changes in
classification. Alloy currently nets its shipping and handling revenue with
the related costs and includes the residual amount as selling and marketing
expenses. Commencing in the fiscal third quarter of 2000, Alloy will apply
the standards by reclassifying the revenue previously netted against the
related costs.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
The following discussion of the financial condition and results of
operation of Alloy should be read in conjunction with the Financial Statements
and the related Notes included elsewhere in this Report. This discussion
contains forward-looking statements that involve risks and uncertainties. Our
actual results may differ materially from those anticipated in these forward-
looking statements as a result of various factors.
OVERVIEW
Alloy Online is a leading Web-centric direct marketing company serving
the unique interests and tastes of Generation Y. Through our Web sites,
www.alloy.com (the "Alloy Web Site") and www.ccs.com, Generation Y boys and
girls can interact, share information, explore compelling and relevant content
and shop. Through our Web sites and our Alloy and CCS direct mail catalogs, we
offer Generation Y boys and girls a variety of merchandise, including boys and
girls apparel, accessories, footwear, cosmetics, room furnishings and action
sporting goods such as skateboards and skateboard accessories.
Our revenues consist of merchandise revenues and sponsorship and other
revenues. We generate merchandise revenues through both our catalogs and our
Web sites. We generate sponsorship and other revenues primarily through the
sale of sponsorships, banner advertisements, co-marketing programs and other
revenue sharing arrangements on our Web sites and in our catalog, and through
the publishing of book properties we develop. Revenues from sales of
merchandise are recognized at the time products are shipped to customers net of
an allowance for sales returns which is determined in accordance with our return
policy and is based on historical experience. Revenues from sponsorships,
advertising and other arrangements are recognized during the period in which the
sponsorship or advertisement is displayed, provided that no significant
performance obligations remain and the collection of the related receivable is
probable. Revenues from sales of Internet advertisements are recognized net of
commissions paid to advertising sales firms and to technology and content
providers. Revenues earned and related expenses incurred in connection with our
book development activities are recognized upon property publication. Any
amounts received or paid prior to publication are treated as advances and
classified as a current liability or current asset.
We were incorporated in January 1996, launched the Alloy Web Site in
August 1996 and began recognizing meaningful revenues in August 1997 following
the distribution of our first Alloy catalog. To date, the majority of our
revenues have been generated through merchandise sales; however, sponsorship and
other revenues have been increasing and we expect them to continue to increase
in future periods as a result of our plan to increase visitors to the Alloy Web
Site and further develop our marketing and sales team to capitalize on our
sponsorship, advertising and other revenue opportunities. In May 1999, we issued
3,700,000 shares of common stock in our initial public offering (the "Offering")
and received approximately $50.1 million in net proceeds, after deduction of
underwriter's commissions and discounts and expenses related to the Offering. In
April 2000, we entered into a financial and strategic arrangement with Liberty
Digital, Inc. ("LDIG"), a subsidiary of Liberty Media Group, Inc., pursuant to
which we issued 2,922,694 shares of common stock to a subsidiary of LDIG in
exchange for $9.2 million in net cash proceeds and 837,740 shares of LDIG common
stock. In July 2000, we purchased all of the capital stock of Kubic Marketing,
Inc., which through its subsidiary Phase Three, Inc. owns the CCS direct
marketing business, in exchange for 3,267,981 shares of Alloy common stock, $.01
par value per share; a warrant to purchase shares of Alloy's common stock, $.01
par value per share, in an aggregate amount, if any, as determined pursuant to
the provisions of the warrant; and $10.0 million in cash to retire debt
obligations of Kubic Marketing.
We incurred net losses of approximately $118,000 for the fiscal year
ended January 31, 1997, $1.9 million for the fiscal year ended January 31, 1998,
$6.4 million for the fiscal year ended January 31, 1999, $14.9 million for the
year ended January 31, 2000, and $13.2 million for the six months ended July 31,
2000. These net losses resulted primarily from the costs associated with
developing the Alloy Web Site and database of Generation Y boys and girls,
attracting users to the Alloy Web Site and establishing the Alloy brand. Because
of our plans to invest heavily in marketing and promotion, to hire additional
employees and to develop our Web sites and operating infrastructure, we expect
to incur significant net losses for the foreseeable future. Although we have
experienced revenue growth in recent periods, this growth may not be sustainable
and, therefore, these recent periods should not
13
<PAGE>
be considered indicative of future performance. We may never achieve significant
revenues or profitability, or if we achieve significant revenues they may not be
sustained in future periods.
RESULTS OF OPERATIONS
The following table sets forth the statement of operations data for the
periods indicated as a percentage of revenues. Any trends reflected by the
following table may not be indicative of future results.
THREE MONTHS ENDED JULY 31,
---------------------------
1999 2000
-------- --------
Net merchandise revenues......................... 94.2% 76.9%
Sponsorship and other revenues................... 5.8 23.1
-------- --------
Total revenues................................ 100.0 100.0
Cost of goods sold............................... 49.8 40.2
-------- --------
Gross profit..................................... 50.2 59.8
Operating expenses:
Selling and marketing......................... 113.2 87.8
General and administrative.................... 30.0 26.7
Amortization of goodwill...................... -- 10.8
Total operating expenses...................... 143.2 125.3
-------- -------
Loss from operations............................. (93.0) (65.5)
Interest (expense) income, net................... 12.4 3.5
Charge for early retirement of debt.............. (6.2) --
-------- -------
Net loss......................................... (86.8)% (62.0)%
COMPARISON OF THREE MONTHS ENDED JULY 31, 1999 AND 2000
Revenues
Merchandise Revenues. Net merchandise revenues increased 137.4% from
$3.6 million in the three months ended July 31, 1999 to $8.5 million in the
three months ended July 31, 2000. The increase in merchandise revenues in the
three months ended July 31, 2000 was due primarily to the significant increase
in orders driven by our expanded database of Generation Y buyers and prospects
to whom we marketed in the quarter, and from the inclusion of CCS merchandise
revenues during the portion of the quarter we owned the company.
Sponsorship and Other Revenues. Sponsorship and other revenues amounted
to $2.6 million in the three months ended July 31, 2000 as compared to $219,000
in the three months ended July 31, 1999. The increase in sponsorship and other
revenues in the three months ended July 31, 2000 resulted from the increased
number of visitors to the Alloy Web Site and the expanding commercial
relationships with advertisers we are developing through our in-house
advertising sales group, together with the contribution of the book development
business we purchased in January 2000. As Alloy's online community continues to
grow and our sales force further develops client relationships, we anticipate
our sponsorship and other revenues to increase significantly on a comparative
basis.
Cost of Goods Sold
Cost of goods sold consists of the cost of the merchandise sold by
Alloy plus the freight cost to deliver the merchandise to the warehouse, along
with the directly allocated costs associated with book development. Our cost of
goods sold increased 134.9% from $1.9 million in the three months ended July 31,
1999 to $4.5 million in the three months ended July 31, 2000. The increase in
cost of goods sold was due primarily to the increase in merchandise sales
volume. Alloy's gross profit as a percentage of total revenues increased from
50.2% in the three months ended July 31, 1999 to 59.8% in the three months ended
July 31, 2000 due to the substantially larger percentage of sponsorship and
other revenues in our total revenue mix.
Operating Expenses
Selling and Marketing. Selling and marketing expenses consist
primarily of Alloy catalog production and
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mailing costs; our call center and fulfillment operations expenses; salaries of
our sales and marketing personnel; advertising and marketing costs; and expenses
related to the development, maintenance and marketing of our Web sites. These
expenses increased 125.9% from $4.3 million in the three months ended July 31,
1999 to $9.8 million in the three months ended July 31, 2000 due to the
increased costs incurred in marketing to our expanded database, increased Web
site promotion and development, and the hiring of selling and marketing staff.
As a percentage of total revenues, our selling and marketing expenses decreased
from 113.2% in the three months ended July 31, 1999 to 87.8% in the three months
ended July 31, 2000. The decrease was primarily driven by the growth in
sponsorship and other revenues and the increased efficiency of marketing to our
expanded customer database.
We expect selling and marketing expenses to increase significantly in
future periods. These increases will be principally related to hiring
additional sales and marketing personnel; increased spending on advertising in a
variety of media to increase brand awareness, attract additional visitors to our
Web sites, and grow online merchandise sales; and marketing our merchandise
offerings to an expanded database. There can be no assurance that these
increased expenditures will result in increased visitors to our Web sites, or
additional sales.
General and Administrative. General and administrative expenses consist
primarily of salaries and related costs for our executive, administrative,
finance and management personnel, as well as support services and professional
service fees. These expenses increased 158.8% from $1.1 million in the three
months ended July 31, 1999 to $3.0 million in the three months ended July 31,
2000. As a percentage of total revenues, our general and administrative expenses
decreased from 30.0% in the three months ended July 31, 1999 to 26.7% in the
three months ended July 31, 2000. The increase in general and administrative
expenses was driven by an increase in compensation expense for additional
personnel to handle our growing business, together with expenses incurred as a
result of becoming a public company, such as professional fees, insurance
premiums and public relations costs. We expect general and administrative
expenses to grow as we hire additional personnel and incur additional expenses
related to the growth of our business and our operations as a public company.
Amortization of Goodwill. Amortization of goodwill was approximately
$1.2 million in the three months ended July 31, 2000 as compared to zero in the
three months ended July 31, 1999. These costs were recorded in connection with
our acquisition of substantially all of the assets of Celebrity Sightings, LLC
in December 1999; the merger of our acquisition subsidiary with and into 17th
Street Acquisition Corp., the sole stockholder of 17th Street Productions, Inc.
in January 2000; and the merger of our acquisition subsidiary with and into
Kubic Marketing, Inc., the holding company of Phase Three, Inc., in July 2000.
These acquisitions were accounted for under the purchase method of accounting.
We anticipate that the future amortization of goodwill in connection with these
acquisitions will continue to be amortized on a straight-line basis over three
years in the case of Celebrity Sightings, LLC, five years in the case of 17th
Street Productions, Inc., and five years in the case of Kubic Marketing, Inc.,
and will amount to approximately $3.3 million per quarter until the end of
fiscal 2002 and approximately $2.8 million per quarter thereafter until the
related goodwill is fully amortized. Any additional acquisitions or impairment
of goodwill could result in additional merger and acquisition related costs.
Loss from Operations
As described above, we have invested heavily to build the Alloy brand,
grow our customer database, enhance and attract visitors to the Alloy Web Site,
increase the number of our employees to support a growing operation, and
purchase complementary businesses. For the foregoing reasons, our loss from
operations increased from $3.6 million in the three months ended July 31, 1999
to $7.3 million in the three months ended July 31, 2000.
Interest (Expense) Income, Net
Interest income net of expense includes income from our cash and cash
equivalents and from investments and expenses related to our financing
obligations. We generated net interest income of $472,000 in the three months
ended July 31, 1999 and $386,000 in the three months ended July 31, 2000 from
the investment of the proceeds raised in the Offering and from the sale of a
minority stake to LDIG.
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Extraordinary Item
As a result of the early retirement of our outstanding promissory notes
upon the closing of the Offering, we incurred a one-time extraordinary charge of
$235,000 in the three months ended July 31, 1999.
SIX MONTHS ENDED JULY 31,
-------------------------
1999 2000
-------- --------
Net merchandise revenues..................... 94.0% 74.5%
Sponsorship and other revenues............... 6.0 25.5
-------- --------
Total revenues............................ 100.0 100.0
Cost of goods sold........................... 49.4 39.8
-------- --------
Gross profit................................. 50.6 60.2
Operating expenses:
Selling and marketing..................... 108.8 97.3
General and administrative................ 32.4 26.9
Amortization of goodwill.................. -- 10.7
Total operating expenses.................. 141.2 134.9
-------- --------
Loss from operations......................... (90.6) (74.7)
Interest (expense) income, net............... 6.2 4.4
Charge for early retirement of debt.......... (3.7) --
-------- --------
Net loss..................................... (88.1)% (70.3)%
COMPARISON OF SIX MONTHS ENDED JULY 31, 1999 AND 2000
Revenues
Merchandise Revenues. Net merchandise revenues increased 133.6% from
$6.0 million in the six months ended July 31, 1999 to $14.0 million in the six
months ended July 31, 2000. The increase in merchandise revenues in the six
months ended July 31, 2000 was due primarily to the significant increase in
orders driven by our expanded database of Generation Y buyers and prospects to
whom we marketed in the period, and from the inclusion of CCS merchandise
revenues during the portion of the period we owned the company.
Sponsorship and Other Revenues. Sponsorship and other revenues amounted
to $4.8 million in the six months ended July 31, 2000 as compared to $382,000 in
the six months ended July 31, 1999. The increase in sponsorship and other
revenues in the six months ended July 31, 2000 resulted from the increased
number of visitors to the Alloy Web Site and the expanding commercial
relationships with advertisers we are developing through our in-house
advertising sales group, together with the contribution of the book development
business we purchased in January 2000. As Alloy's online community continues to
grow and our sales force further develops client relationships, we anticipate
our sponsorship and other revenues to increase significantly on a comparative
basis.
Cost of Goods Sold
Cost of goods sold increased 137.0% from $3.1 million in the six months
ended July 31, 1999 to $7.5 million in the six months ended July 31, 2000. The
increase in cost of goods sold was due primarily to the increase in merchandise
sales volume. Alloy's gross profit as a percentage of total revenues increased
from 50.6% in the six months ended July 31, 1999 to 60.2% in the six months
ended July 31, 2000 due to the substantially larger percentage of sponsorship
and other revenues in our total revenue mix.
Operating Expenses
Selling and Marketing. Selling and marketing expenses increased 163.4%
from $6.9 million in the six months ended July 31, 1999 to $18.3 million in the
six months ended July 31, 2000 due to the increased costs incurred in marketing
to our expanded database, increased Web site promotion and development, and the
hiring of selling and marketing staff. As a percentage of total revenues, our
selling and marketing expenses decreased from 108.8% in the six months ended
July 31, 1999 to 97.3% in the six months ended July 31, 2000. The decrease was
primarily driven by the growth in sponsorship and other revenues and the
increased efficiency of marketing to our expanded customer database.
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General and Administrative. General and administrative expenses
increased 144.8% from $2.1 million in the six months ended July 31, 1999 to $5.1
million in the six months ended July 31, 2000. As a percentage of total
revenues, our general and administrative expenses decreased from 32.4% in the
six months ended July 31, 1999 to 26.9% in the six months ended July 31, 2000.
The increase in general and administrative expenses was driven by an increase in
compensation expense for additional personnel to handle our growing business,
together with expenses incurred as a result of becoming a public company, such
as professional fees, insurance premiums and public relations costs. The decline
in general and administrative expenses as a percentage of total revenues in the
first half of 2000 was due to the larger revenue base over which to spread these
expenses.
Amortization of Goodwill. Amortization of goodwill was approximately
$2.0 million in the six months ended July 31, 2000 as compared to zero in the
six months ended July 31, 1999. These costs were recorded in connection with our
acquisition of substantially all of the assets of Celebrity Sightings, LLC in
December 1999; the merger of our acquisition subsidiary with and into 17th
Street Acquisition Corp., the sole stockholder of 17th Street Productions, Inc.
in January 2000; and the merger of our acquisition subsidiary with and into
Kubic Marketing, Inc., the holding company of Phase Three, Inc., in July 2000.
Loss from Operations
As described above, we have invested heavily to build the Alloy brand,
grow our customer database, enhance and attract visitors to our Web sites,
increase the number of our employees to support a growing operation, and
purchase complementary businesses. For the foregoing reasons, our loss from
operations increased from $5.8 million in the six months ended July 31, 1999 to
$14.0 million in the six months ended July 31, 2000.
Interest (Expense) Income, Net
Interest income net of expense includes income from our cash and cash
equivalents and from investments and expenses related to our financing
obligations. We generated net interest income of $393,000 in the six months
ended July 31, 1999 and $819,000 in the six months ended July 31, 2000 from the
investment of the proceeds raised in the Offering and from the sale of a
minority stake to LDIG. In the six months ended July 31, 1999, we paid interest
on the promissory notes that we retired upon the closing of the Offering in May
1999.
Extraordinary Item
As a result of the early retirement of our outstanding promissory notes
upon the closing of the Offering, we incurred a one-time extraordinary charge of
$235,000 in the six months ended July 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations primarily through the sale of equity
and debt securities as we have generated negative cash flow from operations
since our inception. In May 1999, we raised approximately $50.1 million in net
proceeds upon the closing of the Offering. In April 2000, we raised $9.2 million
in net cash proceeds and acquired 837,740 shares of LDIG common stock in
connection with our sale of 2,922,694 shares of Alloy common stock to a
subsidiary of LDIG. At July 31, 2000, we had approximately $5.9 million of cash
and cash equivalents and a further $31.4 million of marketable securities. Our
principal commitments at July 31, 2000 consisted of accounts payable and
obligations under our capital and operating leases.
Net cash used in operating activities was $4.8 million in the six
months ended July 31, 1999 and $15.8 million in the six months ended July 31,
2000. The principal use of cash in both periods was to fund our losses from
operations and finance growth in working capital.
Cash used in investing activities was $232,000 in the six months ended
July 31, 2000 due to the net effect of sales and maturities of marketable
securities, offset by the application of the proceeds to the purchase of Kubic
Marketing, Inc., capital expenditures and strategic investing activities. Cash
used in investing activities was $23.0 million in the six months ended July 31,
1999 due to the investment of proceeds from the Offering in high quality,
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fixed-income securities; our capital expenditures for computers, office
furniture and equipment; and the acquisition of certain intangible assets,
consisting of a Web site domain name and a customer mailing list in separate
transactions.
Net cash provided by financing activities was approximately $48.4
million in the six months ended July 31, 1999 due to the proceeds from the
Offering and the collection of the stock subscription receivable associated with
the second installment of our Series A Preferred Stock sold in November 1998. In
the six months ended July 31, 2000, we received $9.2 million in net cash
proceeds from our sale of 2,922,694 shares of Alloy common stock to a subsidiary
of LDIG.
We currently anticipate that we will continue to experience significant
growth in our operating expenses for the foreseeable future as we build our
brand and customer database and that our operating expenses will be a material
use of our cash resources. We believe that in light of the Offering which
raised net proceeds of $50.1 million in May 1999, together with the $9.2 million
in net cash proceeds and 837,740 shares of LDIG common stock we received in
April 2000 in exchange for LDIG's investment in Alloy, our existing working
capital and cash flows from operations will be sufficient to meet our
anticipated cash needs for working capital and capital expenditures for at least
the next 24 months, although we will consider attractive opportunities to raise
additional capital should these opportunities arise. If cash generated from
operations is insufficient to satisfy our cash needs, we may be required to
raise additional funds. If we raise additional funds through the issuance of
equity securities, our existing shareholders may experience significant
dilution. Furthermore, additional financing may not be available when needed
or, if available, financing may not be on terms favorable to us or our
stockholders. If financing is not available when required or is not available
on acceptable terms, we may be unable to develop or enhance our products or
services. In addition, we may be unable to take advantage of business
opportunities or respond to competitive pressures. Any of these events could
have a material and adverse effect on our business, results of operations and
financial condition.
ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. SFAS No.
133 is effective for our first fiscal quarter beginning February 1, 2001 and
will not require retroactive restatement of prior period financial statements.
This statement requires the recognition of all derivative instruments as either
assets or liabilities in the balance sheet measured at fair value. Generally,
increases or decreases in the fair value of derivative instruments will be
recognized as gains or losses in earnings in the period of change. If certain
conditions are met, where the derivative instrument has been designated as a
fair value hedge, the hedged item may also be marked to market through earnings
thus creating an offset. If the derivative is designated as a cash flow hedge,
the changes in fair value of the derivative instrument may be recorded on the
balance sheet as other comprehensive income.
We are currently in the process of identifying all potential derivative
instruments and embedded derivative instruments and will reflect any required
changes as of the February 1, 2001 adoption date. In July 2000, we hedged our
exposure to adverse changes in value of certain available-for-sale marketable
securities through "cashless collars" that will either provide the counterparty
to the collars with an option to purchase the underlying securities, or require
the counterparty to purchase the underlying securities at specified prices,
pursuant to the terms of the options. These instruments qualify as fair value
hedges, as defined in SFAS No. 133. Upon adoption of SFAS No. 133, the change in
fair value of the collars will be reflected in the statement of operations,
offset by changes in fair value of the underlying securities.
In July 2000, the Emerging Issues Task Force ("EITF") reached a
consensus on Issue No. 00-10, "Accounting for Shipping and Handling Revenues and
Costs". This consensus addressed the classification of shipping and handling
revenues and costs and requires that all amounts billed to customers for
shipping and handling be classified as revenues. No consensus was reached
regarding the classification of shipping and handling costs as either costs of
sales or operating expenses. We currently net shipping and handling revenues
with the related costs, and the residual costs are reflected as selling and
marketing expenses. Commencing with our third fiscal 2000 quarter, as required
by the consensus, we will reclassify all shipping and handling revenues that
were previously netted against the related costs. While we have not completed
the required analysis to calculate the impact, the amounts of historical
revenues and operating expenses will be adjusted to reflect this
reclassification, resulting in changes to these amounts, as well as gross
profit. Our historical loss from operations, net loss and net loss per share
will not be effected by this reclassification.
IMPACT OF THE YEAR 2000
The "Year 2000 Problem" arose because many existing computer programs
use only the last two digits to refer to a year. Therefore, these computer
programs may recognize a year ending in "00" as the Year 1900 rather than the
Year 2000, which could result in a significant disruption of operations and an
inability to process certain transactions. We have conducted an internal
assessment of all material information technology and non-information technology
systems at our headquarters and at OneSoft, our Web site host, including our
accounting software, our servers and related software, our personal computers
and related software, and our telephone system. The assessment revealed that all
mission critical software and hardware systems in our corporate headquarters and
OneSoft was 100% Year 2000 Compliant. We developed a strategic plan to estimate
the potential risks related to the four vendors upon whom we materially relied:
Harrison Fulfillment Services, our fulfillment services and call center
provider; OneSoft Corporation, which maintains our Web site and provides our
connection to the Internet; Quad/Graphics, Inc., our commercial printer; and the
United States Postal Service, our mail carrier. We have concluded that Year 2000
issues would not materially affect the continuation of our normal daily
operations. To date, our operations have suffered no significant disruption from
Year 2000 problems. We do not expect to experience any material adverse effects
on our business, financial condition or results of operations from any other
vendor, distributor or supplier who may experience Year 2000 problems, including
our new fulfillment services and call center provider. We incurred no material
historical costs relating to Year 2000 compliance, and we have not incurred any
material costs in resolving the Year 2000 problems of third parties with whom we
interact. We intend, however, to continue monitoring our internal computer
systems and those of third parties with whom we deal for Year 2000 problems.
Year 2000 problems that are as yet undiscovered may arise in the future and
could have a significant impact on our operations.
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FORWARD-LOOKING STATEMENTS - SAFE HARBOR PROVISION
Statements in this report 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 Form 10-Q, 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 and increase visitors to our Web sites; 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; the appeal of our Web sites
to marketers and users; and our ability to meet anticipated cash needs for
working capital and capital expenditures for the next 24 months.
Such statements are based upon management's current expectations and 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.
Factors that might cause or contribute to such differences include, among
others: our expected future losses; our planned sales and marketing campaigns
may not attract sufficient additional visitors to our Web sites; our planned
sales and marketing campaigns may not increase our revenues or generate
additional revenue streams; we lack experienced management and personnel; we may
not be able to manage successfully the risks and challenges associated with
integrating newly acquired businesses; 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; we may experience business
disruptions with third parties that provide us with essential business
operations; and general economic conditions.
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Alloy is exposed to market risk as a result of our holding of 837,740 shares
of LDIG common stock. Market risk with respect to this holding refers to the
risk of loss arising from adverse changes in LDIG's stock price. In order to
illustrate the effect of changes in LDIG's stock price, we provide the following
sensitivity analysis. Had the stock price of LDIG been 10% lower at July 31,
2000, the value of our LDIG holding would have been lower by approximately $2.0
million.
In July 2000, we entered into a series of three "cashless collars" with a
financial services institution with respect to 600,000 LDIG shares owned by us.
Each of the cashless collars covers 200,000 shares of LDIG and has stated terms
of approximately 30 months, 33 months and 36 months, respectively. In effect,
we purchased put options that give us the right to require the counterparty to
buy 600,000 LDIG shares from us in 30 to 36 months at an average price of
approximately $27.88 per share. We simultaneously sold call options giving the
counterparty the right to buy 600,000 LDIG shares from Alloy in 30 to 36 months
at an average price of approximately $51.70 per share. Since the purchase price
of the put options was equal to the proceeds from the sale of the call options,
the collar transactions were at no cost to us.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
(a) Not applicable.
(b) Not applicable.
(c) Previously reported in Alloy's Current Report on Form 8-K filed on
August 2, 2000.
(d) In connection with Alloy's initial public offering, Alloy sold
3,700,000 shares of its Common Stock and received net offering proceeds of
approximately $50.1 million. On May 13, 1999, the Securities and Exchange
Commission declared Alloy's Registration Statement on Form S-1 (file No. 333-
74159) effective.
The following table sets forth Alloy's cumulative use of net offering
proceeds as of July 31, 2000:
Construction of plant, building and facilities:...................... --
Purchase and installation of machinery and equipment:................ 3,500,000
Purchase of real estate:............................................. --
Acquisition of other business(es):................................... 14,400,000
Repayment of indebtedness:........................................... 4,200,000
Working capital...................................................... 5,600,000
Temporary investments:...............................................
Investment grade fixed income securities: --
General corporate purposes........................................... 22,400,000
The foregoing use of net proceeds does not represent a material change in the
use of net proceeds described in the Registration Statement.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its Annual Meeting of shareholders on July 21, 2000,
and the following matters were voted on at that meeting:
1. The election of David Yarnell and Peter Graham as Class I Directors,
each to serve for a three year term of office or until their successors are
elected. The following chart shows the number of votes cast for or against each
director, as well as the number of abstentions and broker nonvotes:
Director For Against Abstain Broker Nonvotes
---------- ------- ------- ---------------
Mr. Graham 15,928,865 13,840 0 0
Mr. Yarnell 15,928,865 13,840 0 0
Matthew C. Diamond, our president and chief executive officer,
James K. Johnson, Jr., our chief operating officer, Samuel C. Gradess, our chief
financial officer, and Lee Masters continued their respective terms of office as
directors after the annual meeting
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2. The proposal to increase by 4,000,000 shares the aggregate number of
shares for which stock options and stock awards may be granted under the
Company's 1997 Restated Employee, Director and Consultant Stock Plan. The
following chart shows the number of votes cast for or against the proposal, as
well as the number of abstentions and broker nonvotes:
For Against Abstain Broker Nonvotes
---------- ------- ------- ---------------
9,991,766 3,848,573 9,030 2,093,336
3. The proposal to ratify the selection of Arthur Andersen, LLP as
independent auditors for our fiscal year ending January 31, 2001. The following
chart shows the number of votes cast for or against the proposal, as well as the
number of abstentions and broker nonvotes:
For Against Abstain Broker Nonvotes
---------- ------- ------- ---------------
15,933,595 560 8,540 10
ITEM 5. OTHER INFORMATION.
Not applicable.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) Exhibits
--------
Exhibit No. 3.1 Restated Certificate of Incorporation (filed as Exhibit 3.1 to
Registration Statement on Form S-1, No. 333-74159, and
incorporated herein by reference).
Exhibit No. 3.2 Restated Bylaws (filed as Exhibit 3.2 to Registration Statement
on Form S-1, No. 333-74159, and incorporated herein by
reference).
Exhibit No. 4.1 Form of Common Stock Certificate (filed as Exhibit 4.1 to
Registration Statement on Form S-1, No. 333-74159, and
incorporated herein by reference).
Exhibit No. 27 Financial Data Schedule
____________
(B) Reports on Form 8-K.
-------------------
The following report on Form 8-K was filed during the quarter
ended July 31, 2000.
1. Current Report on Form 8-K filed on August 2, 2000 regarding Alloy's
acquisition of Kubic Marketing, Inc.
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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.
ALLOY ONLINE, INC.
Date: September 14, 2000 By: /s/ Samuel A. Gradess
---------------------
Samuel A. Gradess,
Chief Financial Officer
(Principal Accounting and
Financial Officer)
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ALLOY ONLINE, INC.
EXHIBIT INDEX
Exhibit No. 3.1 Restated Certificate of Incorporation (filed as Exhibit 3.1 to
Registration Statement on Form S-1, No. 333-74159, and
incorporated herein by reference).
Exhibit No. 3.2 Restated Bylaws (filed as Exhibit 3.2 to Registration Statement
on Form S-1, No. 333-74159, and incorporated herein by
reference).
Exhibit No. 4.1 Form of Common Stock Certificate (filed as Exhibit 4.1 to
Registration Statement on Form S-1, No. 333-74159, and
incorporated herein by reference).
Exhibit No. 27 Financial Data Schedule
24
