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Registration No. 333-______
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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BLUEFLY, INC.
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(Exact name of Registrant as specified in its charter)
DELAWARE 13-3612110
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) Number)
42 West 39th Street
New York, New York 10018
(212) 944-8000
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of the Registrant's Principal Executive Offices)
Melissa Payner-Gregor
Chief Executive Officer
Bluefly, Inc.
42 West 39th Street
New York, New York 10018
(212) 944-8000
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
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Copies to:
Richard A. Goldberg, Esq.
Dechert LLP
30 Rockefeller Plaza
New York, New York 10112
(212) 698-3500
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
REGISTERED REGISTERED (1) PER SHARE (2) PRICE (2) FEE
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Common Stock, $0.01 par value 7,528,993 (3) $ 1.64 $ 12,347,547.84 $ 1,453.31
1. Pursuant to Rule 416 promulgated under the Securities Act of 1933, this
Registration Statement shall also cover any additional shares of the
Registrant's Common Stock which become issuable by reason of any stock
dividend, stock split or similar transaction.
2. Estimated solely for the purpose of computing the registration fee
required by Section 6(b) of the Securities Act and computed pursuant to
Rule 457 under the Securities Act based upon the average of the high and
low prices of the Common Stock on August 2, 2005, as reported on the
Nasdaq SmallCap Market.
3. Includes: (a) 3,046,654 shares issuable upon the conversion of 2,315.457
shares of the Registrant's Series D preferred stock that were issued in
March 2003; (b) 1,724,138 shares issuable upon the conversion of 4,000
shares of the Registrant's Series F preferred stock that were issued in
June 2005; (c) 603,448 shares issuable upon the exercise of warrants
issued in June 2005 with an exercise price of $2.87 per share; and (d)
2,154,753 shares, which represents the Registrant's good faith estimate
of the number of shares that may be paid as dividends on the shares of
Series D preferred stock and Series F preferred stock described above
(the actual number of shares that may be paid as dividends depends upon
the time at which each share is converted, the market price of the
Registrant's common stock at such time, and whether the Registrant
chooses to pay such dividends in cash or in shares of common stock).
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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The information in this prospectus is not complete and may be changed.
These securities may not be sold pursuant to this prospectus until the
registration statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.
SUBJECT TO COMPLETION, DATED AUGUST 2, 2005
PROSPECTUS
7,528,993 SHARES OF COMMON STOCK
BLUEFLY, INC.
This prospectus relates to the resale, from time to time, of up to
7,528,993 shares of our common stock by the selling stockholders listed in this
Prospectus under the section "Selling Stockholders."
The prices at which the selling stockholders may sell the shares will be
determined by the prevailing market price for the shares or in negotiated
transactions. We will not receive any of the proceeds from the sale of the
shares by the selling stockholders.
Our common stock is quoted on the Nasdaq SmallCap Market under the
symbol "BFLY," and on the Boston Stock Exchange under the symbol "BFL." On
August 2, 2005, the last sale price of our common stock was $1.64 per share.
THE SHARES OFFERED IN THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK. YOU
SHOULD CAREFULLY CONSIDER THE RISK FACTORS COMMENCING ON PAGE 3 IN DETERMINING
WHETHER TO PURCHASE THE SHARES.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 2005
TABLE OF CONTENTS
WHERE YOU CAN FIND MORE INFORMATION........................................... 1
DOCUMENTS INCORPORATED BY REFERENCE........................................... 1
THE COMPANY................................................................... 2
RECENT DEVELOPMENTS........................................................... 2
RISK FACTORS.................................................................. 3
FORWARD-LOOKING STATEMENTS................................................... 11
USE OF PROCEEDS.............................................................. 11
SELLING STOCKHOLDERS......................................................... 11
PLAN OF DISTRIBUTION......................................................... 14
EXPERTS...................................................................... 16
LEGAL MATTERS................................................................ 16
Our address is 42 West 39th Street, New York, New York 10018, and the
phone number of our executive offices is (212) 944-8000.
The terms "Company," "Bluefly," "Registrant," "we," "us," and "our" in
this prospectus refer to Bluefly, Inc. and its subsidiary.
We have not authorized any person to make a statement that differs from
what is in this prospectus. If any person does make a statement that differs
from what is in this prospectus, you should not rely on it. This prospectus is
not an offer to sell, nor is it seeking an offer to buy, these securities in any
state in which the offer or sale is not permitted. The information in this
prospectus is complete and accurate as of its date, but the information may
change after that date.
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in or
incorporated by reference in this prospectus. If given or made, such information
or representations must not be relied upon as having been authorized by us or
the selling stockholders. This prospectus does not constitute an offer to sell,
or a solicitation of an offer to sell, or a solicitation of an offer to buy, any
securities other than the securities covered by this Prospectus, nor does it
constitute an offer to, or solicitation of, any person in any jurisdiction
where, or to any person to whom, it is unlawful to make such offer or
solicitation. Neither the delivery of this prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that there has
been no change in our affairs since the date as of which information is given in
this prospectus.
Until , 2005 (40 days after the commencement of this offering),
all dealers that buy, sell or trade shares of our common stock, whether or not
participating in this offering, may be required to deliver a prospectus. This
delivery requirement is in addition to the obligation of dealers to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
WHERE YOU CAN FIND MORE INFORMATION
Because we are subject to the informational requirements of the Exchange
Act, we file reports, proxy statements and other information with the Securities
and Exchange Commission (SEC). You may read and copy these reports, proxy
statements and other information at the public reference facilities maintained
by the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. You may
also obtain copies of those materials at prescribed rates from the public
reference section of the SEC at 450 Fifth Street, Washington, D.C. 20549. The
public may obtain information on the operation of the public reference room by
calling the SEC at (800) SEC-0330. In addition, we are required to file
electronic versions of those materials with the SEC through the SEC's EDGAR
system. The SEC maintains a web site at http://www.sec.gov that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the SEC. We have filed with the SEC a
registration statement on Form S-3 under the Securities Act with respect to the
securities offered with this prospectus. This prospectus does not contain all of
the information in the registration statement, parts of which we have omitted,
as allowed under the rules and regulations of the SEC. You should refer to the
registration statement for further information with respect to us and our
securities. Statements contained in this prospectus as to the contents of any
contract or other document are not necessarily complete (although they include a
description of the terms thereof that the Company believes are material to such
statement) and, in each instance, we refer you to the copy of each contract or
document filed as an exhibit to the registration statement. Copies of the
registration statement, including exhibits, may be inspected without charge at
the SEC's principal office in Washington, D.C., and you may obtain copies from
this office upon payment of the fees prescribed by the SEC. We will furnish
without charge to each person to whom a copy of this prospectus is delivered,
upon written or oral request, a copy of the information that has been
incorporated by reference into this prospectus (except exhibits, unless they are
specifically incorporated by reference into this prospectus). You should direct
any requests for copies to: Bluefly, Inc., 42 West 39th Street, New York, New
York 10018, Attention: General Counsel, Telephone: (212) 944-8000.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to incorporate by reference certain of our
publicly-filed documents into this prospectus, which means that information
included in these documents is considered part of this prospectus. We
incorporate by reference in this prospectus the information contained in the
following documents:
. our Annual Report on Form 10-K for the year ended December 31, 2004,
filed with the SEC on March 3, 2005;
. our Quarterly Report on Form 10-Q for the quarter ended March 31,
2005, filed with the SEC on May 3, 2005;
. our Proxy Statement, dated March 29, 2005, filed with the SEC on
March 25, 2005 in connection with our Annual Meeting of Stockholders
held on April 29, 2005;
. our Current Reports on Forms 8-K, each filed with the SEC
on February 22, 2005;
. our Current Report on Form 8-K, filed with the SEC on February 23,
2005;
. our Current Report on Form 8-K, filed with the SEC on March 4, 2005;
. our Current Report on Form 8-K, filed with the SEC on March 23,
2005;
. our Current Report on Form 8-K, filed with the SEC on June 28, 2005;
. our Current Report on Form 8-K, filed with the SEC on July 29, 2005;
. the description of our common stock in our registration statement on
Form 8-A filed with the SEC on April 22, 1997, including any
amendments or reports filed for the purpose of updating such
description; and
. all documents that we subsequently file with the SEC under Sections
13(a), 13(c), 14 or 15 of the Exchange Act until all of the
securities that may be offered with this prospectus are sold.
We will furnish without charge to you, on written or oral request, a
copy of any or all of the documents incorporated by reference, other than the
exhibits to those documents. You may obtain copies of those documents from us,
free of cost, by contacting us at the address or telephone number provided in
"Where You Can Find More Information" immediately above.
Information that we file later with the SEC and that is incorporated by
reference in this prospectus will automatically update information contained in
this prospectus or that was previously incorporated by reference into this
prospectus.
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THE COMPANY
We are a leading Internet retailer that sells over 350 brands of
designer apparel, accessories and home products at discounts up to 75% off
retail value. During 2004, we offered over 27,000 different styles for sale in
categories such as men's, women's and accessories as well as house and home
accessories. We launch the www.bluefly.com web site in September 1998. Since its
inception, www.bluefly.com has served over 640,000 customers and shipped to over
20 countries.
Our common stock is listed on the Nasdaq SmallCap Market under the
symbol "BFLY" and on the Boston Stock Exchange under the symbol "BFL" and we are
incorporated in Delaware. Our executive offices are located at 42 West 39th
Street, New York, New York 10018, and our telephone number is (212) 944-8000.
Our Internet address is www.bluefly.com. We make available, free of charge,
through our Web site, our annual report on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K, and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as
reasonably practicable after we electronically file such material with, or
furnish it to, the SEC.
RECENT DEVELOPMENTS
On June 24, 2005, we completed a private placement (the "New Financing")
pursuant to which we raised $7,075,431 through the sale of 7,000 shares of newly
designated Series F Preferred Stock for an aggregate purchase price of
$7,000,000 and warrants to purchase an additional 603,448 shares of our common
stock at an exercise price of $2.87 per share. The aggregate purchase price for
the warrants was $75,431, or $0.125 per warrant, and all of the warrants were
purchased by the New Investors described below. The investors participating in
the New Financing included eight private equity funds that had not previously
participated in our financing transactions (the "New Investors"), and two
private equity funds affiliated with Soros Fund Management LLC (the "Soros
Funds") that collectively own a majority of our capital stock. In connection
with the New Financing, the New Investors also purchased from the Soros Funds
previously issued shares of our Series D Preferred Stock with an aggregate
liquidation preference and accrued dividends of $3,000,000. Both the Series D
Preferred Stock and the Series F Preferred Stock are convertible into common
stock. The number of shares to be issued upon a conversion is determined by
dividing the liquidation preference of the shares of preferred stock to be
converted by the conversion price. The conversion price of the Series D
Preferred Stock is $0.76 and the conversion price of the Series F Preferred
Stock is $2.32. The Series D Preferred Stock accrues dividends at the rate of
12% per year, compounded annually, and the Series F Preferred Stock accrues
dividends at the rate of 7% per year, compounded annually. Such dividends may
(subject to certain exceptions) be paid in cash or common stock, at our option.
We currently intend to pay such dividends in shares of common stock. The
majority of the proceeds of the New Financing are expected to be used for
marketing, with the remainder to be used for general corporate purposes. This
Prospectus is part of a registration statement that registers the offer and sale
by the New Investors of the shares of our common stock issuable upon the
conversion of the Series D Preferred Stock and Series F Preferred Stock, and the
exercise of the warrants, that they purchased in the New Financing.
On July 27, 2005, we entered into a new three year, $7.5 million
revolving credit facility with Wells Fargo Retail Finance, LLC. The Wells Fargo
credit facility refinanced our previous credit facility with Rosenthal &
Rosenthal, Inc. Under the terms of the credit facility, Wells Fargo provides us
with a revolving credit facility and issues letters of credit in favor of
suppliers or factors. The credit facility is secured by a lien on all of our
assets, as well as a $2,000,000 letter of credit issued by one of the Soros
Funds in favor of Wells Fargo.
On July 14, 2005, we announced that our sales for the month of June 2005
increased by approximately 10%, to approximately $3.3 million, from
approximately $3.0 million in June 2004.
On June 6, 2005, we announced that our sales for the month of May 2005
increased by over 35%, to more than $4.2 million, from more than $3.1 million in
May 2004.
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On May 5, 2005, we announced that our sales for the month of April 2005
increased by over 33%, to approximately $4.5 million, from approximately $3.4
million in April 2004.
RISK FACTORS
Before you invest in our common stock, you should be aware of the risks
described below, which we believe to be the material risks involved with an
investment in our common stock. You should carefully consider these risk
factors, together with all of the other information included in this prospectus,
including the documents incorporated in this prospectus by reference, before you
decide whether to purchase shares of our common stock.
We Have A History Of Losses And Expect That Losses Will Continue In The
Future. As of December 31, 2004, we had an accumulated deficit of $96,127,000.
We incurred net losses of $3,791,000, $6,369,000 and $6,479,000 for the years
ended December 31, 2004, 2003 and 2002, respectively. In the first quarter of
2005, we incurred a net loss of $893,000, as compared to net losses of
$1,130,000 in the first quarter of 2004, and $1,840,000 in the first quarter of
2003. We have incurred substantial costs to develop our Web site and
infrastructure. In order to expand our business, we intend to invest in sales,
marketing, merchandising, operations, information systems, site development and
additional personnel to support these activities. We therefore expect to
continue to incur substantial operating losses for the foreseeable future. Our
ability to become profitable depends on our ability to generate and sustain
substantially higher net sales while maintaining reasonable expense levels, both
of which are uncertain. If we do achieve profitability, we cannot be certain
that we would be able to sustain or increase profitability on a quarterly or
annual basis in the future.
Our Lenders Have Liens On Substantially All Of Our Assets And Could
Foreclose In The Event That We Default Under Our Loan Facility. Under the terms
of our loan facility, our lender has a first priority lien on substantially all
of our assets, including our cash balances. In connection with the loan
facility, we entered into a reimbursement agreement with one of the Soros Funds,
pursuant to which the Soros Fund posted a $2.0 million letter of credit as
additional collateral under the loan facility, and we agreed to reimburse the
Soros Fund for any amounts it paid to our lender pursuant to such guarantee. We
granted the Soros Fund a subordinated lien on substantially all of our assets,
including our cash balances, in order to secure our reimbursement obligations.
If we default under the loan facility, our lender and/or Soros would be
entitled, among other things, to foreclose on our assets in order to satisfy our
obligations under the loan facility.
Our Ability To Maintain Our Minimum Availability Requirement and Pay Our
Indebtedness Under Our Loan Facility Is Dependent Upon Meeting Our Business
Plan. We are required to pay interest under our loan facility on a monthly basis
and maintain minimum availability of $850,000. Assuming we meet our business
plan, we will be able to pay our interest and meet our minimum availability
requirement. To a certain extent, however, our ability to meet our business
plan, is subject to general economic, financial, competitive, legislative,
regulatory and other factors that are beyond our control, and therefore we
cannot assure you that based on our business plan we will generate sufficient
cash flow from operations to enable us to pay our indebtedness under the Loan
Facility and maintain our minimum availability requirement throughout the term
of the agreement. If we fall short of our business plan and are unable to raise
additional capital, we could default under our loan facility. In the event of a
default under the loan facility, our lender would be entitled, among other
things, to foreclose on our assets (whether inside or outside a bankruptcy
proceeding) in order to satisfy our obligations under the loan facility. See
"Risk Factors - Our Lenders Have Liens On Substantially All Of Our Assets And
Could Foreclose In The Event That We Default Under Our Loan Facility."
We Are Making A Substantial Investment In Our Business And May Need To
Raise Additional Funds. We intend to use a majority of the funds raised in the
New Financing to invest in marketing and accelerate our customer acquisition. In
the event that this increased marketing effort is successful, we may seek to
raise additional capital in order to further expand our customer acquisition
efforts. Moreover, in the event that the marketing effort is not successful it
may be necessary for us to raise additional capital in order to fund planned
expenditures. The environment for raising investment capital has been difficult
and there can be no assurance that additional financing or other capital will be
available upon terms acceptable to us, or at all. In the event that we are
unable to obtain additional financing, if needed, we could be forced to decrease
expenses that we believe are necessary for us to realize on our long-term
prospects for growth and profitability and/or liquidate inventory in order to
generate cash. Moreover, any additional equity financing that we may raise could
result in significant dilution of the existing holders of common stock. See
"Risk Factors - Certain Events Could Result In Significant Dilution Of Your
Ownership Of Common Stock."
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Certain Events Could Result In Significant Dilution Of Your Ownership Of
Our Common Stock. Stockholders could be subject to significant dilution to the
extent that we raise additional equity financing, as a result of both the
issuance of additional equity securities, the potential conversion of the
convertible promissory notes described below and the anti-dilution provisions of
our Series B, C, D, E and F preferred stock described below, which provide for
the issuance of additional securities to the holders thereof, under certain
circumstances, to the extent that the Preferred Stock is converted at any time
after a sale of Common Stock at less than $2.32 (in the case of the Series E
preferred stock) or $0.76 per share (in the case of the Series B, C, D and E
preferred stock).
Moreover, as of June 30, 2005, there were outstanding options to
purchase 8,791,285 shares of our Common Stock issued under our Stock Option
Plans, warrants to purchase 756,644 shares of our Common Stock issued to the
Soros Funds, and additional warrants and options to purchase 1,326,749 shares of
our Common Stock. In addition, as of such date, our outstanding Preferred Stock
was convertible into an aggregate of 46,340,671 shares of our Common Stock (plus
any shares of our Common Stock issued upon conversion in payment of any accrued
and unpaid dividends). The exercise of our outstanding options and warrants
and/or the conversion of our outstanding Preferred Stock would dilute the then
existing stockholders' percentage ownership of our Common Stock, and any sales
in the public market of our Common Stock underlying such securities, could
adversely affect prevailing market price of our Common Stock. In the event that
all of the securities described above were converted to Common Stock, the
holders of the Common Stock immediately prior to such conversion would own
approximately 21% of the outstanding Common Stock immediately after such
conversion, excluding the effect of accrued dividends on Preferred Stock.
Anti-Dilution Provisions Relating To Our Preferred Stock Could Result In
Further Dilution To Your Ownership Of Our Common Stock. As described above, our
Series B, C, D and E Preferred Stock contain anti-dilution provisions pursuant
to which, subject to certain exceptions, in the event that we issue or sell our
Common Stock or new securities convertible into our Common Stock in the future
for less than $0.76 per share, the conversion price of that preferred stock
would be decreased to the price at which such Common Stock or other new
securities are sold. Our Series F Preferred Stock contains anti-dilution
provisions pursuant to which, subject to certain exceptions, in the event that
we issue or sell our Common Stock or new securities convertible into our Common
Stock in the future for less than $2.32 per share, but for $1.50 or more per
share, the conversion price of the Series F preferred stock would be decreased
on a weighted average basis, taking into account the number of new shares issued
and the price at which such shares are issued. In the event that we issue or
sell our Common Stock or new securities convertible into our Common Stock in the
future for less than $1.50 per share, the conversion price of the Series F
preferred stock would be decreased to the price at which such Common Stock or
other new securities are sold. The anti-dilution provisions of the Series F
preferred stock are subject to the approval of our stockholders. We expect that
approval to be obtained at our next shareholder meeting, as the Soros Funds have
agreed to vote all of their shares of our stock (which represent a majority of
the votes) in favor of such approval.
The Soros Funds also own $4 million of convertible promissory notes
issued by us that bear interest at the rate of 12% per annum and are
convertible, at Soros' option, into our equity securities sold in any subsequent
round of financing at a price that is equal to the lowest price per share
accepted by any investor (including the Soros Funds or any of its affiliates) in
such subsequent round of financing.
The Soros Funds Owns A Majority Of Our Stock And Therefore Effectively
Controls Our Management And Policies. As of June 30, 2005, through its holdings
of our common stock, as well as our preferred stock, and warrants convertible
into our common stock, the Soros Funds beneficially owned, in the aggregate,
approximately 75% of our common stock. The holders of our preferred stock vote
on an "as converted" basis with the holders of our common stock. By virtue of
its ownership of our Series A and B preferred stock, the Soros Funds have the
right to appoint two designees to our Board of Directors, each of whom has seven
votes on any matter voted upon by our Board of Directors. Collectively, these
two designees have 14 out of 19 possible votes on each matter voted upon by our
Board of Directors. In addition, we are required to obtain the approval of
holders of our Series A, B, C, D and E preferred stock prior to taking certain
actions. The holders of our Series A, B, C, D and E preferred stock have certain
pre-emptive rights to participate in future equity financings and, along with
the holders of the Series F preferred stock, have certain anti-dilution rights
described above that could result in the
4
issuance of additional securities to such holders. In view of their large
percentage of ownership and rights as the holders of our preferred stock, Soros
effectively controls our management and policies, such as the election of our
directors, the appointment of new management and the approval of any other
action requiring the approval of our stockholders, including any amendments to
our certificate of incorporation, a sale of all or substantially all of our
assets or a merger. In addition, Soros has demand registration rights with
respect to the shares of our common stock that it beneficially owns. Any
decision by Soros to exercise such registration rights and to sell a significant
amount of our shares in the public market could have an adverse effect on the
price of our common stock. See "Risk Factors - Certain Events Could Result In
Significant Dilution of Your Ownership Of Common Stock."
If We Are Not Accurate In Forecasting Our Revenues, We May Be Unable To
Adjust Our Operating Plans In A Timely Manner. Because our business has not yet
reached a mature stage, it is difficult for us to forecast our revenues
accurately. We base our current and future expense levels and operating plans on
expected revenues, but in the short term a significant portion of our expenses
are fixed. Accordingly, we may be unable to adjust our spending in a timely
manner to compensate for any unexpected revenue shortfall. This inability could
cause our operating results in some future quarter to fall below the
expectations of securities analysts and investors. In that event, the trading
price of our common stock could decline significantly. In addition any such
unexpected revenue shortfall could significantly affect our short-term cash flow
and our net worth, which could require us to seek additional financing and/or
cause a default under our credit facility. See "Risk Factors - We Are Making A
Substantial Investment In Our Business And May Need To Raise Additional Funds"
and "Risk Factors -Our Ability To Comply With Our Financial Covenants And Pay
Our Indebtedness Under Our Loan Facility Is Dependent Upon Meeting Our Business
Plan."
Unexpected Changes In Fashion Trends Could Cause Us To Have Either
Excess or Insufficient Inventory. Fashion trends can change rapidly, and our
business is sensitive to such changes. There can be no assurance that we will
accurately anticipate shifts in fashion trends and adjust our merchandise mix to
appeal to changing consumer tastes in a timely manner. If we misjudge the market
for our products or are unsuccessful in responding to changes in fashion trends
or in market demand, we could experience insufficient or excess inventory levels
or higher markdowns, either of which would have a material adverse effect on our
business, financial condition and results of operations.
We Will Be Subject To Cyclical Variations In The Apparel And E-Commerce
Markets. The apparel industry historically has been subject to substantial
cyclical variations. Furthermore, Internet usage slows down in the summer
months. We and other apparel vendors rely on the expenditure of discretionary
income for most, if not all, sales. In the first three quarters of 2003, the
retail apparel market experienced sluggish growth, requiring many retailers to
significantly reduce prices and discount merchandise. We lowered our prices
during the first quarter of 2003, in part, as the result of this sluggish
growth, and maintained lower pricing levels in the second and third quarters of
2003 in order to generate cash from excess out-of-season inventory. While the
retail apparel market improved modestly during the fourth quarter of 2003 and
the 2004 calendar year, any future decrease in growth rates or downturn, whether
real or perceived, in economic conditions or prospects could adversely affect
consumer spending habits and, therefore, have a material adverse effect on our
revenue, cash flow and results of operations. Alternatively, any improvement,
whether real or perceived, in economic conditions or prospects could adversely
impact our ability to acquire merchandise and, therefore, have a material
adverse effect on our business, prospects, financial condition and results of
operations, as our supply of merchandise is dependent on the inability of
designers and retailers to sell their merchandise in full-price venues. See
"Risk Factors - We Do Not Have Long Term Contracts With The Majority Of Our
Vendors And Therefore The Availability of Merchandise Is At Risk."
We Purchase Product From Some Indirect Supply Sources, Which Increases
Our Risk of Litigation Involving The Sale Of Non-Authentic Or Damaged Goods. We
purchase merchandise both directly from brand owners and indirectly from
retailers and third party distributors. The purchase of merchandise from parties
other than the brand owners increases the risk that we will mistakenly purchase
and sell non-authentic or damaged goods, which could result in potential
liability under applicable laws, regulations, agreements and orders. Moreover,
any claims by a brand owner, with or without merit, could be time consuming,
result in costly litigation, generate bad publicity for us, and have a material
adverse impact on our business, prospects, financial condition and results of
operations.
5
If Our Co-Location Facility, Third Party Distribution Center Or Third
Party Call Center Fails, Our Business Could Be Interrupted For A Significant
Period Of Time. Our ability to receive and fulfill orders successfully and
provide high-quality customer service, largely depends on the efficient and
uninterrupted operation of our computer and communications hardware systems and
fulfillment center. Substantially all of our computer and communications
hardware is located at a single co-location facility owned by a third party in
New York City. Primarily all of our inventory is held, and our customer orders
are filled, at a third party distribution center located in Virginia, and a
large majority of our customer service representatives are employees of a third
party call center in Ohio. These operations are vulnerable to damage or
interruption from fire, flood, power loss, telecommunications failure, terrorist
attacks, acts of war, break-ins, earthquake and similar events. We do not
presently have redundant systems in multiple locations or a formal disaster
recovery plan. Accordingly, a failure at one of these facilities could interrupt
our business for a significant period of time, and our business interruption
insurance may be insufficient to compensate us for losses that may occur. Any
such interruption would negatively impact our sales, results of operations and
cash flows for the period in which it occurred, and could have a long-term
adverse effect on our relationships with our customers and suppliers.
Security Breaches To Our Systems And Database Could Cause Interruptions
to Our Business And Impact Our Reputation With Customers, And We May Incur
Significant Expenses to Protect Against Such Breaches. A fundamental requirement
for online commerce and communications is the secure transmission of
confidential information over public networks. There can be no assurance that
advances in computer capabilities, new discoveries in the field of cryptography,
or other events or developments will not result in a compromise or breach of the
algorithms we use to protect customer transaction and personal data contained in
our customer database. A party who is able to circumvent our security measures
could misappropriate proprietary information or cause interruptions in our
operations. If any such compromise of our security were to occur, it could have
a material adverse effect on our reputation with customers, thereby affecting
our long-term growth prospects. In addition, we may be required to expend
significant capital and other resources to protect against such security
breaches or to alleviate problems caused by such breaches.
Brand Owners Could Establish Procedures To Limit Our Ability To Purchase
Products Indirectly. Brand owners have implemented, and are likely to continue
to implement, procedures to limit or control off-price retailers' ability to
purchase products indirectly. In addition, several brand owners in the U.S. have
distinctive legal rights rendering them the only legal importer of their
respective brands into the U.S. If we acquire such product indirectly from
distributors and other third parties who may not have complied with applicable
customs laws and regulations, such goods could be subject to seizure from our
inventory by U.S. Customs Service, and the importer may have a civil action for
damages against us. See "Risk Factors - We Do Not Have Long Term Contracts With
The Majority of Our Vendors And Therefore The Availability Of Merchandise Is At
Risk."
Our Growth May Place A Significant Strain On Our Management And
Administrative Resources And Cause Disruptions In Our Business. Our historical
growth has placed, and any further growth is likely to continue to place, a
significant strain on our management and administrative resources. To be
successful, we must continue to implement information management systems and
improve our operating, administrative, financial and accounting systems and
controls. We will also need to train new employees and maintain close
coordination among our executive, accounting, finance, marketing, merchandising,
operations and technology functions. Any failure to implement such systems and
training, and to maintain such coordination, could affect our ability to plan
for, and react quickly to, changes in our business and, accordingly, could cause
an adverse impact on our cash flow and results of operations in the periods
during which such changes occur. In addition, as our workforce grows, our
exposure to potential employment liability issues increases, and we will need to
continue to improve our human resources functions in order to protect against
such increased exposure. Moreover, our business is dependent upon our ability to
expand our third-party fulfillment operations, customer service operations,
technology infrastructure, and inventory levels to accommodate increases in
demand, particularly during the peak holiday selling season. Our planned
expansion efforts in these areas could cause disruptions in our business. Any
failure to expand our third-party fulfillment operations, customer service
operations, technology infrastructure or inventory levels at the pace needed to
support customer demand could have a material adverse effect on our cash flow
and results of operations during the period in which such failures occur and
could have a long-term effect on our reputation with our customers.
6
We Are Heavily Dependent On Third-Party Relationships, And Failures By A
Third Party Could Cause Interruptions To Our Business. We are heavily dependent
upon our relationships with our fulfillment operations provider, third party
call center and Web hosting provider, delivery companies like UPS and the United
States Postal Service, and credit card processing companies such as Paymentech
and Cybersource to service our customers' needs. To the extent that there is a
slowdown in mail service or package delivery services, whether as a result of
labor difficulties, terrorist activity or otherwise, our cash flow and results
of operations would be negatively impacted during such slowdown, and the results
of such slowdown could have a long-term negative effect on our reputation with
our customers. The failure of our fulfillment operations provider, third party
call center, credit card processors or Web hosting provider to properly perform
their services for us could cause similar effects. Our business is also
generally dependent upon our ability to obtain the services of other persons and
entities necessary for the development and maintenance of our business. If we
fail to obtain the services of any such person or entities upon which we are
dependent on satisfactory terms, or we are unable to replace such relationship,
we would have to expend additional resources to develop such capabilities
ourselves, which could have a material adverse impact on our short-term cash
flow and results of operations and our long-term prospects.
We Are In Competition With Companies Much Larger Than Ourselves.
Electronic commerce generally and, in particular, the online retail apparel and
fashion accessories market, is a new, dynamic, high-growth market and is rapidly
changing and intensely competitive. Our competition for customers comes from a
variety of sources including:
o existing land-based, full price retailers, such as Neiman Marcus,
Saks Fifth Avenue, Bergdorf Goodman, Nordstrom, The Gap, and Macy's
that are using the Internet to expand their channels of
distribution;
o less established online companies, such as eLuxury and Yoox;
o internet sites such as Amazon.com, Overstock.com, Smartbargains.com,
Zappos.com, eBags.com and ebay.com
o traditional direct marketers, such as L.L. Bean, Lands' End and J.
Crew; and
o traditional off-price retail stores such as T.J. Maxx, Marshalls,
Ross, Filene's Basement and Loehmanns, which may or may not use the
Internet to grow their customer base.
Competition in our industry has intensified, and we expect this trend to
continue as the list of our competitors grows. Many of our competitors and
potential competitors have longer operating histories, significantly greater
resources, greater brand name recognition and more firmly established supply
relationships. We believe that the principal competitive factors in our market
include:
o brand recognition;
o merchandise selection;
o price;
o convenience;
o customer service;
o order delivery performance; and
o site features.
There can be no assurance that we will be able to compete successfully against
competitors and future competitors, and competitive pressures faced by us could
force us to increase expenses and/or decrease our prices at some point in the
future.
We Do Not Have Long Term Contracts With Our Vendors And Therefore The
Availability Of Merchandise Is At Risk. We have few agreements controlling the
long-term availability of merchandise or the continuation of particular pricing
practices. Our contracts with suppliers typically do not restrict such suppliers
7
from selling products to other buyers. There can be no assurance that our
current suppliers will continue to sell products to us on current terms or that
we will be able to establish new or otherwise extend current supply
relationships to ensure product acquisitions in a timely and efficient manner
and on acceptable commercial terms. In addition, in order to entice new vendors
to open up relationships with us, we sometimes are required to either make
prepayments or agree to shortened payment terms. Our ability to develop and
maintain relationships with reputable suppliers and obtain high quality
merchandise is critical to our success. If we are unable to develop and maintain
relationships with suppliers that would allow us to obtain a sufficient amount
and variety of quality merchandise on acceptable commercial terms, our ability
to satisfy our customer's needs, and therefore our long-term growth prospects,
would be materially adversely affected. See "Risk Factors - Brand Owners Could
Establish Procedures to Limit Our Ability to Purchase Products Indirectly."
We Need To Further Establish Brand Name Recognition. We believe that
further establishing, maintaining and enhancing our brand is a critical aspect
of our efforts to attract and expand our online traffic. The number of Internet
sites that offer competing services, many of which already have well established
brands in online services or the retail apparel industry generally, increases
the importance of establishing and maintaining brand name recognition. Promotion
of Bluefly.com will depend largely on our success in providing a high quality
online experience supported by a high level of customer service, which cannot be
assured. In addition, to attract and retain online users, and to promote and
maintain Bluefly.com in response to competitive pressures, we may find it
necessary to increase substantially our advertising and marketing expenditures.
If we are unable to provide high quality online services or customer support, or
otherwise fail to promote and maintain Bluefly.com, or if we incur excessive
expenses in an attempt to promote and maintain Bluefly.com, our long-term growth
prospects, would be materially adversely affected.
There Can Be No Assurance That Our Technology Systems Will Be Able To
Handle Increased Traffic; Implementation Of Changes To Web Site. A key element
of our strategy is to generate a high volume of traffic on, and use of,
Bluefly.com. Accordingly, the satisfactory performance, reliability and
availability of Bluefly.com, transaction processing systems and network
infrastructure are critical to our reputation and our ability to attract and
retain customers, as well as maintain adequate customer service levels. Our
revenues will depend on the number of visitors who shop on Bluefly.com and the
volume of orders we can handle. Unavailability of our Web site or reduced order
fulfillment performance would reduce the volume of goods sold and could also
adversely affect consumer perception of our brand name. We may experience
periodic system interruptions from time to time. If there is a substantial
increase in the volume of traffic on Bluefly.com or the number of orders placed
by customers, we will be required to expand and upgrade further our technology,
transaction processing systems and network infrastructure. There can be no
assurance that we will be able to accurately project the rate or timing of
increases, if any, in the use of Bluefly.com or expand and upgrade our systems
and infrastructure to accommodate such increases on a timely basis. In order to
remain competitive, we must continue to enhance and improve the responsiveness,
functionality and features of Bluefly.com, which is particularly challenging
given the rapid rate at which new technologies, customer preferences and
expectations and industry standards and practices are evolving in the online
commerce industry. Accordingly, we redesign and enhance various functions on our
Web site on a regular basis, and we may experience instability and performance
issues as a result of these changes.
We May Be Subject To Higher Return Rates. We recognize that purchases of
apparel and fashion accessories over the Internet may be subject to higher
return rates than traditional store bought merchandise. We have established a
liberal return policy in order to accommodate our customers and overcome any
hesitancy they may have with shopping via the Internet. As a result, our reserve
for returns and credit card chargebacks for fiscal 2004, 2003 and 2002 has been
36.6%, 37.1% and 35.5%, respectively. If return rates are higher than expected,
our business, prospects, financial condition, cash flows and results of
operations could be materially adversely affected.
Our Success Is Largely Dependent Upon Our Executive Personnel. We
believe our success will depend to a significant extent on the efforts and
abilities of our executive personnel. In particular, we rely upon their
strategic guidance, their relationships and credibility in the vendor and
financial communities and their ability to recruit key operating personnel. Our
current employment agreements with our Chief Executive Officer and Chief
Financial Officer run through March 2007 and July 2006 respectively, however
there can be no assurance that either of them will not terminate their
employment earlier. The loss of the services of any of our executive officers
could have a material adverse effect on our credibility in the vendor
communities and our ability to recruit new key operating personnel.
8
Our Success Is Dependent Upon Our Ability To Attract New Key Personnel.
Our operations will also depend to a great extent on our ability to attract new
key personnel with relevant experience and retain existing key personnel in the
future. The market for qualified personnel is extremely competitive. Our failure
to attract additional qualified employees could have a material adverse effect
on our prospects for long-term growth.
There Are Inherent Risks Involved In Expanding Our Operations. We may
choose to expand our operations by developing new Web sites, promoting new or
complementary products or sales formats, expanding the breadth and depth of
products and services offered, expanding our market presence through
relationships with third parties, adopting non-Internet based channels for
distributing our products, or consummating acquisitions or investments.
Expansion of our operations in this manner would require significant additional
expenses and development, operations and editorial resources and would strain
our management, financial and operational resources. For example, we have
historically expended significant internal resources in connection with the
redesign of our Web site and the implementation of our online strategic
alliances. Moreover, in the event that we expand upon our efforts to open
brick-and-mortar outlet stores, we will be required to devote significant
internal resources and capital to such efforts. There can be no assurance that
we would be able to expand our efforts and operations in a cost-effective or
timely manner or that any such efforts would increase overall market acceptance.
Furthermore, any new business or Web site that is not favorably received by
consumer or trade customers could damage our reputation.
We May Be Liable For Infringing The Intellectual Property Rights Of
Others. Third parties may assert infringement claims against us. From time to
time in the ordinary course of business we have been, and we expect to continue
to be, subject to claims alleging infringement of the trademarks and other
intellectual property rights of third parties. These claims and any resulting
litigation, if it occurs, could subject us to significant liability for damages.
In addition, even if we prevail, litigation could be time-consuming and
expensive and could result in the diversion of our time and attention. Any
claims from third parties may also result in limitations on our ability to use
the intellectual property subject to these claims unless we are able to enter
into agreements with the third parties making these claims.
We May Be Liable for Product Liability Claims. We sell products
manufactured by third parties, some of which may be defective. If any product
that we sell were to cause physical injury or injury to property, the injured
party or parties could bring claims against us as the retailer of the product.
Our insurance coverage may not be adequate to cover every claim that could be
asserted. If a successful claim were brought against the Company in excess of
our insurance coverage, it could have a material adverse effect on our cash flow
and on our reputation with customers. Unsuccessful claims could result in the
expenditure of funds and management time and could have a negative impact on our
business.
We Cannot Guarantee The Protection Of Our Intellectual Property. Our
intellectual property is critical to our success, and we rely on trademark,
copyright, domain names and trade secret protection to protect our proprietary
rights. Third parties may infringe or misappropriate our trademarks or other
proprietary rights, which could have a material adverse effect on our business,
prospects, results of operations or financial condition. While we enter into
confidentiality agreements with our employees, consultants and strategic
partners and generally control access to and distribution of our proprietary
information, the steps we have taken to protect our proprietary rights may not
prevent misappropriation. We are pursuing registration of various trademarks,
service marks and domain names in the United States and abroad. Effective
trademark, copyright and trade secret protection may not be available in every
country, and there can be no assurance that the United States or foreign
jurisdictions will afford us any protection for our intellectual property. There
also can be no assurance that any of our intellectual property rights will not
be challenged, invalidated or circumvented. In addition, we do not know whether
we will be able to defend our proprietary rights since the validity,
enforceability and scope of protection of proprietary rights in Internet-related
industries is uncertain and still evolving. Moreover, even to the extent that we
are successful in defending our rights, we could incur substantial costs in
doing so.
Our Business Could Be Harmed By Consumers' Concerns About The Security
Of Transactions Over The Internet. Concerns over the security of transactions
conducted on the Internet and commercial online services, the increase in
identity theft and the privacy of users may also inhibit the growth of the
Internet and commercial online services, especially as a means of conducting
commercial transactions. Moreover, although we have
9
developed systems and processes that are designed to protect consumer
information and prevent fraudulent credit card transactions and other security
breaches, failure to mitigate such fraud or breaches could have a material
adverse effect on our business, prospects, financial condition and results of
operations.
We Face Legal Uncertainties Relating To The Internet In General And To
Our Industry In Particular And May Become Subject To Costly Government
Regulation. We are not currently subject to direct regulation by any domestic or
foreign governmental agency, other than regulations applicable to businesses
generally, and laws or regulations directly applicable to online commerce.
However, it is possible that laws and regulations may be adopted that would
apply to the Internet and other online services. Furthermore, the growth and
development of the market for online commerce may prompt calls for more
stringent consumer protection laws that may impose additional burdens on those
companies conducting business online. The adoption of any additional laws or
regulations may increase our cost of doing business and/or decrease the demand
for our products and services and increase our cost of doing business.
The applicability to the Internet of existing laws in various jurisdictions
governing issues such as property ownership, sales and other taxes, libel and
personal privacy is uncertain and may take years to resolve. Any such new
legislation or regulation, the application of laws and regulations from
jurisdictions whose laws do not currently apply to our business, or the
application of existing laws and regulations to the Internet and online commerce
could also increase our cost of doing business. In addition, if we were alleged
to have violated federal, state or foreign, civil or criminal law, we could face
material liability and damage to our reputation and, even if we successfully
defend any such claim, we incur significant costs in connection with such
defense.
We Face Uncertainties Relating To Sales And Other Taxes. We are not
currently required to pay sales or other similar taxes in respect of shipments
of goods into states other than Virginia, Ohio and New York. However, state
taxation laws and regulations may change in the future, and one or more states
may seek to impose sales tax collection obligations on out-of-state companies
such as our company that engage in online commerce. In addition, any new
operation in states outside Virginia, Ohio and New York could subject shipments
into such states to state sales taxes under current or future laws. A successful
assertion by one or more states or any foreign country that the sale of
merchandise by us is subject to sales or other taxes, could subject us to
material liabilities and, to the extent that we pass such costs on to our
customers, could decrease our sales.
Change Of Control Covenant And Liquidation Preference Of Preferred
Stock. We have agreed with the Soros Funds, that for so long as any shares of
their Series A, B, C, D or E preferred stock are outstanding, we will not take
any action to approve or otherwise facilitate any merger, consolidation or
change of control, unless provisions have been made for the holders of such
preferred stock to receive from the acquirer an amount in cash equal to the
respective aggregate liquidation preferences of such preferred stock. The
aggregate liquidation preference of such preferred stock is equal to the greater
of (i) approximately $46,800,000 (plus any accrued and unpaid dividends) and
(ii) the amount that the holders of shares of such preferred stock would receive
if they were to convert such shares of Common Stock immediately prior to
liquidation.
The Holders Of Our Common Stock May Be Adversely Affected By The Rights
Of Holders Of Preferred Stock That May Be Issued In The Future. Our certificate
of incorporation and by-laws, as amended, contain certain provisions that may
delay, defer or prevent a takeover. Our Board of Directors has the authority to
issue up to 15,479,250 additional shares of preferred stock, and to determine
the price, rights, preferences and restrictions, including voting rights, of
those shares, without any further vote or action by the stockholders.
Accordingly, our Board of Directors is empowered, without approval of the
holders of Common Stock, to issue preferred stock, for any reason and at any
time, with such rates of dividends, redemption provisions, liquidation
preferences, voting rights, conversion privileges and other characteristics as
they may deem necessary. The rights of holders of Common Stock will be subject
to, and may be adversely affected by, the rights of holders of any preferred
stock that may be issued in the future.
We Rely On The Effectiveness Of Our Internal Controls. Section 404 of
the Sarbanes-Oxley Act of 2002 requires that we establish and maintain an
adequate internal control structure and procedures for financial reporting and
assess on an on-going basis the design and operating effectiveness of our
internal control structure and procedures for financial reporting. Our
independent registered accounting firm will be required to audit both the design
and operating effectiveness of our internal controls and management's assessment
of the design and the
10
effectiveness of its internal controls for the year ended December 31, 2005. It
is possible that, in preparation for this audit, we could discover certain
deficiencies in the design and/or operation of our internal controls that could
adversely affect our ability to record, process, summarize and report financial
data. We have invested and will continue to invest significant resources in this
process. Because management's assessment of internal controls has not been
required to be reported in the past, we are uncertain as to what impact a
conclusion that deficiencies exist in our internal controls over financial
reporting would have on the trading price of our common stock.
FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this prospectus and in
documents that we incorporate by reference into this prospectus. These
forward-looking statements are subject to risks and uncertainties. Actual
results may differ materially from those expressed in these forward-looking
statements.
Forward-looking statements include information concerning our possible
or assumed future results of operations as well as statements that include the
words "believe," "expect," "anticipate," "intend" or similar expressions. You
should understand that certain important factors, including those set forth in
"Risk Factors" above and elsewhere in this prospectus and the documents that we
incorporate by reference into this prospectus, could affect our future results
of operations and could cause those results to differ materially from those
expressed in our forward-looking statements. In connection with these forward-
looking statements, you should carefully review the risks set forth in this
prospectus and the documents we incorporate by reference into this prospectus.
USE OF PROCEEDS
The proceeds from the sale of the common stock offered pursuant to this
prospectus are solely for the account of the selling stockholders. Accordingly,
we will not receive any proceeds from the sale of the shares from the selling
stockholders. However we would receive the proceeds of any exercise of the
warrants held by these selling stockholders to the extent that such warrants are
exercised for cash. In the event that all such warrants were exercised for cash,
the aggregate proceeds received by us would be approximately $1,732,000. There
can be no assurance concerning the number or the timing of the exercise of such
warrants by the selling stockholders at this date. In addition, because the
warrants contain provisions allowing for a cashless exercise under certain
circumstances, there can be no assurance that we would receive all such proceeds
even if all such warrants are exercised. Any proceeds realized from the exercise
of such warrants will be used for general working capital.
SELLING STOCKHOLDERS
This prospectus relates to the resale of up to 7,528,993 shares of our
common stock by the selling stockholders listed below. These shares include: (a)
3,046,654 shares issuable upon the conversion of 2,315.457 shares of our Series
D preferred stock that were issued in March 2003 and were purchased by the New
Investors in connection with the New Financing; (b) 1,724,138 shares issuable
upon the conversion of 4,000 shares of our Series F preferred stock that were
issued in June 2005 to the New Investors pursuant to the New Financing; (c)
603,448 shares issuable upon the exercise of warrants issued to the New
Investors in June 2005 pursuant to the New Financing with an exercise price of
$2.87 per share; and (d) 2,154,753 shares, which represents our good faith
estimate of the number of shares that may be paid as dividends on the shares of
Series D preferred stock and Series F preferred stock described below (the
actual number of shares that may be paid as dividends depends upon the time at
which each share is converted, the market price of our common stock at such
time, and whether we choose to pay such dividends in cash or in shares of common
stock). The Series D Preferred Stock accrues dividends at the rate of 12% per
year, compounded annually, and the Series F Preferred Stock accrues dividends at
the rate of 7% per year, compounded annually. Such dividends may (subject to
certain exceptions) be paid in cash or common stock, at our option. We currently
intend to pay such dividends in shares of common stock.
The table below sets forth certain information known to us, based upon
written representations from the selling stockholders, with respect to the
beneficial ownership of our common stock by the selling stockholders, as of June
30, 2005. The following table assumes that the selling stockholders sell all of
their shares. We are unable to determine the exact number of shares that will
actually be sold.
11
Pursuant to the New Financing, we agreed with the selling stockholders
to file the Registration Statement of which this Prospectus is a part, and we
agreed to pay their expenses in connection therewith (exclusive of any selling
commissions or similar fees). We have also agreed to indemnify the selling
stockholders for certain liabilities arising out of the registration statement
of which this prospectus is a part. In addition, we have agreed to indemnify the
selling stockholders for any and all liabilities, losses, damages, claims, costs
and expenses, interest, awards, judgments, penalties (including without
limitation, reasonable attorneys' fees and expenses) actually suffered or
incurred by them, arising out of or resulting from any breach of our
representations and warranties in the common stock and warrant purchase
agreement that we entered into with them in connection with the New Financing.
Notwithstanding the foregoing, we have no obligation to compensate any of such
selling stockholders for punitive damages and our liability to each selling
stockholder under such indemnification provision cannot exceed 100% of the
purchase price for the Series F preferred stock and warrants purchased by such
selling stockholder in the New Financing. In addition, we paid HPC Capital
Management, Inc. a fee of $240,000 in consideration for its role in arranging
the New Financing. We believe that the terms of this relationship were at least
as favorable to us as what we could have obtained from a third party that was
not affiliated with an entity that was purchasing an equity interest in us.
Except as described above and in the documents incorporated by reference
into this prospectus, none of the selling shareholders listed in the table have
held any position or office or have had a material relationship with us or any
of our affiliates within the past three years, other than as described above,
elsewhere in this Prospectus or in the documents incorporated herein by
reference.
The percentage of shares beneficially owned is based on 15,669,405
shares outstanding at June 30, 2005 determined in accordance with Rule 13d-3 of
the Exchange Act. Under such rule, beneficial ownership includes any shares as
to which the individual has sole or shared voting power or investment power and
also any shares which the individual has the right to acquire within sixty days
of such date through the exercise of any warrants or other right. The number of
shares beneficially owned does not include shares that may, at our option, be
issued as payment of accrued dividends upon conversion. Unless otherwise
indicated in the footnotes, each person has sole voting and investment power (or
shares such powers with his or her spouse) with respect to the shares shown as
beneficially owned.
Shares Beneficially
Number of Shares Owned After Offering
Beneficially Owned (Assuming All Shares
Prior to the Offering Being Offered Are Sold)
----------------------- Shares Being -----------------------
Name of Selling Stockholder Number Percent Offered** Number Percent
--------------------------------------------- ---------- ------- ------------ ---------- -------
PEF Advisors LTD (8)......................... 575,811 (1) 3.54% 575,811 (1) -- --
Palisades Master Fund, LP (9)................ 822,969*(2) 4.99%* 1, 535,497 (2) -- --
JGB Capital, L.P. (10)....................... 575,811 (3) 3.54% 575,811 (3) -- --
Crescent International Ltd. (11)............. 383,875 (4) 2.39% 383,875 (4) -- --
SRG Capital, LLC (12)........................ 575,811 (5) 3.54% 575,811 (5) -- --
Bristol Investment Fund, Ltd. (13)........... 822,969*(6) 4.99%* 959,686 (6) -- --
Portside Growth and Opportunity Fund (14).... 767,749 (7) 4.67% 767,749 (7) -- --
TOTAL...................................... 4,524,995* 22.41*% 5,374,240** -- --
* After giving effect to certain provisions in the Series F preferred stock and
the warrants that limit the ability of the holder thereof to exercise or convert
such securities to the extent that such exercise or conversion would result in
such holder beneficially owning over 4.99% of our common stock. We make no
representation as to whether this limitation should be included in the
calculation of beneficial ownership under Rule 13d-3, and the number and
percentage of shares that would be beneficially owned without giving effect to
this beneficial ownership limitation is indicated in the appropriate footnote
below.
** Does not included 2,154,753 additional shares, which represents the
Registrant's good faith estimate of the number of shares that may be paid as
dividends on the shares of Series D preferred stock and Series F preferred stock
described above (the actual number of shares that may be paid as dividends
depends upon the time at which each share is converted, the market price of the
Registrant's common stock at such time, and whether the Registrant chooses to
pay such dividends in cash or in shares of common stock).
12
1. Includes: (a) 326,427 shares issuable upon conversion of 248.085 shares of
Series D preferred stock (which represents 3.48% of the currently
outstanding Series D preferred stock); (b) 184,729 shares issuable upon
conversion of 428.571 shares of Series F preferred stock (which represents
6.12% of the currently outstanding Series F preferred stock); and (c)
warrant to purchase 64,655 shares at a price of $2.87 per share.
2. Without giving effect to the beneficial ownership limitation described
above, the number of shares beneficially owned would be 1,535,497 (or
8.92%), which would include: (a) 870,473 shares issuable upon conversion of
661.559 shares of Series D preferred stock (which represents 9.27% of the
currently outstanding Series D preferred stock); (b) 492,610 shares
issuable upon conversion of 428.571 shares of Series F preferred stock
(which represents 16.33% of the currently outstanding Series F preferred
stock); and (c) warrant to purchase 172,414 shares at a price of $2.87 per
share.
3. Includes: (a) 326,427 shares issuable upon conversion of 248.085 shares of
Series D preferred stock (which represents 3.48% of the currently
outstanding Series D preferred stock); (b) 184,729 shares issuable upon
conversion of 428,571 shares of Series F preferred stock (which represents
6.12% of the currently outstanding Series F preferred stock); and (c)
warrant to purchase 64,655 shares at a price of $2.87 per share.
4. Includes: (a) 217,619 shares issuable upon conversion of 165.39 shares of
Series D preferred stock (which represents 2.32% of the currently
outstanding Series D preferred stock); (b) 123,153 shares issuable upon
conversion of 285.714 shares of Series F preferred stock (which represents
4.08% of the currently outstanding Series F preferred stock); and (c)
warrant to purchase 43,103 shares at a price of $2.87 per share.
5. Includes: (a) 326,427 shares issuable upon conversion of 248.085 shares of
Series D preferred stock (which represents 3.48% of the currently
outstanding Series D preferred stock); (b) 184,729 shares issuable upon
conversion of 428.571 shares of Series F preferred stock (which represents
6.12% of the currently outstanding Series F preferred stock); and (c)
warrant to purchase 64,655 shares at a price of $2.87 per share.
6. Without giving effect to the beneficial ownership limitation described
above, the number of shares beneficially owned would be 959,686 (or 5.77%),
which would include: (a) 544,045 shares issuable upon conversion of 413.474
shares of Series D preferred stock (which represents 5.79% of the currently
outstanding Series D preferred stock); (b) 307,882 shares issuable upon
conversion of 714.286 shares of Series F preferred stock (which represents
10.2% of the currently outstanding Series F preferred stock); and (c)
warrant to purchase 107,759 shares at a price of $2.87 per share.
7. Includes: (a) 435,236 shares issuable upon conversion of 330.78 shares of
Series D preferred stock (which represents 4.64% of the currently
outstanding Series D preferred stock); (b) 246,306 shares issuable upon
conversion of 571.429 shares of Series F preferred stock (which represents
8.16% of the currently outstanding Series F preferred stock); and (c)
warrant to purchase 86,207 shares at a price of $2.87 per share.
8. Paul T. Mannion and Andy Reckles in their capacity as members of PEF
Advisors, LLC, the general partner of PEF Advisors, LTD, share voting and
investment power over such securities.
9. Paul T. Mannion and Andy Reckles in their capacity as members of PEF
Advisors, LLC, the general partner of Palisades Master Fund, LP, share
voting and investment power over such securities.
10. Brett Cohen in his capacity as the President of JGB Management, Inc., the
general partner of JGB Capital, LP, has voting and investment power over
such securities.
11. Mel Craw and Maxi Brezzi, in their capacity as managers of GreenLight
Switzerland SA, the investment advisor to Crescent International Ltd., have
voting and investment power over the shares owned by Crescent International
Ltd. Messrs. Craw and Brezzi disclaim beneficial ownership of such shares.
12. Edwin Mecabe and Tai May Lee jointly have voting and investment power over
such securities. Both Edwin Mecabe and Tai May Lee disclaim beneficial
ownership of such securities.
13. Bristol Capital Advisors, LLC ("BCA") is the investment advisor to Bristol
Investment Fund, Ltd. ("Bristol"). Paul Kessler is the manager of BCA and a
director of Bristol, and as such has voting and investment power over the
securities held by Bristol. Mr. Kessler disclaims beneficial ownership of
such securities.
14. Ramius Capital Group, LLC ("Ramius Capital") is the investment advisor of
Portside Growth and Opportunity Fund ("Portside") and consequently has
voting and investment power over securities held by Portside. Ramius Capital
disclaims beneficial ownership of the shares held by Portside. Peter A.
Cohen, Morgan B. Stark, Thomas W. Strauss and Jeffrey M. Solomon are the
sole managing members of C4S & Co., LLC, the sole managing member of Ramius
Capital. As a result, Messrs. Cohen, Stark, Strauss and Solomon may be
considered beneficial owners of any shares deemed to be beneficially owned
by Ramius Capital. Messrs. Cohen, Stark, Strauss and Solomon disclaim
beneficial ownership of these shares.
We assume that the selling stockholders will seek to sell all of the shares
offered under this prospectus, but we are unable to determine the exact number
of shares that will actually be sold or whether and to what extent any of the
selling stockholders will exercise any warrants or options that they may hold.
13
PLAN OF DISTRIBUTION
We are registering the resale of the shares of our common stock on
behalf of the selling stockholders. As used in this prospectus, the term selling
stockholders includes pledgees, assignees, transferees or other
successors-in-interest selling shares received from the selling stockholders as
pledgors, borrowers or in connection with other non-sale-related transfers after
the date of this prospectus. This prospectus may also be used by transferees of
the selling stockholders, including broker-dealers or other transferees who
borrow or purchase the shares to settle or close out short sales of shares of
common stock. The selling stockholders will act independently of us in making
decisions with respect to the timing, manner, and size of each sale or non-sale
related transfer. We will not receive any of the proceeds of this offering.
However we would receive the proceeds of any exercise of the warrants held by
these selling stockholders to the extent that such warrants are exercised for
cash. In the event that all such warrants were exercised for cash, the aggregate
proceeds received by us would be approximately $1,732,000. There can be no
assurance concerning the number or the timing of the exercise of such warrants
by the selling stockholders at this date. In addition, because the warrants
contain provisions allowing for a cashless exercise under certain circumstances,
there can be no assurance that we would receive all such proceeds even if all
such warrants are exercised.
This prospectus covers the selling stockholders resale of up to
7,528,993 shares of common stock. The shares of our common stock covered by this
prospectus may be offered and sold from time to time by the selling
stockholders. The selling stockholders may sell the shares on the Nasdaq
SmallCap Market, the Boston Stock Exchange, any other exchange or market on
which the shares of our common stock are then traded, or in private sales at
negotiated prices.
A selling stockholder may use any one or more of the following methods
when selling shares:
. ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
. block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
. purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
. an exchange distribution in accordance with the rules of the
applicable exchange;
. privately negotiated transactions;
. settlement of short sales entered into after the date of this
prospectus;
. broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share;
. a combination of any such methods of sale;
. through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;
or
. any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), if available, rather
than under this prospectus.
Broker-dealers engaged by the selling stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. Each selling stockholder does not expect these commissions and
discounts relating to its sales of shares to exceed what is customary in the
types of transactions involved.
14
In connection with the sale of our common stock or interests therein,
the selling stockholders may enter into hedging transactions with broker-dealers
or other financial institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume. The selling
stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The selling
stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).
The selling stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
The Company is required to pay certain fees and expenses incurred by the
Company incident to the registration of the shares. The Company has agreed to
indemnify the selling stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
Because selling stockholders may be deemed to be "underwriters" within
the meaning of the Securities Act, they will be subject to the prospectus
delivery requirements of the Securities Act. In addition, any securities covered
by this prospectus which qualify for sale pursuant to Rule 144 under the
Securities Act may be sold under Rule 144 rather than under this prospectus.
Each selling stockholder has represented to us that it has not entered into any
agreements, understandings or arrangements, directly or indirectly, with any
underwriter, broker-dealer or other person regarding the sale or other
distribution of the shares of common stock to be sold pursuant to this
Prospectus. There is no underwriter or coordinating broker acting in connection
with the proposed sale of the resale shares by the selling stockholders.
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the shares to be sold pursuant to this
Prospectus may not simultaneously engage in market making activities with
respect to our common stock for a period of two business days prior to the
commencement of the distribution. In addition, the selling stockholders will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including Regulation M, which may limit the timing of
purchases and sales of shares of our common stock by the selling stockholders or
any other person. We will make copies of this prospectus available to the
selling stockholders and have informed them of the need to deliver a copy of
this prospectus to each purchaser at or prior to the time of the sale.
In order to comply with the securities laws of certain states, if
applicable, the shares must be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
We have advised the selling stockholders that the anti-manipulation
rules of Regulation M under the Exchange Act may apply to sales of shares in the
market and to the activities of the selling stockholders and their affiliates.
In addition, we will make copies of this prospectus available to the selling
stockholders and we have informed them of the need for delivery of copies of
this prospectus to purchasers at or prior to the time of any sale of the shares
offered hereby. The selling stockholders may indemnify any broker-dealer that
participates in transactions involving the sale of the shares against certain
liabilities, including liabilities arising under the Securities Act of 1933.
At the time a particular offer of shares is made, if required, a
prospectus supplement will be distributed that will set forth the number of
shares being offered and the terms of the offering, including the name of any
underwriter, dealer or agent, the purchase price paid by any underwriter, any
discount, commission and other item constituting compensation, any discount,
commission or concession allowed or reallowed or paid to any dealer, and the
proposed selling price to the public.
15
Certain of the selling stockholders may be affiliates of a
broker-dealer. Each of the selling stockholders has represented to us that it
purchased the securities to be resold pursuant to this prospectus in the
ordinary course of business and, at the time of the purchase of such securities,
had no agreements or understandings, directly or indirectly, with any person to
distribute such securities. We are not aware of any plans, arrangements or
undertakings between the selling stockholders and any underwriter, broker-dealer
or agent regarding the sale of the common stock covered by this Prospectus by
the selling stockholders.
EXPERTS
The financial statements incorporated in this Prospectus by reference to
the Annual Report on Form 10-K for the year ended December 31, 2004 have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP, an
independent registered public accounting firm, given on the authority of said
firm as experts in auditing and accounting.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon by Dechert LLP, our special corporate counsel.
16
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The Registrant will pay all expenses incident to the offering and sale
to the public of the shares being registered other than any commissions and
discounts of underwriters, dealers or agents and any transfer taxes. Such
expenses are set forth in the following table. All of the amounts shown are
estimates except the Securities and Exchange Commission (SEC) registration fee.
SEC registration fee $ 1,453.31
Legal fees and expenses $ 30,000.00
Accounting fees and expenses $ 15,000.00
Miscellaneous expenses $ 12,285.00
------------
Total $ 58,738.31
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The indemnification of officers and directors of the Registrant is
governed by Section 145 of the General Corporation Law of the State of Delaware
(the "DGCL") and the Certificate of Incorporation (the "Charter") and By-Laws
(the "By-laws") of the Registrant. Subsection (a) of DGCL Section 145 empowers a
corporation to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that the person is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by the person in
connection with such action, suit or proceeding if the person acted in good
faith and in a manner the person reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe the person's conduct was
unlawful.
Subsection (b) of DGCL Section 145 empowers a corporation to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that the
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or settlement
of such action or suit if the person acted in good faith and in a manner the
person reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Delaware Court
of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
DGCL Section 145 further provides that to the extent that a present or
former director or officer is successful, on the merits or otherwise, in the
defense of any action, suit or proceeding referred to in subsections (a) and (b)
of Section 145, or in defense of any claim, issue or matter therein, such person
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith. In all cases in
which indemnification is permitted under subsections (a) and (b) of Section 145
(unless ordered by a court), it shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
present or former director, officer, employee or agent is proper in the
circumstances because the applicable standard of conduct has been met by the
party to be indemnified. Such determination must be made, with respect to a
person who is a director or officer at the time of such determination, (1) by a
majority vote of the directors who are
II-1
not parties to such action, suit or proceeding, even though less than a quorum,
or (2) by a committee of such directors designated by majority vote of such
directors, even though less than a quorum, or (3) if there are no such
directors, or if such directors so direct, by independent legal counsel in a
written opinion, or (4) by the stockholders.
The statute authorizes the corporation to pay expenses incurred by an
officer or director in advance of the final disposition of a proceeding upon
receipt of an undertaking by or on behalf of the person to whom the advance will
be made, to repay the advances if it shall ultimately be determined that he was
not entitled to indemnification. DGCL Section 145 also provides that
indemnification and advancement of expenses permitted thereunder are not to be
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any By-law, agreement, vote of
stockholders or disinterested directors, or otherwise. DGCL Section 145 also
authorizes the corporation to purchase and maintain liability insurance on
behalf of its directors, officers, employees and agents regardless of whether
the corporation would have the statutory power to indemnify such persons against
the liabilities insured.
The Charter provides that no director of the Registrant shall be
personally liable to the Registrant or its stockholders for monetary damages for
breach of fiduciary duty as a director, provided that this provision shall not
eliminate or limit the liability of a director (a) for any breach of such
person's duty of loyalty to the Registrant or its stockholders, (b) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (c) under section 174 of the DGCL or (d) for any transaction
from which the director derived any improper personal benefits.
The Charter and By-laws also provide that, to the extent not prohibited
by law, the Registrant shall indemnify any person who is or was made, or
threatened to be made, a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
including, without limitation, an action by or in the right of the Registrant to
procure a judgment in its favor, by reason of the fact that such person, or a
person of whom such person is the legal representative, is or was a director or
officer of the Registrant, or, at the request of the Registrant, is or was
serving as a director or officer of any other corporation or in a capacity with
comparable authority or responsibilities for any partnership, joint venture,
trust, employee benefit plan or other enterprise, against any judgments, fines,
penalties, excise taxes, amounts paid in settlement and costs, charges and
expenses (including attorneys' fees, disbursements and other charges).
Additionally, the Charter and By-laws provide that the Registrant shall
reimburse or advance to any director or officer entitled to indemnification the
funds necessary for payment of expenses, including attorneys' fees and
disbursements, incurred in connection with any Proceeding, in advance of the
final disposition of such Proceeding and that such any such advancement shall,
if required by the DGCL, by paid by the Registrant only upon receipt by the
Registrant of an undertaking, by or on behalf of such director or officer to
repay any amount so advanced if it shall ultimately be determined by final
judicial decision from which there is no further right of appeal that such
director or officer is not entitled to be indemnified for such expenses.
The Charter and By-laws authorize the Registrant to purchase and
maintain insurance on behalf of any person who is or was a director or officer
of the Registrant, or is or was serving at the request of the Registrant as a
director or officer of any other entity, against any liability asserted against
such person and incurred by such person in any such capacity, or arising out of
such person's status as such, whether or not the Registrant would have the power
to indemnify such person against such liability under applicable provisions of
the Restated Certificate of Incorporation, the by-laws of the Registrant or
under Section 145 of the DGCL or any other provision of law.
II-2
ITEM 16. EXHIBITS
5.1 Opinion of Dechert LLP
23.1 Consent of PricewaterhouseCoopers LLP, an independent registered
accounting firm
23.2 Consent of Counsel (included as Exhibit 5.1)
24.1 Power of Attorney (included in signature page)
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being
made, a post- effective amendment to this registration statement:
1. To include any prospectus required by Section 10(a)(3)
of the Securities Act;
2. To reflect in the prospectus any facts or events arising
after the effective date of the registration statement
(or the most recent post-effective amendment thereof)
which, individually, or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would
not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration
statement; and
3. To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
provided, however, that the undertakings set forth in clauses
(i) and (ii) above shall not apply if the information required
to be included in a post- effective amendment by these clauses
is contained in periodic reports filed by the registrant
pursuant to Section 13 or Section 15(d) of the Exchange Act
that are incorporated by reference in this registration
statement.
2. That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. To remove from registration by means of a post-effective
amendment any of the securities being registered, which remain, unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act, each filing of
the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-3
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on August 4, 2005.
BLUEFLY, INC.
By: /s/ Melissa Payner-Gregor
-------------------------------------
Melissa Payner-Gregor
Chief Executive Officer and President
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Melissa Payner-Gregor and Patrick
C. Barry, and each of them, his true and lawful attorneys-in-fact and agents
with full power of substitution and resubstitution, for him and in his name,
place, and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) and additions to this Registration
Statement on Form S-3, and any subsequent registration statements pursuant to
Rule 462(b) under the Securities Act of 1933, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, and hereby grants to such attorneys-in-fact
and agents, and each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
-------------------------------- ---------------------------------- --------------
/s/ Melissa Payner-Gregor Chief Executive Officer, President August 4, 2005
-------------------------------- and Director (Principal Executive
Melissa Payner-Gregor Officer)
/s/ Patrick C. Barry Chief Financial Officer and Chief August 4, 2005
-------------------------------- Operating Officer (Principal
Patrick C. Barry Financial and Accounting Officer)
/s/ Alan Kane Chairman of the Board August 4, 2005
--------------------------------
Alan Kane
/s/ Barry Erdos Director August 4, 2005
--------------------------------
Barry Erdos
/s/ Christopher G. McCann Director August 4, 2005
--------------------------------
Christopher G. McCann
/s/ Martin Miller Director August 4, 2005
--------------------------------
Martin Miller
/s/ Neal Moszkowski Director August 4, 2005
--------------------------------
Neal Moszkowski
/s/ David Wassong Director August 4, 2005
--------------------------------
David Wassong
II-5
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- ----------------------------------------------------------------------
5.1 Opinion of Dechert LLP
23.1 Consent of PricewaterhouseCoopers LLP, an independent registered
public accounting firm
23.2 Consent of Counsel (included as Exhibit 5.1)
24.1 Power of Attorney (included in signature page)