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As filed with the Securities and Exchange Commission on November 20, 2000.
Registration No. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------------
BLUEFLY, INC.
(Exact name of registrant as specified in its charter)
New York 13-3612110
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
42 West 39th Street
New York, New York 10018
(212) 944-8000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------------
E. Kenneth Seiff
President and 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)
------------------------------------
Copies to:
RICHARD A. GOLDBERG, ESQ.
Swidler Berlin Shereff Friedman, LLP
The Chrysler Building
405 Lexington Avenue
New York, New York 10174
(212) 973-0111
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO
THE PUBLIC: As soon as practicable after the effective date
of this registration statement.
<PAGE>
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: [ ]
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
<TABLE>
<CAPTION>
====================================================================================================================================
Title of Shares to Amount to be Proposed Maximum Proposed Maximum Amount of
be Registered Registered Offering Price Per Share Aggregate Offering Price Registration Fee
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par 8,547,009 shares $2.34 $20,000,000 $5,280
value $0.01 per share
====================================================================================================================================
</TABLE>
-----------------------------------------
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 an amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
EXPLANATORY NOTE
Quantum Industrial Partners LDC and SFM Domestic Investments LLC,
affiliates of Soros Private Equity Partners LLC, have agreed, subject to certain
conditions, to invest up to an additional $15,000,000 in our equity securities.
As more fully described in this Prospectus, the investment will be made through
the purchase of $5,000,000 of subordinated convertible notes, which are
convertible into shares of Series B Convertible Preferred Stock and, as a
standby purchaser in this offering, of up to an aggregate of $10,000,000 of
common stock. The issuance of the Series B Convertible Preferred Stock upon
conversion of the notes is subject to shareholder approval. This offering is
therefore also subject to, and will not commence until, such shareholder
approval is received. We are currently a New York corporation. Our shareholders
will also be voting upon our reincorporation in Delaware, by merging into a
newly formed Delaware corporation, which will retain the name Bluefly, Inc. This
offering will be made by the surviving corporation in the merger.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities 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 solicitating an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion, dated November 20, 2000
Preliminary Prospectus
BLUEFLY, INC.
RIGHTS OFFERING
of 8,547,009 Shares of Common Stock at $2.34 per Share
You will receive 1.735 subscription rights for each share of common
stock that you owned on _________, 2000, the record date. Your subscription
rights will be aggregated for all the shares that you owned on the record date
and then rounded down to the nearest whole number, so you will not receive
fractional rights. Each subscription right entitles you to purchase one share of
common stock for a subscription price of $2.34 per share. If you fully exercise
your rights and other shareholders do not fully exercise their rights, you may
elect to purchase additional shares on a pro rata basis with other
oversubscribing shareholders. This is your oversubscription privilege.
Our common stock is traded in the NASDAQ SmallCap Market System under
the symbol "BFLY" and on the Boston Stock Exchange under the symbol "BFL". On
[___________], 2000, the last reported sale price for the common stock as
reported by NASDAQ was $[____] per share.
The rights are exercisable beginning on the date of this prospectus and
continuing until ___________, 2001, at 5:00 p.m., New York City time. We have
the option of extending the expiration date.
The rights are transferrable and it is anticipated that they will be
listed for trading on the NASDAQ SmallCap Market System.
We will use all net cash proceeds from this offering for working
capital and other general corporate purposes.
Quantum Industrial Partners LDC and SFM Domestic Investments LLC,
affiliates of Soros Private Equity Partners LLC, who will beneficially own an
aggregate of 72.2% of our outstanding common stock upon commencement of this
offering, have agreed, subject to certain conditions, to act as standby
purchasers in this offering. The total dollar amount of shares of common stock
to be purchased by Quantum Industrial Partners LDC and SFM Domestic Investments
LLC at $2.34 per share will be equal to the difference between $20,000,000 and
the amount purchased by our shareholders pursuant to this offering, but in no
event will Quantum Industrial Partners LDC and SFM Domestic Investments LLC
purchase more than $10,000,000 in the aggregate.
WE URGE YOU TO READ CAREFULLY THE "RISK FACTORS" SECTION BEGINNING ON
PAGE 11 WHERE WE DESCRIBE SPECIFIC RISKS ASSOCIATED WITH AN INVESTMENT IN OUR
COMPANY AND THESE SECURITIES BEFORE YOU MAKE YOUR INVESTMENT DECISION.
<TABLE>
<CAPTION>
Subscription Price Discount and Commissions Our Proceeds
------------------ ------------------------ ------------
<S> <C> <C> <C>
Per Share Total..................... $2.34 None $2.34
Total............................... $20,000,000 None $20,000,000
</TABLE>
Subscription Agent: D.F. King & Co., Inc.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is ____________.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
EXPLANATORY NOTE.......................................................................................iii
WHERE YOU CAN FIND MORE INFORMATION.....................................................................iv
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS.........................................................vi
PROSPECTUS SUMMARY.......................................................................................1
SUMMARY HISTORICAL FINANCIAL DATA.......................................................................10
RISK FACTORS............................................................................................11
We Are Making A Substantial Investment In Our Business And May Need to Raise
Additional Funds.............................................................................11
Our Limited Operating History Makes Forecasting Our Revenues Difficult.........................11
We Have a History of Losses and Expect that Losses will Continue in the Future.................12
We Are Dependent on Indirect Supply Sources Which Increases Our Risk of Litigation.............12
Brand Owners Could Establish Procedures to Limit Our Ability to Purchase Products
Indirectly...................................................................................12
Our Growth May Place a Significant Strain On Our Management And Administrative
Resources and Cause Disruptions In Our Business..............................................12
We Are Heavily Dependent on Third Party Relationships..........................................13
We Are in Competition with Companies a lot Larger than Ourselves...............................13
We Do Not Have Long Term Contracts With Our Vendors And Therefore The Availability
Of Merchandise Is At Risk......................................................................14
We Are New To The Industry And Need To Establish Brand Name Recognition........................14
Due to Our Use Of the Internet and Web Servers As Presentation Vehicles, Our Success
Depends On Continued Development And Maintenance Of These Technologies By
Other Companies..............................................................................15
There Can Be No Assurance That Our Technology Systems Will Be Able To Handle
Increased Traffic............................................................................15
We Operate In A Rapidly Changing, Highly Competitive Market and We May Not Have
Adequate Resources to Compete Successfully...................................................16
Our Business Will Suffer If Online Apparel Commerce Is Not Widely Accepted.....................17
Unexpected Changes in Fashion Trends Can Affect Our Business...................................17
We Will Be Subject To Cyclical Variations In The Apparel Market................................17
We May Be Subject to Higher Return Rates.......................................................17
Our Success Is Largely Dependent Upon Our Executive Personnel..................................17
Our Success Is Dependent Upon Our Ability To Attract New Key Personnel.........................18
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There Are Inherent Risks Involved in Expanding Our Operations..................................18
We May Be Unable To Protect Our Intellectual Property Rights And We May Be Liable For
Infringing The Intellectual Property Rights Of Others..........................................18
We Cannot Guarantee The Protection of Our Intellectual Property................................18
Unauthorized Security Breaches To Our Service Could Harm Our Business..........................19
Our Business Could Be Harmed By Consumers' Concerns About The Security of
Transactions Over the Internet...............................................................19
We Face Legal Uncertainties Relating To the Internet In General and To Our Industry In
Particular And May Become Subject to Costly Government Regulation............................19
We Face Uncertainties Relating To Sales And Other Taxes........................................20
Standby Commitment By Principal Stockholders Is Conditional....................................20
The Price of Our Common Stock May Decline Before or after the Subscription Rights
Expire.......................................................................................20
Once You Exercise Your Subscription Rights, You May Not Revoke the Exercise....................21
The Subscription Price Is Not an Indication of Our Value.......................................21
Quantum Industrial Partners LDC and SFM Domestic Investments LLC Will Own a
Majority of Our Stock..........................................................................21
We Have a Large Amount of Shares Eligible For Future Sale......................................22
Certain Events Could Result In A Dilution Of Your Ownership Of Our Common Stock................22
Change of Control Covenant and Liquidation Preference of Series A Preferred Stock And
Series B Preferred Stock.....................................................................23
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..........................................23
There Is No Assurance That We Will Remain Listed On An Active Trading Market...................23
THIS OFFERING...........................................................................................23
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.................................................................32
RECENT DEVELOPMENTS.....................................................................................34
USE OF PROCEEDS.........................................................................................36
DETERMINATION OF SUBSCRIPTION PRICE.....................................................................36
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY.........................................................37
CAPITALIZATION..........................................................................................37
PLAN OF DISTRIBUTION....................................................................................39
LEGAL MATTERS...........................................................................................39
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EXPERTS.................................................................................................40
CONSENT OF INDEPENDENT ACCOUNTANTS......................................................................49
CONSENT OF INDEPENDENT AUDITORS.........................................................................50
</TABLE>
iii
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
This prospectus constitutes part of a registration statement on Form
S-3 filed by us with the Securities and Exchange Commission under the U.S.
Securities Act of 1933 with respect to this offering. This prospectus does not
contain all of the information set forth in the registration statement and the
exhibits and schedules thereto, certain portions of which have been omitted in
accordance with the rules and regulations of the SEC. You should refer to the
registration statement and the exhibits relating thereto for further information
with respect to us and this offering. Statements made in this prospectus as to
any contract, agreement or other document are summaries of the material terms of
such contracts, agreements or other documents and are not necessarily complete.
With respect to each such contract, agreement or other document filed as an
exhibit to the registration statement, reference is made to the exhibit for a
more complete description of the matter involved, and each such statement is
qualified in its entirety by such reference.
We are subject to the informational requirements of the U.S. Securities
Exchange Act of 1934, and in accordance with these requirements we file annual,
quarterly and special reports and other information with the SEC. These filings
are available to the public from commercial document retrieval services and at
the SEC's web site at http://www.sec.gov. You may also read and copy any
document we file at the SEC's public reference facilities at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the SEC's
regional offices at 7 World Trade Center, Suite 1300, New York, New York 10048
and at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials also may be obtained from the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549
at prescribed rates. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference facilities.
The SEC allows us to "incorporate by reference" the information we file
with it. This permits us to disclose important information to you by referencing
these filed documents. We incorporate by reference in this prospectus the
following documents which have been filed with the SEC:
o Our Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1999, filed with the SEC on March 30, 2000, as
amended on May 15, 2000;
o The Amendment to our Quarterly Report on Form 10-QSB/A
amending our Quarterly Report on Form 10-QSB filed with the
SEC on November 9, 1999, filed with the SEC on May 15, 2000;
o Our Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2000, filed with the SEC on May 15, 2000;
o Our Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 2000, filed with the SEC on August 14, 2000;
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o Our Current Report on Form 8-K, concerning a non-binding
letter of intent relating to a proposed investment in us by
affiliates of Soros Private Equity Partners, filed with the
SEC on October 17, 2000;
o Our Current Report on Form 8-K, concerning a report of
independent accountants, filed with the SEC on the same date
as this Form S-3; and
o Our Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 2000, filed with the SEC on November 14,
2000.
We incorporate by reference all documents filed pursuant to Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date
of this prospectus and prior to the termination of this offering.
We will provide promptly without charge to you, upon written or oral
request, a copy of any document incorporated by reference in this prospectus,
other than exhibits to such documents unless such exhibits are specifically
incorporated by reference in such documents. Requests should be directed as
follows:
Bluefly, Inc.
42 West 39th Street
New York, New York 10018
Telephone: (212) 944-8000
Attention: Investor Relations
You should request any such information at least 5 days in advance of
the date on which you expect to make your decision with respect to this offer.
In any event, you must request such information prior to
--------------.
v
<PAGE>
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
This prospectus includes or incorporates by reference forward looking
statements as they are defined in the U.S. Securities Act of 1933 and the U.S.
Securities Exchange Act of 1934, including statements regarding our expected
financial position and business and financing plans. The occurrence of the
events described, and the achievement of the intended results, depend on many
events, some or all of which are not predictable or within our control. Actual
results may differ materially from those anticipated in any forward looking
statements. Many risks and uncertainties are inherent in our industry. Others
are more specific to our operations. Many of the significant risks related to
our business are described in this prospectus. These include, among other
things:
o Our business is capital intensive and we may need additional
financing;
o Our limited operating history;
o Our history of losses;
o Our dependence on indirect supply sources and third party
relationships;
o We operate in a rapidly changing, highly competitive market
and may not have adequate resources to compete successfully;
o We are new to the industry and need to establish general name
recognition;
o Our competitors are much larger than we are;
o Our business will suffer if online apparel commerce is not
widely accepted;
o Unexpected changes in fashion trends can affect our business;
o We may be unable to protect our intellectual property rights
and we may be liable for infringing the intellectual property
rights of others; and
o Our business could be harmed by consumer's concerns about the
security of transactions over the Internet.
We undertake no obligation to publicly update or revise any forward
looking statements, whether as a result of new information, future events or
otherwise. In light of these risks, uncertainties and assumptions, the forward
looking events discussed or incorporated by reference into this prospectus might
not occur. For additional risks related to our business, see the section
entitled "Risk Factors" on page __.
vi
<PAGE>
PROSPECTUS SUMMARY
This summary highlights selected information from this prospectus. The
summary is not complete and may not provide all information you should consider
before deciding whether or not to exercise the rights. Therefore, we urge you to
read the entire prospectus carefully. We also encourage you to review the
financial statements and other information provided in reports and other
documents that we file with the SEC, as described under "Where You Can Find More
Information" on the inside front cover of this prospectus.
QUESTIONS AND ANSWERS ABOUT THIS OFFERING
WHAT IS A RIGHT?
Rights enable you to purchase additional shares of our common stock for
$2.34 per share. On ___________, 2000, the last reported sales price
for our common stock on the NASDAQ SmallCap Market System was
$_________ per share.
You will receive as of 5:00 p.m. on ____________, 1.735 rights for
every share of common stock you own at the time. Each right entitles
you to purchase one share of common stock for $2.34. Your subscription
rights will be aggregated for all the shares that you owned on that
date and then rounded down to the nearest whole number, so that you
will not receive fractional rights. For example, if you owned 100
shares on __________, 2000, you have the right to purchase 173 shares
of common stock for $2.34 per share.
WHY IS BLUEFLY OFFERING THE RIGHTS?
Our largest shareholders, Quantum Industrial Partners LDC and SFM
Domestic Investment LLC, have agreed, subject to certain conditions
outlined in the Investment Agreement described under "Recent
Developments" on page [___], to make a further investment in us. As
part of that investment:
o their $20,0000,000 in loans to us will be converted, at the
rate of $2.34 per share, into shares of Series B Preferred
Stock, which is convertible into shares of common stock,
initially on a one-for-one basis;
o the conversion price of their existing Class A Preferred Stock
will be reduced to $2.34 per share; and
o through their standby purchase commitment, they have committed
to purchase up to $10,000,000 of the common stock offered in
this offering.
This investment is more fully described under "Recent Developments" on
page [___]. After review by our management and an independent committee
of the Board of Directors, we determined that it would be appropriate
to offer you the right to purchase common stock at the same $2.34 per
share
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price. We believe this is not only fair to you, but also an excellent
way for us to raise additional equity capital.
WHAT IS THE BASIC SUBSCRIPTION PRIVILEGE?
You may purchase one newly-issued share of common stock for every right
held by you, at the subscription price of $2.34 per share. This is your
basic subscription privilege.
WHAT IS THE OVERSUBSCRIPTION PRIVILEGE?
If you fully exercise your basic subscription privilege, the
oversubscription privilege entitles you to subscribe for additional
shares of our common stock at the same subscription price of $2.34 per
share that applies to your basic subscription privilege.
WHAT ARE THE LIMITATIONS ON THE OVERSUBSCRIPTION PRIVILEGE?
We will be able to satisfy your exercise of the oversubscription
privilege only if our other shareholders receiving rights do not elect
to purchase all of the shares offered under their basic subscription
privilege. We will honor oversubscription requests in full to the
extent sufficient shares are available following the exercise of rights
under the basic subscription privilege. If oversubscription requests
exceed shares available, we will allocate the available shares pro rata
among our shareholders who exercised their oversubscription privilege.
WHAT IS THE ROLE OF THE STANDBY PURCHASERS IN THIS OFFERING?
As standby purchasers, Quantum Industrial Partners LDC will purchase up
to 4,138,034 shares of common stock and SFM Domestic Investments LLC
will purchase up to 135,470 shares of common stock, at $2.34 per share,
subject to certain conditions outlined in the Investment Agreement
described under "Recent Developments" on page [___]. The total dollar
amount of shares of common stock to be purchased by Quantum Industrial
Partners LDC and SFM Domestic Investments LLC at $2.34 per share will
be equal to the difference between $20,000,000 and the amount purchased
by our shareholders pursuant to this offering, but in no event will
Quantum Industrial Partners LDC and SFM Domestic Investments LLC
purchase more than $10,000,000 in the aggregate. Quantum Industrial
Partners LDC will purchase 96.83% of such amount and SFM Domestic
Investments LLC will purchase 3.17% of such amount. We refer to the
commitment of Quantum Industrial Partners LDC and SFM Domestic
Investments LLC to purchase shares of common stock as described in this
paragraph as the Standby Commitment.
HAS THE BOARD OF DIRECTORS MADE A RECOMMENDATION REGARDING THIS OFFERING?
Our Board of Directors makes no recommendation to you about whether you
should exercise any rights.
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HOW SOON MUST SHAREHOLDERS ACT?
The rights expire on ___________, at 5:00 p.m., New York City time. The
subscription agent must actually receive all required documents and
payments before that date and time. Although we have the option of
extending the expiration date, we currently do not intend to do so.
MAY I SELL OR GIVE AWAY MY RIGHTS?
Yes. The rights are transferable and it is anticipated that they will
trade on the NASDAQ SmallCap Market System and may be purchased and
sold through brokers in the same manner as our common stock until the
close of business on the last trading day prior to the end of the
subscription period, that trading day being _______, 2001, unless we
extend the date. We cannot guarantee, however, that any market for the
rights will develop or, if a market does develop, that the market will
remain available throughout the period in which the subscription rights
may be exercised.
AM I REQUIRED TO SUBSCRIBE IN THIS OFFERING?
No. You are not required to exercise any rights, purchase any new
shares, or otherwise take any action in response to this offering.
WHAT WILL HAPPEN IF I DO NOT EXERCISE MY RIGHTS?
If you do not exercise any rights, the number of shares you own will
not change, but your percentage ownership in us will decline following
this offering.
MAY I CHANGE OR CANCEL MY EXERCISE OF RIGHTS AFTER I SEND IN THE REQUIRED FORMS?
No. Once you send in your subscription certificate and payment, you
cannot revoke the exercise of your rights, even if you later learn
information about us that you consider to be unfavorable. You should
not exercise your rights unless you are certain that you wish to
purchase additional shares of common stock at a price of $2.34 per
share.
WILL MY MONEY BE RETURNED IF THIS OFFERING IS CANCELLED?
We may cancel or terminate this offering at any time and for any reason
prior to the expiration date. In the event that certain conditions
required by the Standby Commitment are not satisfied and funds required
to be purchased by Quantum Industrial Partners LDC and SFM Domestic
Investments LLC under the Standby Commitment are not made, we will
terminate this offering. If we terminate or cancel this offering, we
will return your subscription price, but without any payment of
interest.
WHAT SHOULD I DO IF I WANT TO PARTICIPATE IN THIS OFFERING, BUT MY SHARES ARE
HELD IN THE NAME OF MY BROKER, DEALER OR OTHER NOMINEE?
If you hold your shares of our common stock through a broker, dealer or
other nominee, for example, through a custodian bank, then your broker,
dealer or other nominee is the record holder of the shares
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you own. This record holder must exercise the rights on your behalf for
the share you wish to purchase. Therefore, you will need to have your
record holder act for you.
If you wish to participate in this offering and purchase shares, please
promptly contact the record holder of your shares. To indicate your
decision with respect to your rights, you should complete and return to
your record holder the form entitled "Beneficial Owner Election Form."
You should receive this form from your record holder with the other
offering materials.
WHAT FEES OR CHARGES APPLY IF I PURCHASE SHARES?
We are not charging any fee or sales commission to issue rights to you
or to issue shares of common stock to you if you exercise rights. If
you exercise rights through a record holder of your shares, you are
responsible for paying any fees that person may charge.
HOW DO I EXERCISE MY RIGHTS? WHAT FORMS AND PAYMENT ARE REQUIRED TO PURCHASE
SHARES?
As a record holder of our common stock on ____________, 2000, you are
receiving this prospectus, a subscription warrant evidencing your
subscription rights and instructions on how to purchase shares. If you
wish to participate in this offering, then before your rights expire,
you must:
o deliver the subscription price by wire transfer of immediately
available funds, certified or cashier's check drawn on a U.S.
bank, or personal check that clears before expiration of the
rights; and
o deliver a properly completed subscription warrant. The
instructions also describe an alternate procedure called
"Notice of Guarantee Delivery," which allows an extra 3 days
to deliver the subscription warrant if full payment is
received before the expiration date and a securities broker or
qualified financial institution signs the "Notice of
Guaranteed Delivery" form to guaranty that your properly
completed subscription warrant will be timely delivered.
TO WHOM SHOULD I SEND FORMS AND PAYMENTS?
You should send your subscription documents and payment by mail or
courier service to:
By Hand: By First Class Mail: By Overnight Courier:
[_________________] [__________________] [________________]
For instructions on how your subscription payment should be sent to
[___________________], see "The Offering - Required Forms of Payment of
Subscription Price" on page [____].
Securities brokers and other qualified financial institutions can use
an alternate procedure called "Notice of Guaranteed Delivery." See "The
Offering - Special Procedure under "Notice of Guaranteed Delivery"
Form" on page [_____].
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WHAT SHOULD I DO IF I HAVE OTHER QUESTIONS?
If you have questions, need additional copies of offering documents or
otherwise need assistance, please contact the information agent for
this offering:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
To ask other questions or to receive copies of our recent SEC filings,
you can also contact us by mail or telephone, or refer to the other
sources described under "Where You Can Find More Information" on the
inside front cover of this prospectus.
OUR COMPANY
We are a leading Internet retailer of designer apparel, fashion
accessories and home products at outlet store prices. We sell over 350 brands of
designer apparel and home accessories at 25% to 75% off of retail prices through
our Web Site, Bluefly.com.
BUSINESS STRATEGY
Our goal is to become the pre-eminent direct marketer of excess and
end-of-season apparel, fashion accessories and home products by creating a
superior marketplace for these products. We intend to do this by addressing what
we believe are inherent deficiencies in the traditional market for off-price
products, which limit its appeal to both customers and designers. We believe
that the economic advantages provided by Internet retailing, including inventory
management efficiencies resulting from centralized warehousing and distribution
and the ability to more easily maintain an upscale atmosphere through the design
of a single online storefront, provide a unique opportunity to address these
deficiencies. Our goal is to utilize these economic advantages to create a new
retail paradigm that combines the best practices of a number of successful
retail and fashion companies, combining the service and selection found at
high-end retailers such as Saks Fifth Avenue and Nordstroms with the savings
found at off-price retailers such as T.J. Maxx and Ross, and the convenience of
catalogs such as Lands' End and L.L. Bean.
We do not believe that this could be accomplished without using the
Internet as a platform. The direct marketing of excess and end-of-season
apparel, fashion accessories and home products requires a cost-effective medium
that can display a large number of products, many of which are in limited
supply, and some of which are neither available in all sizes nor easily
replenished. We believe print catalogs are not well suited to this task. The
paper, printing, mailing and other production costs of a print catalog can be
significant. To support these costs, a traditional cataloger typically requires
products that are replenishable, available in a full range of sizes and in
substantial quantities. Similarly, television is a costly medium that requires
substantial quantities of products that are available in all sizes in order for
it to be an economical medium. In addition, the number of items that can be
displayed on television is limited, and television cannot permit viewers to
search for products that interest them.
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The Internet, however, can be a far less expensive and, in many ways,
more effective medium. By using the Internet as our platform, the number of
items that we offer is not limited by the high costs of printing and mailing.
With the Internet, we can automatically update product images as new products
arrive and other items sellout. By integrating real-time databases containing
information about both inventory and customers' preferences and sizes, we can
create a personalized shopping environment and allow our customers to search for
the products that specifically interest them. In addition, we are able to
maintain an upscale environment through the design of a single online
storefront.
We believe we have created a customer experience that is fundamentally
better than that offered by traditional off-price retailers. Similarly, we
believe that our upscale atmosphere, fashion content and premium brand selection
create a superior distribution channel for designers who wish to liquidate their
end-of-season and excess merchandise without suffering the brand dilution
inherent in traditional off-price channels.
MARKETING
We have implemented an aggressive advertising and marketing campaign to
increase awareness of our brand and acquire new customers. We are seeking to
position ourselves as the world's first full service outlet store, combining the
service and selection found at high-end retailers with savings typically
available only at off-price stores or company-owned outlet stores. We seek to
incorporate this branding effort into all aspects of our operations, including
advertising, customer service, site experience, packaging and delivery. We
acquire new customers through multiple channels, including traditional and
online advertising, direct marketing and strategic online relationships. We have
established strategic marketing alliances with many of the most visited Web
Sites and portals, including AOL, Excite, MSN, Netcenter, Women.com and Yahoo!.
MERCHANDISING
Our merchandising efforts are led by a team of 8 buyers who hail from
such venerable retailers as Saks Fifth Avenue, Bergdorf Goodman and Henri
Bendel. We buy merchandise directly from designers as well as from retailers and
other third party, indirect resources. Currently, we offer products from more
than 350 top, name brand designers, which we believe to be the widest selection
of designers available from any online store. We have established direct supply
relationships with over 200 such designers. We believe that we have been
successful in opening up over 200 direct supply relationships, in part, because
we have devoted substantial resources to establishing Bluefly.com as a high-end
retail environment. In this regard, we are committed to displaying all of our
merchandise in an attractive manner, offering superior customer service and
gearing all aspects of our business towards creating a better channel for top
designers to liquidate their excess inventory.
For a number of reasons, we believe that our inventory risk can be
lower than that of traditional retailers:
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o By centralizing our inventory, we believe that we will be able
to optimize inventory turns because we will not be forced to
anticipate sales by region or allocate merchandise between
multiple locations.
o Our Web Site captures a tremendous amount of customer data
that we can use to optimize our purchase of inventory.
o Unlike traditional brick-and-mortar retailers and catalogs, we
can change the pricing of our products almost instantaneously
and can price products based on supply and demand.
o Unlike traditional brick-and-mortar retailers, which have a
limited amount of shelf space, significant rent payments and
attendant sales personnel costs, we hold inventory in a
warehouse with a lower per square foot rental charge, lower
personnel costs and more shelf space. These factors create
lower inventory carrying costs.
STATE AND DATE OF INCORPORATION AND ADDRESS
We were incorporated under the laws of the State of New York in 1991 as
Pivot Corporation. Prior to commencement of this offering, we intend to
reincorporate in Delaware through a merger which will be voted upon by our
shareholders at the annual meeting scheduled for [January 15], 2001. In 1994, we
changed our name to Pivot Rules, Inc., and, in October 1998, changed our name to
Bluefly, Inc. Bluefly.com was publicly launched in September 1998. In June 1998,
prior to the launch of Bluefly.com, we discontinued our Pivot Rules division,
which marketed a collection of golf sportswear, in order to devote all of our
energy and resources to building Bluefly.com. Our executive office is 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.
SUMMARY OF THE TERMS OF THIS OFFERING
Further details concerning this part of the summary are set forth under
"The Offering" beginning on page [___]. Only holders of record of common stock
at the close of business on the record date stated below may exercise rights.
Securities Offered............... We are offering up to 8,547,009 shares of
common stock to be issued upon exercise of
the rights.
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Subscription Ratio; Basic
Subscription Privilege........... 1.735 rights for every share of common stock
owned as of the record date. Each right
entitles you to purchase one share of common
stock for the subscription price. We are not
issuing any fractional rights or fractional
shares. If the number of shares of common
stock you held of record on the record date
would result in your receipt of fractional
rights, the number of rights issued to you
is being rounded down to the nearest whole
number. So, for example, if you were the
record holder of 100 shares of common stock
on the record date, you are receiving rights
to subscribe to 173 shares instead of 173.5
shares.
You may not purchase fractional shares. You
may, however, subscribe for any whole number
of shares by exercising less than all of
your rights.
Subscription Price............... $2.34 per share, payable in cash. All
payments must be cleared on or before the
expiration date.
Oversubscription Privilege....... If you fully exercise your basic
subscription privilege, you may also
purchase additional shares of common stock
that are not purchased by other
shareholders. The same subscription price of
$2.34 per share applies to this purchase. If
there are not enough shares available to
fill all subscriptions for additional
shares, the available shares will be
allocated pro rata based on the number of
shares each subscriber for additional shares
has purchased under the basic subscription
privilege.
Record Date...................... [__________], 2000 at 5:00 p.m., New York
City time. Only our shareholders of record
as of the record date will receive rights to
subscribe for new shares of common stock.
Expiration Date.................. The rights expire on ___________ at
5:00 p.m., New York City time. Rights not
exercised by the expiration date will be
null and void. We have the option of
extending the expiration date for any
reason.
Use of Proceeds.................. We will use the net proceeds of this
offering for working capital and other
general corporate purposes.
Transferability of Rights........ The rights are transferable and it is
anticipated that they will trade on the
NASDAQ SmallCap Market System and may be
purchased or sold through brokers in the
same manner as our common stock until the
close of business on the last trading day
prior to the end of the subscription period,
that trading day being ________, 2001,
unless we extend the date. We cannot assure
you, however, that any market for the rights
will develop or, if a market does develop,
that the market will remain available
throughout the period in which the rights
may be exercised.
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No Board Recommendation.......... Our Board of Directors does not make any
recommendation to shareholders regarding the
exercise of rights in this offering.
Shareholders who do exercise the right to
purchase shares of common stock risk losing
the new money invested. We cannot assure you
that the subscription price will remain
below any trading price for our common stock
or that the trading price will not decline
to below the subscription price during or
after this offering. For more information
regarding some of the risks inherent in this
offering, please see "Risk Factors"
beginning on page [____].
Standby Purchasers............... Quantum Industrial Partners LDC and SFM
Domestic Investments LLC, affiliates of
Soros Private Equity Partners LLC, who will
beneficially own an aggregate of 72.2% of
our outstanding common stock upon
commencement of this offering, have agreed,
subject to certain conditions, to act as
standby purchasers in this offering. The
total dollar amount of shares of common
stock to be purchased by Quantum Industrial
Partners LDC and SFM Domestic Investments
LLC will be equal to the difference between
$20,000,000 and the amount purchased by our
shareholders pursuant to this offering, but
in no event will Quantum Industrial Partners
LDC and SFM Domestic Investments LLC
purchase more than $10,000,000 in the
aggregate.
No Revocation.................... If you exercise any rights, you are not
allowed to revoke or change your exercise or
request a refund of monies paid.
Certain Federal Income Tax
Consequences..................... For United States federal income tax
purposes, we believe that a shareholder will
not recognize taxable income upon the
receipt or exercise of rights. See "Certain
Federal Income Tax Consequences" beginning
on page ___. Each shareholder should consult
the holder's own tax adviser concerning the
tax consequences of this offering under the
holder's own tax situation. This prospectus
does not summarize tax consequences arising
under state tax laws, non-U.S. tax law, or
any tax laws relating to special tax
circumstances or particular types of
taxpayers.
Extension, Withdrawal and
Amendment........................ We have the option of extending this
offering and the subscription period,
although we presently do not intend to do
so. We also reserve the right to withdraw,
terminate or amend this offering at any time
for any reason. In the event that such
conditions required by the Standby
Commitment and outlined in the Investment
Agreement described under "Recent
Developments" on page [____] are not
satisfied and funds required to be purchased
by Quantum Industrial Partners LDC and SFM
Domestic Investments LLC under the Standby
Commitment are not made, we will terminate
this offering. If this offering is withdrawn
or terminated, or any submitted
subscriptions no longer comply with the
amended terms of this offering, we will
return all refunds received from such
subscriptions (without interest).
Procedure of Exercising Rights... To exercise rights, you must complete the
subscription warrant and deliver it to the
subscription agent, [_______________], with
full payment for all the rights you elect to
exercise. [________________] must receive
the proper forms and payments on or before
the expiration date.
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You may deliver your subscription documents
and payments by mail or commercial courier.
If regular mail is used for this purpose, we
recommend using insured, registered mail.
You may use an alternative "Notice of
Guaranteed Delivery" procedure if you are
unable to deliver the subscription warrant
before the expiration date, subject to the
requirements of this procedure described
under "The Offering - Special Procedure"
under "Notice of Guaranteed Delivery Form"
on page [_____].
Shares of Common Stock Outstanding
Before the Rights Offering....... 4,924,906.
Shares of Common Stock Outstanding
Upon Completion of Rights Offering Between 9,198,410 and 13,471,915, depending
on the participation level of existing
shareholders.
RISK FACTORS
See the section entitled "Risk Factors" immediately following this
summary for a discussion of certain factors you should consider in connection
with exercising your right to purchase our common stock.
SUMMARY HISTORICAL FINANCIAL DATA
All data in thousands except share data
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
----------------------- -------------
1999 1998 1997 2000 1999
---- ---- ---- ---- ----
(Unaudited) (Unaudited)
Statement of Operations Data:
<S> <C> <C> <C> <C> <C>
Net sales $ 4,951 $ 215 $ - $ 11,100 $ 1,909
Cost of sales 3,766 266 - 8,603 1,455
Gross profit (Loss) 1,185 (51) - 2,497 454
Selling, marketing and fulfillment expenses 11,424 1,121 - 14,310 6,267
General and administrative expenses 3,460 1,166 819 3,765 2,038
Internet business start up costs - 332 - - -
Total operating expenses 14,884 2,619 819 (18,075) (8,305)
Loss from continuing operations (13,699) (2,670) (819) (15,578) (7,851)
Net loss from continuing (13,257) (2,478) (469) (15,749) (7,568)
operations
Net loss (13,194) (3,656) (381) (15,749) (7,505)
Basic and diluted (loss) income per share: $(2.82) $(1.32) $(.18) $(3.32) $(1.61)
Continuing Operations (2.83) (.89) (.22) (3.32) (1.62)
Discontinued Operations .01 (.43) .04 - .01
Basic and diluted weighted average shares 4,802,249 2,770,869 2,149,315 4,924,906 4,763,074
outstanding available to common stockholders
</TABLE>
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<TABLE>
<CAPTION>
As of December 31, 1999 As of September 30, 2000
----------------------- ------------------------
(unaudited) (unaudited)
Balance Sheet Data:
<S> <C> <C>
Cash $ 7,934 $ 906
Inventories, net 7,020 7,934
Other current assets 1,080 1,785
Total current liabilities 6,523 5,048
Notes Payable, net - 11,679
Redeemable Preferred Stock 10,586 10,886
Shareholders' equity (deficit) 643 (15,544)
</TABLE>
RISK FACTORS
You should carefully consider the risks described below and the other
information in this prospectus before deciding to purchase shares in this
offering. Our shares are subject to significant investment risks. Many factors,
including the risks described below and other risks we have not recognized,
could cause our operating results to differ from our expectations and plans.
THERE ARE RISKS RELATED TO OUR BUSINESS THAT COULD RESULT IN SUBSTANTIAL LOSSES
FOR INVESTORS WHO EXERCISE THEIR RIGHTS.
WE ARE MAKING A SUBSTANTIAL INVESTMENT IN OUR BUSINESS AND MAY NEED TO RAISE
ADDITIONAL FUNDS.
Our business is capital intensive and we may need additional financing
to effect our business plan. We anticipate, based on current plans and
assumptions relating to our operations, that the proceeds from prior financings
and this offering, inclusive of the Standby Commitment, together with existing
resources and cash generated from operations, should be sufficient to satisfy
our current cash requirements through the end of 2001. However, we intend to
seek additional debt and/or equity financing in order to maximize the growth of
our business. We are currently exploring a secured inventory line of credit.
However, the environment for raising investment capital by companies in the
Internet industry has been difficult and there can be no assurance that
additional financing or other capital will be available to us upon acceptable
terms, or at all. The inability to obtain additional financing, when needed,
would have a material adverse effect on our business, financial condition and
results of operations.
OUR LIMITED OPERATING HISTORY MAKES FORECASTING OUR REVENUES DIFFICULT.
We launched Bluefly.com in September 1998. As a result of our limited
operating history, 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
net loss in a given quarter to be greater than expected and could also 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.
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WE HAVE A HISTORY OF LOSSES AND EXPECT THAT LOSSES WILL CONTINUE IN THE FUTURE.
As of September 30, 2000, we had an accumulated deficit of $32,980,000.
We incurred net losses from continuing operations of $15,749,000 for the nine
months ended September 30, 2000 and $13,257,000 and $2,478,000 for the years
ended December 31, 1999 and 1998, respectively. We anticipate that losses will
continue for the foreseeable future as we incur expenses related to the growth
of our business and expend substantial amounts on the development of Bluefly.com
and marketing and advertising to build recognition and market share for
Bluefly.com.
WE ARE DEPENDENT ON INDIRECT SUPPLY SOURCES WHICH INCREASES OUR RISK OF
LITIGATION.
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. We have taken steps to ensure
that we sell only authentic, high quality name brand products and to avoid
selling any non-authentic or damaged goods. While we believe that our procedures
are effective, the possibility for error exists and therefore we face potential
liability under applicable laws, regulations, agreements and orders for the sale
of non-authentic or damaged goods. Moreover, any claims by a brand owner, with
or without merit, could be time consuming, result in costly litigation and
generate bad publicity for us.
BRAND OWNERS COULD ESTABLISH PROCEDURES TO LIMIT OUR ABILITY TO PURCHASE
PRODUCTS INDIRECTLY.
Brand owners could establish procedures to limit or control our 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. In the event that 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, and the importer may have a civil
action for damages against us.
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. Any failure to manage growth effectively could have a material
adverse effect on our business, financial condition and results of operations.
We have grown from 12 employees in January 1999 to 88 employees in September
2000. To be successful, we must continue to implement management information
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. 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 and inventory levels at
the pace needed to support customer demand could have a material adverse effect
on our business, financial condition and results of operations.
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WE ARE HEAVILY DEPENDENT ON THIRD PARTY RELATIONSHIPS.
We are heavily dependent upon our relationships with our fulfillment
operations provider and Web hosting provider, as well as delivery companies like
UPS and the United States Postal Service to service our customers' needs. We
began using a new fulfillment operations provider in August 2000 and have a
limited operating history with it. The failure of our fulfillment operations
provider, Web hosting provider or delivery companies to properly perform their
services for us could have a material adverse effect on our business, prospects,
financial condition and results of operations. 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, it would
have a material adverse impact on our business, prospects, financial condition
and results of operations.
WE ARE IN COMPETITION WITH COMPANIES A LOT 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 online
customers comes from a variety of sources including:
o existing land based retailers such as The Gap, Nordstrom, Saks
Fifth Avenue and Macy's, which are using the Internet to
expand their channels of distribution;
o less established companies such as Ashford, which are building
their brands online;
o traditional direct marketers such as L.L. Bean, Lands' End, J.
Crew and Spiegel's;
o television direct marketers such as QVC; and
o traditional off-price retail stores such as T.J. Maxx,
Marshalls, Filene's Basement and Loehmanns, which may or may
not use the Internet to grow their customer base.
We expect our competition to intensify, and believe that the list of
competitors will grow. 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 order delivery performance;
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o customer service;
o site features; and
o content.
Although we believe we compare favorably with our competitors, we recognize that
this market is relatively new and is evolving rapidly. There can be no assurance
that we will be able to compete successfully against competitors and future
competitors, and competitive pressures faced by us may have a material adverse
effect on our business, prospects, financial condition and results of
operations.
WE DO NOT HAVE LONG TERM CONTRACTS WITH OUR VENDORS AND THEREFORE THE
AVAILABILITY OF MERCHANDISE IS AT RISK.
Although we believe we can establish and maintain relationships with
brand owners and third party distributors of merchandise who will offer
competitive sources of merchandise, there can be no assurance that we will be
able to obtain the quantity, selection or brand quality of items that we believe
is necessary. We have no 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 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 acquisitions in a
timely and efficient manner and on acceptable commercial 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
business, prospects, financial condition and results of operation would be
materially, adversely affected.
WE ARE NEW TO THE INDUSTRY AND NEED TO ESTABLISH BRAND NAME RECOGNITION.
We believe that 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 business, prospects, financial condition and results
of operations would be materially adversely affected.
WE MAY NOT BE ABLE TO IMPLEMENT OUR GROWTH STRATEGY.
Our future success, and in particular our revenues and operating
results, depend upon our ability to successfully execute several key aspects of
our business plan. We must continually increase the dollar
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volume of transactions booked through Bluefly.com, either by generating
significantly higher and continuously increasing levels of traffic to
Bluefly.com or by increasing the percentage of visitors to our online sites who
purchase products, or through some combination thereof. We must also achieve a
high level of repeat purchasers. In addition, we must deliver a high level of
customer service and compelling content. There can be no assurance that we will
be effective in increasing:
o the dollar volume of products purchased through Bluefly.com;
o traffic to Bluefly.com;
o the percentage of visitors who purchase products; or
o the number of repeat purchasers.
The failure to do one or more of the foregoing would likely have a
material adverse effect on our business, prospects, financial condition and
results of operations.
DUE TO OUR USE OF THE INTERNET AND WEB SERVERS AS PRESENTATION VEHICLES, OUR
SUCCESS DEPENDS ON CONTINUED DEVELOPMENT AND MAINTENANCE OF THESE TECHNOLOGIES
BY OTHER COMPANIES.
The Internet and other online services may not be accepted as a viable
commercial marketplace for a number of reasons, including potentially inadequate
development of the necessary network infrastructure or delayed development of
technologies that provide access to the Internet and improve the performance of
Internet services. To the extent that the Internet and other online services,
such as AOL, continue to experience significant growth in their number of users,
their frequency of use or an increase in their bandwidth requirements, there can
be no assurance that the infrastructure for the Internet and other online
services will have sufficient bandwidth or other technical features to support
the increased demands placed upon them. In addition, the Internet or other
online services could lose their viability due to delays in the development or
adoption of new standards and protocols required to handle increased levels of
Internet or other online service activity, or due to increased governmental
regulation. Changes in or insufficient availability of telecommunications
services to support the Internet or other online services also could result in
slower response times and adversely affect usage of the Internet and other
online services generally and Bluefly.com in particular. If use of the Internet
and other online services does not continue to grow or grows more slowly than
expected or if the infrastructure for the Internet and other online services
does not effectively support growth that may occur, our business prospects,
financial condition and results of operations would be materially adversely
affected.
THERE CAN BE NO ASSURANCE THAT OUR TECHNOLOGY SYSTEMS WILL BE ABLE TO HANDLE
INCREASED TRAFFIC.
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 the
attractiveness of our merchandise and could also adversely affect consumer
perception of our brand name. We may
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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.
WE OPERATE IN A RAPIDLY CHANGING, HIGHLY COMPETITIVE MARKET AND WE MAY NOT HAVE
ADEQUATE RESOURCES TO COMPETE SUCCESSFULLY.
To remain competitive, we must continue to enhance and improve the
responsiveness, functionality and features of Bluefly.com. The online commerce
industry is characterized by:
o rapid technological change;
o evolving user and customer requirements and preferences;
o frequent new product, service and technology introductions;
and
o the emergence of new industry standards and practices.
Each of these characteristics could render the technology we use obsolete. Our
future success will depend, in part, on our ability to:
o license leading technologies useful in our business;
o enhance our Web Site;
o develop new services and technologies that address the
increasingly sophisticated and varied needs of our prospective
customers; and
o respond to technological advances and emerging industry
standards and practices on a cost effective and timely basis.
If we are unable, for technical, legal, financial or other reasons, to adapt in
a timely manner in response to changing market conditions or customer
requirements, our business prospects, financial condition and results of
operations would be materially adversely affected.
OUR BUSINESS WILL SUFFER IF ONLINE APPAREL COMMERCE IS NOT WIDELY ACCEPTED.
Our future revenues and any future profits are dependent upon the
widespread acceptance and use of the Internet and other online services as an
effective medium of commerce by consumers. Rapid growth in the use of and
interest in the Web, the Internet and other online services is a recent
phenomenon, and there can be no assurance that acceptance and use will continue
to develop or that a sufficiently broad base of consumers will adopt, and
continue to use, the Internet and other online services as a medium of commerce
and, in particular, online apparel commerce. Demand and market acceptance for
recently introduced
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services and products over the Internet are subject to a high level of
uncertainty and there exist few proven services and products. We rely, and will
continue to rely, on consumers who have historically used traditional means of
commerce to purchase merchandise. Our success depends on consumer acceptance and
utilization of the Internet as a place to shop for apparel.
UNEXPECTED CHANGES IN FASHION TRENDS CAN AFFECT OUR BUSINESS.
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 MARKET.
The apparel industry historically has been subject to substantial
cyclical variations and 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. Any 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 business, financial condition
and operating results.
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 Internet shopping.
If return rates are higher than expected, our business, prospects, financial
condition 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. We have entered into
employment agreements with each of our executive officers, with expiration dates
ranging from July 2002 to November 2003. We maintain a $1,200,000 key person
life insurance policy on the life of our Chief Executive Officer. The loss of
the services of any of our executive officers could have a material adverse
effect on our business, prospects, financial condition and results of
operations.
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 Internet experience and retain existing key
personnel in the future. The market for personnel with Internet experience is
extremely competitive. Our failure to attract additional qualified employees
could have a material adverse effect on our business, prospects, financial
condition and results of operations.
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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. 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, including Bluefly.com,
that is not favorably received by consumer or trade customers could damage our
reputation.
WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS AND WE MAY BE
LIABLE FOR INFRINGING THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS.
Third parties may infringe or misappropriate our trademarks or other
proprietary rights, which could have a material adverse effect on our business,
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. 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
could also incur substantial costs in asserting our intellectual property or
proprietary rights.
WE CANNOT GUARANTEE THE PROTECTION OF OUR INTELLECTUAL PROPERTY.
Our intellectual property is critical to our success, and we rely on
trademark, copyright, and trade secret protection to protect our proprietary
rights. We are pursuing registration service marks in the United States and
abroad. Effective trademark, copyright and trade secret protection may not be
available in every country in which our products will be available. We intend to
effect appropriate registrations internationally and domestically as we expand
our operations. 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.
UNAUTHORIZED SECURITY BREACHES TO OUR SERVICE COULD HARM OUR BUSINESS.
A fundamental requirement for online commerce and communications is the
secure transmission of confidential information over public networks. We rely on
encryption and authentication technology
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licensed from third parties to provide the security and authentication necessary
to effect secure transmission of confidential information, such as customer
credit card numbers. In addition, we maintain an extensive confidential database
of customer profiles and transaction information. 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. If any such compromise of our security were to occur, it
could have a material adverse effect on our reputation, business, operating
results and financial condition. A party who is able to circumvent our security
measures could misappropriate proprietary information or cause interruptions in
our operations. 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.
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 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.
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 decrease the growth of the Internet or other online services,
which could, in turn, decrease the demand for our products and services and
increase our cost of doing business, or otherwise have a material adverse effect
on our business, prospects, financial condition and results of operations.
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 have a material adverse effect on our business, prospects, financial
condition and results of operations. If we were alleged to have violated
federal, state or foreign, civil or criminal law, even if we could successfully
defend such claims, it could have a material adverse effect on our business,
prospects, financial condition and results of operations.
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 and New York.
However, one or more states may seek to impose sales tax collection obligations
on out-of-state companies such as our company which engage in online commerce.
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In addition, any new operation in states outside Virginia 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 have a
material adverse effect on our business, prospects, financial condition and
results of operations.
THERE ARE RISKS RELATED TO THIS OFFERING THAT COULD RESULT IN SUBSTANTIAL LOSSES
FOR INVESTORS WHO EXERCISE THEIR RIGHTS.
IF YOU DO NOT EXERCISE YOUR RIGHTS, YOUR OWNERSHIP INTEREST WILL BE DILUTED.
If you do not exercise all of your rights, you may suffer significant
dilution of your percentage ownership in us relative to stockholders who
exercise their rights.
STANDBY COMMITMENT BY PRINCIPAL STOCKHOLDERS IS CONDITIONAL.
Quantum Industrial Partners LDC and SFM Domestic Investments LLC,
affiliates of Soros Private Equity Partners LLC, who will beneficially own an
aggregate of 72.2% of our outstanding common stock upon commencement of this
offering, have agreed to act as standby purchasers in this offering. However,
this commitment is subject to certain conditions described in the Investment
Agreement described under "Recent Developments" starting on page [____],
including that there must not have been a material adverse change in our
business, properties, liabilities, results of operations, financial condition,
assets or prospects. We can not assure you that all of these conditions will be
satisfied and that Quantum Industrial Partners LDC and SFM Domestic Investments
LLC will complete the agreed upon purchases. If Quantum Industrial Partners LDC
and SFM Domestic Investments LLC fail to fund the Standby Commitment for any
reason, we will cancel this offering.
THE PRICE OF OUR COMMON STOCK MAY DECLINE BEFORE OR AFTER THE SUBSCRIPTION
RIGHTS EXPIRE.
We cannot assure you that the public trading market price of our common
stock will not decline after you exercise your subscription rights. If that
occurs, you will have committed to buy shares of common stock at a price above
the prevailing market price and you will have an immediate unrealized loss.
Moreover, we cannot assure you that following the exercise of subscription
rights you will be able to sell your shares of common stock at a price equal to
or greater than the subscription price. Until certificates are delivered upon
expiration of this offering, you may not be able to sell the shares of our
common stock you purchase in this offering. Certificates representing shares of
our common stock purchased will be delivered as soon as practicable after
expiration of this offering. We will not pay you interest on funds delivered to
the subscription agent pursuant to the exercise of rights.
ONCE YOU EXERCISE YOUR SUBSCRIPTION RIGHTS, YOU MAY NOT REVOKE THE EXERCISE.
Once you exercise your subscription rights, you may not revoke the
exercise. If we elect to withdraw or terminate the rights offering, neither we
nor the subscription agent will have any obligation with respect to the
subscription rights except to return, without interest, any subscription
payments.
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THE SUBSCRIPTION PRICE IS NOT AN INDICATION OF OUR VALUE.
The subscription price was set by an independent committee of the Board
of Directors after considering a variety of factors, including the desire to
encourage full shareholder participation in this offering by setting an exercise
price below the current market price of the common stock. The subscription price
does not necessarily bear any relationship to the book value of our assets,
which is negative, past operations, cash flows, losses, financial condition or
any other established criteria for value. You should not consider the
subscription price as an indication of our present or future value. We have
neither sought nor obtained a valuation opinion from an outside financial
consultant or investment banker.
QUANTUM INDUSTRIAL PARTNERS LDC AND SFM DOMESTIC INVESTMENTS LLC WILL OWN A
MAJORITY OF OUR STOCK.
Upon commencement of this offering, Quantum Industrial Partners LDC and
SFM Domestic Investments LLC will beneficially own in the aggregate Preferred
Stock and warrants convertible into 72.2% of common stock without giving effect
to the shares purchased pursuant to their Standby Commitment in this offering.
The holders of the Series A Preferred Stock and the Series B Preferred Stock to
be issued vote on an "as-converted" basis with the holders of the common stock.
By virtue of its ownership of the Series A and Series B Preferred Stock, Quantum
Industrial Partners LDC and SFM Domestic Investments LLC will have rights to
appoint 2 designees to our Board of Directors, each of whom will have 7 votes on
any matter voted upon by our Board of Directors. Collectively, these 2 designees
will have 14 out of 19 possible votes on each matter voted upon by our Board of
Directors. In addition, we will be required to obtain the approval of such
designees prior to taking certain actions. The holders of the Preferred Stock
have certain pre-emptive rights to participate in future equity financings and
certain anti-dilution rights which could result in the issuance of additional
securities to such holders. In view of their large percentage of ownership and
rights as the holders of Preferred Stock, Quantum Industrial Partners LDC and
SFM Domestic Investments LLC, will effectively control 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
shareholders, including any amendments to our certificate of incorporation and
mergers or sales of all or substantially all of the our assets.
WE HAVE A LARGE AMOUNT OF SHARES ELIGIBLE FOR FUTURE SALE.
We currently have 4,924,906 shares of common stock outstanding and,
upon the completion of this offering, will have between 9,198,410 and 13,471,915
shares of common stock outstanding depending on the number of shares subscribed
for in this Offering. All such shares, other than shares which may be held by
our "affiliates," will be freely tradeable without restriction or further
registration under the Securities Act. At least 12,820,512 shares of common
stock are issuable upon conversion of the Series A Preferred Stock and Series B
Preferred Stock owned by Quantum Industrial Partners LDC and SFM Domestic
Investments LLC and other investors, all of which are "restricted securities" as
that term is defined under Rule 144 promulgated under the Securities Act ("Rule
144"), and may only be sold pursuant to a registration statement under the
Securities Act or an applicable exemption from the registration requirements of
the Securities Act, including Rule 144 thereunder. Quantum Industrial Partners
LDC and SFM Domestic Investments LLC and the other holders of Series A Preferred
Stock have demand and piggy-back registration rights that require the filing of
a registration statement with respect to the shares underlying their options.
Such registration statement will permit Quantum Industrial Partners LDC and SFM
Domestic Investments
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LLC and the other holders of Series A Preferred Stock to sell such shares from
time to time notwithstanding the limitations imposed by Rule 144. No predictions
can be made as to the effect, if any, that market sales of shares by existing
stockholders (including shares issuable upon the exercise of such warrants and
options) or the availability of such shares for future sale will have on the
market price of shares of common stock prevailing from time to time. The
prevailing market price of the common stock after this offering could be
adversely affected by future sales of substantial amounts of common stock by
existing stockholders.
CERTAIN EVENTS COULD RESULT IN A DILUTION OF YOUR OWNERSHIP OF OUR COMMON STOCK.
As of October 31, 2000, there were outstanding options to purchase
4,778,885 shares of common stock issued under our 1997 and 2000 Stock Option
Plan, (of which 2,837,018 are subject to shareholder approval), warrants to
purchase 375,000 shares issued to Soros, and additional warrants and options to
purchase an aggregate of 84,500 shares of common stock. The exercise of our
outstanding options and warrants would dilute the then existing shareholders'
percentage ownership of our stock, and any sales in the public market of common
stock underlying such securities could adversely affect prevailing market prices
for the common stock. As of the commencement of this Offering, the 500,000
shares of Series A Preferred Stock outstanding will be convertible into
4,273,504 shares of common stock (plus any shares of common stock issued upon
conversion in payment of any unpaid dividends on the Series A Preferred Stock).
As of the commencement of this Offering, at least 8,673,720 shares of Series B
Preferred Stock will be outstanding (depending on the number of shares of Series
B Preferred Stock issued in payment of interest accrued on the subordinated
convertible notes), which shares will be convertible into an aggregate into
8,673,720 shares of common stock (plus any shares of common stock issued upon
conversion in payment of any unpaid dividends on the Series B Preferred Stock).
The Series B Preferred Stock will contain antidilution provisions which, subject
to certain exceptions, would reduce the conversion price of the Series B
Preferred Stock to the price at which we issue or sell new securities in the
future, should those new securities be issued or sold for less than $2.34 per
share. Moreover, the terms upon which we would be able to obtain additional
equity capital could be adversely affected since the holders of shares of Series
A and Series B Preferred Stock can be expected to convert those shares at a time
when we would, in all likelihood, be able to issue new securities on terms more
favorable than those of the Series A and Series B Preferred Stock. In addition,
we have granted certain demand and piggyback registration rights to the holders
of Series A and Series B Preferred Stock.
CHANGE OF CONTROL COVENANT AND LIQUIDATION PREFERENCE OF SERIES A PREFERRED
STOCK AND SERIES B PREFERRED STOCK.
We have agreed in our Investment Agreement with Quantum Industrial
Partners LDC and SFM Domestic Investments LLC, that for so long as any shares of
Series A Preferred Stock or Series B 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 Series
A Preferred Stock and Series B Preferred Stock to receive from the acquiror an
amount in cash equal to their respective aggregate liquidation preference of the
Series A Preferred Stock and Series B Preferred Stock. The Series A liquidation
preference is $10,000,000 (plus any accrued and unpaid dividends) and the Series
B liquidation preference is at least $20,000,000 (plus any accrued and unpaid
dividends) and will be increased by an amount equal to the amount purchased by
Quantum Industrial Partners LDC and SFM Domestic Investments LLC, pursuant to
their Standby Commitment.
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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 Restated Certificate of Incorporation and by-laws, as amended and
restated, contain certain provisions that may delay, defer or prevent a
takeover. Our Board of Directors will have the authority to issue up to
14,000,000 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 shareholders. Accordingly, our Board of
Directors is empowered, without approval of the holder 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.
THERE IS NO ASSURANCE THAT WE WILL REMAIN LISTED ON AN ACTIVE TRADING MARKET.
Although our common stock is quoted on the NASDAQ SmallCap Market and
the Boston Stock Exchange, there can be no assurance that we will, in the
future, be able to meet all requirements for continued quotation thereon. In the
absence of an active trading market or if our common stock cannot be traded on
the NASDAQ SmallCap Market or the Boston Stock Exchange, our common stock could
instead be traded on the Electronic Bulletin Board or in the Pink Sheets. In
such event, the liquidity and stock price in the secondary market may be
adversely affected. In addition, in the event our common stock was delisted,
broker-dealers have certain regulatory burdens imposed upon them which may
discourage broker-dealers from effecting transactions in our common stock,
further limiting the liquidity thereof.
THIS OFFERING
BEFORE EXERCISING OR SELLING ANY RIGHTS, YOU SHOULD READ CAREFULLY THE
INFORMATION SET FORTH UNDER THE "RISK FACTORS" BEGINNING ON PAGE [___].
THE RIGHTS
As soon as practicable after the date of this prospectus, we are
distributing, at no charge, to holders of our common stock as of 5:00 p.m., New
York City time, on the record date of [______], 2000, 1.735 transferable
subscription rights for every share of common stock owned at that time to
purchase additional shares of common stock. Each whole right entitles you to
purchase one share of our common stock for the subscription price. On
[________], 2000, the last reported sales price for our common stock on the
NASDAQ SmallCap Market was $______ per share.
We will not issue fractional rights. If the number of shares of common
stock you held on the record date would have resulted in your receipt of
fractional rights, the number of rights issued to you will be rounded down to
the nearest whole right.
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SUBSCRIPTION PRICE.
The subscription price is $2.34 per share, payable in cash. All
payments must be cleared on or before the expiration date.
BASIC AND OVERSUBSCRIPTION PRIVILEGES.
Basic Subscription Privilege. You are entitled to purchase one share of
common stock at the subscription price for every right exercised.
Oversubscription Privilege. If you exercise your basic subscription
privilege in full, you may also subscribe for additional shares that other
shareholders have not purchased under their basic subscription privilege. If
there are not enough shares available to fill all such subscriptions for
additional shares, the available shares will be allocated pro rata based on the
number of shares each subscriber for additional shares has purchased under the
basic subscription privilege. We will not allocate to you more than the number
of shares you have actually subscribed and paid for.
You are not entitled to exercise the oversubscription privilege unless
you have fully exercised your basic subscription privilege. For this purpose,
you would only count the shares you own in your own name, and not other shares
that might, for example, be jointly held with a spouse, held as a custodian for
someone else, or held in an individual retirement account.
You can elect to exercise the oversubscription privilege only at the
same time you exercise your basic subscription privilege in full.
In exercising the oversubscription privilege, you must pay the full
subscription price for all the shares you are electing to purchase. If we do not
allocate to you all of the shares you have subscribed for under the
oversubscription privilege, we will refund by mail to you any payment you have
made for shares which are not available to issue to you, as soon as practicable
after completion of this offering. Interest will not be payable on amounts
refunded.
Banks, brokers and other nominees who exercise the oversubscription
privilege on behalf of beneficial owners of shares must report certain
information to [_______________] and us and record certain other information
received from each beneficial owner exercising rights. Generally, banks, brokers
and other nominees must report (1) the number of shares held on the record date
on behalf of each beneficial owner, (2) the number of rights as to which the
basic subscription privilege has been exercised on behalf of each beneficial
owner, (3) that each beneficial owner's basic subscription privilege held in the
same capacity has been exercised in full, and (4) the number of shares
subscribed for under the oversubscription privilege by each beneficial owner.
If you complete the portion of the subscription warrant to exercise the
oversubscription privilege, you will be representing and certifying that you
have fully exercised your basic subscription privilege as described above. You
must exercise your oversubscription privilege at the same time you exercise your
basic subscription privilege.
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REASON FOR THE RIGHTS OFFERING.
Our largest shareholders, Quantum Industrial Partners LDC and SFM
Domestic Investment LLC, have agreed, subject to certain conditions outlined in
the Investment Agreement described under "Recent Developments" on page [____],
to make a further investment in us. As part of that investment:
o their $20,000,000 in loans to us will be converted, at the
rate of $2.34 per share, into shares of Series B Preferred
Stock, which is convertible into common stock, initially on a
one-for- one basis;
o the conversion price of their existing Class A Preferred Stock
will be reduced to $2.34 per share; and
o through their Standby Commitment, they have committed to
purchase up to $10,000,000 of the common stock offered in this
offering.
This investment is more fully described under "Recent Developments" on page
[____]. After review by our management and an independent committee of the Board
of Directors, we determined that it would be appropriate to offer our common
shareholders the right to purchase common stock at the same $2.34 per share
price. We believe this is not only fair to our common shareholders, but also an
excellent way for us to raise additional equity capital.
THE BOARD MAKES NO INVESTMENT RECOMMENDATION TO SHAREHOLDERS.
Our Board of Directors, based upon the unanimous recommendation of the
independent directors, has approved but does not make any recommendation to you
about whether you should exercise any rights. In making the decision to exercise
or not exercise your rights, you must consider your own best interests.
If you choose not to exercise your subscription rights in full, your
relative ownership interest in us will be diluted. If you exercise rights, you
risk investment loss on new money invested. The trading price of our common
stock may decline below the subscription price. We cannot assure you that the
subscription price will remain below any trading price for our common stock or
that its trading price will not decline to below the subscription price during
or after this offering. For a summary of some of the risks a new investment
would entail, see "Risk Factors" beginning on page [____].
EXPIRATION TIME AND DATE.
The rights expire on ___________, at 5:00 p.m., New York City time. We
have the option of extending the expiration date for any reason, although
presently we do not intend to do so. Rights not exercised by the expiration date
will be null and void.
In order to exercise rights in a timely manner, you must assure that
[______________] actually receives, prior to expiration of the rights, the
properly executed and completed subscription warrant, or "Form of Notice of
Guaranteed Delivery", together with full payment for all shares you wish to
purchase.
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NO REVOCATION.
You are not allowed to revoke or change your exercise of rights after
you send in your subscription forms and payment.
METHOD OF TRANSFERRING RIGHTS.
We anticipate that the rights will trade on the NASDAQ SmallCap Market
under the symbol [_____] and may be purchased and sold through usual investment
channels until the close of business on the last trading day prior to the
expiration date.
You may transfer all of the rights evidenced by a single subscription
warrant by endorsing the subscription warrant for transfer in accordance with
the accompanying instructions. You may transfer a portion of the rights
evidenced by a single subscription warrant, but not fractional rights, by
delivering to the subscription agent a subscription warrant properly endorsed
for transfer, with instructions to register that portion of the rights indicated
in the name of the transferee and to issue to it a new subscription warrant
evidencing the transferred rights. In that event, a new subscription warrant
evidencing the balance of the rights will be issued to you or, if you so
instruct, to an additional transferee, or will be sold by the subscription agent
in the manner described below upon your instructions.
You should take into account that transfers, particularly those
requiring the issuance of new subscription warrants, can take several business
days. Neither we nor the subscription agent will have any liability if
subscription warrants or any other required documents are not received in time
for exercise or sale prior to the expiration date.
You will be issued a new subscription warrant upon the partial exercise
or sale of rights only if the subscription agent receives a properly endorsed
subscription warrant before 5:00 p.m., New York City time, on the third trading
day before the expiration date. Unless you make other arrangements with the
subscription agent, a new subscription warrant issued after 5:00 p.m., New York
City time, on the fifth business day before the expiration of this offering will
be held for pick-up at the subscription agent's hand delivery address. You
assume all risk associated with the delivery of newly issued subscription
warrants.
You are responsible for all commissions, fees and other expenses,
including brokerage commissions and transfer taxes, incurred in connection with
the purchase, sale or exercise of rights.
EXTENSION, WITHDRAWAL AND AMENDMENT.
We have the option of extending the period for exercising your rights,
although we presently do not intend to do so.
We also reserve the right to withdraw or terminate this offering at any
time for any reason. In the event that such conditions required by the Standby
Commitment and outlined in the Investment Agreement described under "Recent
Developments" on page [____], are not satisfied and funds required to be
purchased by Quantum Industrial Partners LDC and SFM Domestic Investments LLC
under the Standby
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Commitment are not made, we will terminate this offering. In the event that this
offering is withdrawn or terminated, all funds received from subscriptions by
rights holders will be returned. Interest will not be payable on any returned
funds.
We reserve the right to amend the terms of this offering. If we make an
amendment that we consider significant, we will (1) mail notice of the amendment
to all shareholders of record as of the record date, (2) extend the expiration
date by at least 10 days and (3) offer all subscribers no less than 10 days to
revoke any subscription already submitted. The extension of the expiration date
will not, in and of itself, be treated as a significant amendment for these
purposes.
STANDBY COMMITMENT OF QUANTUM INDUSTRIAL PARTNERS LDC AND SFM DOMESTIC
INVESTMENTS LLC TO ACT AS STANDBY PURCHASERS.
Quantum Industrial Partners LDC, which we refer to as QIP, is a Cayman
Islands limited duration company. The sole general partner of QIP is QIH
Management Investor L.P., a Delaware limited partnership, which we refer to as
QIHMI and that is vested with investment discretion with respect to portfolio
assets held for the account of QIP. The sole general partner of QIHMI is QIH
Management, Inc., a Delaware corporation. Mr. George Soros, the sole shareholder
of QIH Management, Inc. has entered into an agreement with Soros Fund Management
LLC, a Delaware limited liability company that we refer to SFM LLC, pursuant to
which Mr. Soros has agreed to use his best efforts to cause QIH Management, Inc.
to act at the direction of SFM LLC. Mr. Soros, as Chairman of SFM LLC, may be
deemed to have sole voting power and sole investment power with respect to
shares of our stock owned by QIP. Accordingly, each of QIHMI, QIH Management,
Inc., SFM LLC and Mr. Soros may be deemed to be the beneficial owners of shares
of our stock owned by QIP.
Quantum Industrial Partners LDC and SFM Domestic Investments LLC,
affiliates of Soros Private Equity Partners LLC, who will beneficially own an
aggregate of 72.2% of our outstanding common stock upon commencement of this
offering, have agreed to act as standby purchasers in this offering subject to
certain conditions under the Investment Agreement described under "Recent
Developments" on page [__]. Quantum Industrial Partners LDC will purchase up to
4,138,034 shares of common stock and SFM Domestic Investments LLC will purchase
up to 135,470 shares of common stock at $2.34 per share. The amount total dollar
amount of shares of common stock to be purchased by Quantum Industrial Partners
LDC and SFM Domestic Investments LLC at $2.34 per share will be equal to the
difference between $20,000,000 and the amount purchased by our shareholders
pursuant to this offering but in no event will Quantum Industrial Partners LDC
and SFM Domestic Investments LLC purchase more than $10,000,000 in the
aggregate. Quantum Industrial Partners LDC will purchase 96.83% of such amount
and SFM Domestic Investments LLC will purchase 3.17% of such amount.
MAILING OF WARRANTS AND RECORD HOLDERS.
We are sending a subscription warrant to each record holder along with
this prospectus and related instructions to evidence the rights. In order to
exercise rights, you must fill out and sign the subscription warrant and timely
deliver it with full payment for the shares to be purchased. Only the holders of
record of our common stock as of the close of business as of the record date may
exercise rights. You are a record holder for this purpose only if your name is
registered as a shareholder with our transfer agent, American Stock Transfer &
Trust Company, as of the record date.
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A depository bank, trust company or securities broker or dealer which
is a record holder for more than one beneficial owner of shares may divide or
consolidate subscription warrants to represent shares held as of the record date
by their beneficial owners, upon proper showing to American Stock Transfer &
Trust Company.
If you own shares held in a brokerage, bank or other custodial or
nominee account, in order to exercise your rights you must promptly send the
proper instruction form to the person holding your shares. Your broker, dealer,
depository or custodian bank or other person holding your shares is the record
holder of your shares and will have to act on your behalf in order for you to
exercise your rights. We have asked your broker, dealer or other nominee holders
of our stock to contact the beneficial owners to obtain instructions concerning
rights the beneficial owners it represents are entitled to exercise.
FOREIGN AND UNKNOWN ADDRESSES.
We are not mailing subscription warrants to shareholders whose
addresses are outside the United States or who have an APO or FPO address. In
those cases, the subscription warrants will be held by [_______] for those
shareholders. To exercise their rights, these shareholders must notify
[___________] prior to 11:00 a.m., New York City time, on the third business day
prior to the expiration date.
RIGHT TO BLOCK EXERCISE DUE TO REGULATORY ISSUES.
We reserve the right to refuse the exercise of rights by any holder of
rights who would, in our opinion, be required to obtain prior clearance or
approval from any state, federal or foreign regulatory authorities for the
exercise of rights or ownership of additional shares if, at the expiration date,
this clearance or approval has not been obtained. We are not undertaking to pay
any expenses incurred in seeking such clearance or approval.
We are not offering or selling, or soliciting any purchase of, shares
in any state or other jurisdiction in which this offering is not permitted. We
reserve the right to delay the commencement of this offering in certain states
or other jurisdictions if necessary to comply with local laws. However, we may
elect not to offer rights to residents of any state or other jurisdiction whose
law would require a change in this offering in order to carry out this offering
in such state or jurisdiction.
PROCEDURES TO EXERCISE RIGHTS.
Please do not send subscription warrants or related forms to us. Please
send the properly completed and executed form of subscription warrant with full
payment to the subscription agent for this offering,
[______________].
You should read carefully the subscription warrant and related
instructions and forms which accompany this prospectus. You should call D.F.
King & Co., Inc., the information agent for this offering, at the address and
telephone number listed below under the caption "This offering - Questions and
Assistance Concerning the Rights" promptly with any questions you may have.
You may exercise your rights by delivering to [______________], at the
address specified below and in the instructions accompanying this prospectus, on
or prior to the expiration date:
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o Properly completed and executed subscription warrant(s) which
evidence your rights. See "The Offering - Delivery of
Subscription Warrant" below for instructions on where to send
these.
o Payment in full of the subscription price for each newly
issued share of our common stock you wish to purchase under
the basic subscription privilege and the oversubscription
privilege. See "This offering - Required Forms of Payment of
Subscription Price" below for payment instructions.
REQUIRED FORMS OF PAYMENT OF SUBSCRIPTION PRICE.
The subscription price is $2.34 per share subscribed for, payable in
cash. All payments must be cleared on or before the expiration date.
If you exercise any rights, you must deliver to [__________] full
payment in the form of:
o a personal check, certified or cashier's check or bank draft
drawn upon a U.S. bank, or a U.S. postal money order, payable
to [____________], subscription agent, or
o a wire transfer of immediately available funds to the account
maintained by the [_____________] for this offering. If you
desire to make payment by wire transfer, you must contact
[_____________] to receive a Wire Authorization Form.
In order for you to timely exercise your rights, [___________], must
actually receive the subscription price before the expiration date.
Funds paid by uncertified personal check may take at least 5 business
days to clear. Accordingly, if you pay the subscription price by means of
uncertified personal check, you should make payment sufficiently in advance of
the expiration date to ensure that your check actually clears and the payment is
received before such date. We are not responsible for any delay in payment by
you and suggest that you consider payment by means of certified or cashier's
check, money order or wire transfer of funds.
DELIVERY OF SUBSCRIPTION WARRANT.
All subscription warrants, payments of the subscription price, nominee
holder certifications, notices of guaranteed delivery and DTC participant
oversubscription exercise forms, to the extent applicable to your exercise of
rights, must be delivered to [____________] as follows:
By Hand: By First Class Mail: By Overnight Courier:
[_________________] [__________________] [________________]
Eligible institutions may deliver "Notice of Guaranteed Delivery" forms
by facsimile transmission. [____________]'s facsimile number is [____________].
You should confirm receipt of all facsimiles by calling [__________].
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<PAGE>
SPECIAL PROCEDURE UNDER "NOTICE OF GUARANTEED DELIVERY" FORM.
If you wish to exercise rights but cannot ensure that [____________]
will actually receive the executed subscription warrant before the expiration
date, you may alternatively exercise rights by causing all of the following to
occur within the time prescribed:
o Full payment must be received by [____________] prior to the
expiration date for all of the newly-issued shares of our
common stock you desire to purchase pursuant to the basic
subscription privilege and the oversubscription privilege.
o A properly executed "Notice of Guaranteed Delivery"
substantially in the form distributed by us with your
subscription warrant and accompanied by a Medallion Guaranty
must be received by [____________] at or prior to the
expiration date.
o The "Notice of Guaranteed Delivery" form must be executed by
both you and one of the following: (1) a member firm of a
registered national securities exchange, (2) a member of the
National Association of Securities Dealers, Inc., (3) a
commercial bank or trust company having an office or
correspondent in the United States, or (4) other eligible
guarantor institution qualified under a guarantee program
acceptable to [_____________]. The co-signing institution must
provide a Medallion Guaranty on the "Notice of Guaranteed
Delivery" guaranteeing that the subscription warrant will be
delivered to [__________] within 3 business days after the
date of the form. Your "Notice of Guaranteed Delivery" form
must also provide other relevant details concerning the
intended exercise of your rights.
o The properly completed subscription warrant(s) with any
required signature guarantee must be received by
[_______________] within 3 business days following the date of
the related Notice of Guaranteed Delivery.
o If you are a nominee holder of rights, the "Nominee Holder
Certification" must also accompany the Notice of Guaranteed
Delivery.
A Notice of Guaranteed Delivery may be delivered to [___________] in
the same manner as subscription warrants at the addresses set forth above under
the caption "This offering - Delivery of Subscription Warrant" or by telegram or
facsimile transmission.
[_____________] 's facsimile number is [__________]. You should confirm
facsimile deliveries by calling [_____________].
Additional copies of the form of Notice of Guaranteed Delivery are
available upon request from [______________], whose address and telephone number
are set forth below under the caption "Questions and Assistance Concerning the
Rights."
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<PAGE>
INCOMPLETE FORMS; INSUFFICIENT PAYMENT.
If you do not indicate on your subscription warrant the number of
rights being exercised, or do not forward sufficient payment for the number of
rights that you indicate are being exercised, then we will accept the
subscription forms and payment only for the maximum number of rights that may be
exercised based on the actual payment delivered. We will make this determination
as follows: (1) you will be deemed to have exercised your basic subscription
privilege to the full extent of the payment received, and (2) if any funds
remain, you will be deemed to have exercised your oversubscription privilege to
the extent of the remaining funds. We will return any payment not applied to the
purchase of shares under this offering as soon as practicable by mail. Interest
will not be payable on amounts refunded.
PROHIBITION ON FRACTIONAL SHARES.
Each right entitles you to purchase one share of common stock at the
subscription price per share. We will accept any inadvertent subscription
indicating a purchase of fractional shares by rounding down to the nearest whole
share and, as soon as practicable, refunding without interest any payment
received for a fractional share.
INSTRUCTIONS TO NOMINEE HOLDERS.
If you are a broker, trustee or depository for securities or other
nominee holder for beneficial owners of our common stock, we are requesting that
you contact such beneficial owners as soon as possible to obtain instructions
and related certifications concerning their rights. Our request to you is
further explained in the suggested form of letter of instructions from nominee
holders to beneficial owners accompanying this prospectus.
To the extent so instructed, nominee holders should complete
appropriate subscription warrants on behalf of beneficial owners and, in the
case of any exercise of the oversubscription privilege, the related form of
"Nominee Holder Certification," and submit them on a timely basis to
[____________] with the proper payment.
RISK OF LOSS ON DELIVERY OF SUBSCRIPTION WARRANT FORMS AND PAYMENTS.
Each holder of rights bears all risk of the method of delivery to
[__________] of subscription warrants and payments of the subscription price.
If subscription warrants and payments are sent by mail, you are urged
to send these by registered mail, properly insured, with return receipt
requested, and to allow a sufficient number of days to ensure delivery to
[_____________] and clearance of payment prior to the expiration date.
Because uncertified personal checks may take at least 5 business days
to clear, you are strongly urged to pay, or arrange for payment, by means of
certified or cashier's check, money order or wire transfer of funds.
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HOW PROCEDURAL AND OTHER QUESTIONS ARE RESOLVED.
We are entitled to resolve all questions concerning the timeliness,
validity, form and eligibility of any exercise of rights. Our determination of
such questions will be final and binding. We, in our sole discretion, may waive
any defect or irregularity, or permit a defect or irregularity to be corrected
within such time as we may determine, or reject the purported exercise of any
right because of any defect or irregularity.
Subscription warrants will not be considered received or accepted until
all irregularities have been waived or cured within such time as we determine in
our sole discretion. Neither we nor [_______________] have any duty to give
notification of any defect or irregularity in connection with the submission of
subscription warrants or any other required document. Neither we nor
[_____________] will incur any liability for failure to give such notification.
We reserve the right to reject any exercise of rights if the exercise
does not comply with the terms of this offering or is not in proper form or if
the exercise of rights would be unlawful or materially burdensome.
ISSUANCE OF STOCK CERTIFICATES.
Stock certificates for shares purchased in this offering will be issued
as soon as practicable after the expiration date. [_____________] will deliver
subscription payments to us only after consummation of this offering and the
issuance of stock certificates to our shareholders that exercised rights. Unless
you instruct otherwise in your subscription warrant form, shares purchased by
the exercise of rights will be registered in the name of the person exercising
the rights.
QUESTIONS AND ASSISTANCE CONCERNING THE RIGHTS.
You should direct any questions, requests for assistance concerning the
rights or requests for additional copies of this prospectus, forms of
instructions or the Notice of Guaranteed Delivery to:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
We have summarized below material United States income tax consequences
of this offering to the holders of our common stock upon the distribution of the
subscription rights, which for the purposes of this tax discussion includes
oversubscription rights, and to the holders of the subscription rights upon
their exercise. The summary is based on the Internal Revenue Code of 1986, as
amended, which we refer to as the Code, the Treasury regulations promulgated
thereunder, judicial authority and current administrative rules and practice,
all of which are subject to change on a prospective or retroactive basis. The
tax consequences of this offering under state, local and foreign law are not
discussed. The consequences of this offering with respect to any taxes other
than income taxes are not discussed. Moreover, special
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<PAGE>
considerations not described in this summary may apply to certain taxpayers or
certain types of taxpayers, such as financial institutions, broker-dealers,
nominee holders of our stock, life insurance companies, tax- exempt
organizations and foreign taxpayers. The discussion is limited to those who have
held the common stock, and will hold the rights and any shares acquired upon the
exercise of the rights, as capital assets (generally, property held for
investment) within the meaning of Section 1221 of the Code.
WE URGE STOCKHOLDERS TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO
THE PARTICULAR FEDERAL INCOME OR OTHER TAX CONSEQUENCES TO THEM OF THE OFFERING,
AS WELL AS THE TAX CONSEQUENCES UNDER STATE, LOCAL AND FOREIGN LAW AND THE
POSSIBLE EFFECTS OF CHANGES IN TAX LAWS.
ISSUANCE OF RIGHTS
You will not recognize taxable income for federal income tax purposes upon
distribution of the rights.
STOCKHOLDER BASIS AND HOLDING PERIOD OF THE RIGHTS
Except as provided in the following sentence, the basis of the
subscription rights you receive as a distribution with respect to your common
stock will be zero. If, however, either (i) the fair market value of the
subscription rights on the date of issuance is 15% or more of the fair market
value, on the date of issuance of the rights, of the common stock with respect
to which they are received or (ii) you properly elect, in your federal income
tax return for the taxable year in which the subscription rights are received,
to allocate part of your basis in your common stock to the subscription rights,
then upon exercise or transfer of the rights, your basis in the common stock
will be allocated between the common stock and the rights in proportion to the
fair market values of each on the date the rights are issued. Your holding
period with respect to the subscription rights received as a distribution on
your common stock will include your holding period for the common stock with
respect to which the rights were distributed. In the case of a purchaser of
subscription rights, who we will call a "Purchaser," the tax basis of the
purchased rights will be equal to the purchase price paid for the rights, and
the holding period for the rights will commence on the day following the date of
the purchase.
TRANSFER OF THE RIGHTS.
If you or a Purchaser sell the subscription rights received in this
offering prior to exercise, you or the Purchaser will recognize gain or loss
equal to the difference between the sale proceeds and the basis, if any, in the
rights sold. The gain or loss will be capital gain or loss if gain or loss from
a sale of the common stock held by the seller would be characterized as capital
gain or loss at the time of the sale. Any gain or loss recognized on a sale of
rights by a Purchaser will be capital gain or loss if the common stock would be
a capital asset in the hands of the Purchaser.
LAPSE OF THE RIGHTS.
If you allow subscription rights received to lapse, no gain or loss
will be recognized and no adjustment will be made to the basis of the common
stock, if any, owned by the holder of the lapsed rights. Purchasers of the
subscription rights will recognize a loss equal to their tax basis in the
rights, if the rights expire unexercised. Any loss recognized on the expiration
of the rights acquired by a Purchaser will be a capital loss if the common stock
would be a capital asset in the hands of the Purchaser.
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<PAGE>
EXERCISE OF THE RIGHTS; BASIS AND HOLDING PERIOD OF THE COMMON STOCK.
Neither you nor a Purchaser will recognize any gain or loss upon the
exercise of rights. The basis of the shares acquired through exercise of the
rights will be equal to the sum of the subscription price paid for the shares
acquired through exercise of the rights and the holder's basis in the rights, if
any. The holding period for the shares acquired through exercise of the rights
will begin on the date the rights are exercised.
SALE OF SHARES.
The sale of shares acquired through the exercise of the rights will
result in the recognition of gain or loss to the seller in an amount equal to
the difference between the amount realized and the seller's basis in the shares.
If the seller holds the shares as a capital asset, gain or loss on the sale of
the shares will be long-term or short-term capital gain or loss, depending on
whether the shares have been held for more than one year.
RECENT DEVELOPMENTS
In order to provide for our immediate working capital needs and to
reorganize our capital structure to better position us to compete in the
marketplace, on November 13, 2000 we entered into an agreement, which we refer
to as the Investment Agreement, with Quantum Industrial Partners LDC and SFM
Domestic Investments LLC, affiliates of Soros Private Equity Partners LLC
(collectively referred to as Soros). The Investment Agreement provides for
Soros, on the terms and subject to the conditions set forth in the Investment
Agreement, to convert $20,000,000 of our indebtedness into an equity interest in
us and to make an additional equity investment in us of up to $10,000,000. The
conversion of indebtedness and additional investment are referred to as the
Soros Investment. As contemplated by the Investment Agreement, the additional
$10,000,000 equity investment would be accomplished through the Standby
Commitment.
The Investment Agreement was unanimously approved by our Board of
Directors on October 30, 2000. It was not necessary for us to obtain the
approval of our shareholders in order to enter into the Investment Agreement and
our shareholders are not being asked to ratify the Investment Agreement.
However, the consummation of the Soros Investment as contemplated by the
Investment Agreement will require us to change the terms of the Series A
Preferred Stock, which, under New York State law, requires the approval of our
shareholders. In addition, we have agreed with Soros that we should take this
opportunity to reincorporate in Delaware (which we refer to as the
Reincorporation), an action that also requires shareholder approval.
Additionally, the issuance of shares of Series B Preferred Stock to Soros upon
conversion of our outstanding debt to Soros and the purchase by Soros of common
stock, if any, pursuant to the Standby Commitment in this offering is being
submitted to the approval of our shareholders in order to comply with the
listing requirements of the NASDAQ SmallCap Market. The meeting of shareholders
is scheduled to be held on [January 15], 2001. The principal terms and
conditions of the Investment Agreement are summarized below.
The Investment Agreement provides for the Soros Investment to be
consummated at three closings, the first of which occurred simultaneously with
the signing of the Investment Agreement on November 13, 2000. At the first
closing, Soros purchased subordinated convertible promissory notes, referred to
as the
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<PAGE>
New Notes, in the aggregate principal amount of $5,000,000 from us, for cash,
and exchanged our senior convertible promissory notes in the aggregate principal
amount of $15,000,000, which had been issued to Soros pursuant to the Note and
Warrant Purchase Agreement, dated as of March 28, 2000, by and between Soros and
us, for subordinated convertible promissory notes (referred to as Amended Notes,
and together with the New Notes, as the Notes) of equal principal amount. The
Notes are convertible into shares of Series B Preferred Stock at the rate of
$2.34 per share. The Amended Notes continue to bear interest at the rate 8% per
annum and the New Notes bear interest at the rate of 11% per annum, in each
case, subject to adjustment. The Notes mature on May 1, 2001 (the Maturity
Date). We are not entitled to prepay the principal amount of or any interest
accrued on the Notes before the Maturity Date. However, upon the occurrence of
certain Events of Default (as defined in the Notes), the principal amount of and
all interest accrued on the Notes shall accelerate and become immediately due
and payable. Also, upon the occurrence of certain other Events of Default or
certain transactions which would constitute a change of control for us, Soros
may require us to immediately prepay the principal amount of and all interest
accrued on the Notes. Any payment of the principal amount of and all interest
accrued on the Notes, whether at maturity or otherwise, must be made in cash.
Soros has agreed that the Notes shall be subordinated to up to $15,000,000 in
secured inventory financing, should we obtain such financing. There can be no
assurance that we will obtain such financing.
Unless the Notes have earlier matured or accelerated or have been
prepaid, the principal amount of and all interest accrued on the Notes will
automatically be converted at the second closing under the Investment Agreement
into shares of Series B Preferred Stock at the rate of $2.34 per share, subject
to adjustment. The second closing is scheduled to occur as soon as reasonably
practicable after the satisfaction of certain conditions, including the approval
by our shareholders of the Reincorporation and of the Soros Issuance, regulatory
approvals, the absence of litigation which is reasonably likely to have a
material adverse effect on us and the absence of a material adverse change in
our business, financial condition or prospects.
Pursuant to the Investment Agreement, upon the effectiveness of the
Reincorporation, the terms of the Series A Preferred Stock will be amended to
reduce the conversion price to $2.34 a share and delete the provision which
provides for adjustment to the conversion price if we issue shares of common
stock at a price below the then effective conversion price. In addition, the
terms of the Series A Preferred Stock will be amended to give the director
nominated by the holders of Series A Preferred Stock seven votes on matters that
come before the Board of Directors. The director nominated by the holders of
Series B Stock will also be entitled to seven votes on matters that come before
the Board of Directors.
The Investment Agreement provides that, as soon as practicable
following the effective date of the registration statement of which this
prospectus is a part, we shall distribute the rights offered hereby to all
holders of our common stock on the record date set forth herein. At the third
closing under the Investment Agreement, which shall occur as soon as practicable
after the expiration of this offering, Soros shall purchase a portion of those
shares of common stock which are not purchased by our shareholders pursuant to
this offering. The total dollar amount of shares of common stock to be purchased
by Quantum Industrial Partners LDC and SFM Domestic Investments LLC at $2.34 per
share will be equal to the difference between $20,000,000 and the amount
purchased by our shareholders pursuant to this offering, but in no event will
Quantum Industrial Partners LDC and SFM Domestic Investments LLC purchase more
than $10,000,000 in the aggregate.
The Investment Agreement may be terminated at our election, under
certain circumstances, including
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<PAGE>
if there has been a material breach of the agreement by Soros or if the third
closing does not occur by August 1, 2001, other than as a result of a breach by
us. The Investment Agreement may be terminated at the election of Soros, under
certain circumstances, including if there has been a material breach of the
agreement by us or if the third closing does not occur by May 1, 2001, other
than as a result of a breach by Soros.
USE OF PROCEEDS
We estimate that the net proceeds of this offering will be
approximately $19,450,000. We will use these proceeds for working capital and
other general corporate purposes.
DETERMINATION OF SUBSCRIPTION PRICE
Our Board of Directors determined to set a $2.34 per share subscription
price based upon the price which had been negotiated by Quantum Industrial
Partners LDC and SFM Domestic Investments LLC, with a special committee
consisting of independent members of our Board of Directors and its independent
advisors, including Credit Suisse First Boston, who acted as its financial
advisor. Such negotiations were conducted on an arms length basis. The special
committee took into account a number of factors including:
o the historic and current market price of our common stock;
o the difficult market conditions prevailing for the raising of
equity capital;
o our business prospects;
o our operating history;
o general conditions in the securities market;
o our need for capital;
o alternatives available to us for raising capital;
o the amount of proceeds desired;
o the liquidity of our common stock;
o the level of risk to our investors;
o the need to offer shares at a price that would be attractive
to our investors relative to the current trading price of our
common stock;
o and the desire to maintain the listing of the common stock on
the NASDAQ SmallCap Market.
The $2.34 per share price should not be considered an indication of the actual
value of our common stock. We cannot assure you that you will be able to sell
shares of purchased during this offering at a price equal to or greater than
$2.34 per share. We have neither sought, nor obtained, any valuation opinion
from outside financial advisors or investment bankers.
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PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
Our common stock is traded in the NASDAQ SmallCap Market System under
the symbol "BFLY" and on the Boston Stock Exchange under the symbol "BFL". On
[________], 2000, there were registered holders of the common stock and the
price of our common stock on NASDAQ was $________. The following table sets
forth the high and low sales prices of our common stock on NASDAQ for each
quarterly period within our three most recent fiscal years.
Fiscal 1998 HIGH Low
----------- ----
First Quarter $ 2.13 $1.94
Second Quarter $ 6.59 $1.50
Third Quarter $ 4.67 $1.94
Fourth Quarter $24.19 $2.00
Fiscal 1999 HIGH Low
----------- ----
First Quarter $17.88 $8.69
Second Quarter $12.88 $7.50
Third Quarter $14.00 $8.00
Fourth Quarter $16.69 $8.50
Fiscal 2000 HIGH Low
----------- ----
First Quarter $15.98 $7.50
Second Quarter $ 9.50 $1.78
Third Quarter $ 4.75 $1.84
We have never declared or paid cash dividends to the holders of our
common stock. We intend to retain earnings for use in the operation of our
business.
CAPITALIZATION
The following table sets forth our capitalization as of September 30,
2000, on the following bases: (i) on an actual basis; (ii) on a pro forma basis
giving effect to the items described in footnotes 1 and 2 below, and (iii) on a
pro forma as adjusted basis to reflect the estimated net proceeds from this
offering on a fully and partially subscribed basis. You should read this table
in conjunction with our financial statements that are incorporated by reference
into this prospectus, as well as the "Recent Developments section on page [ ].
<TABLE>
<CAPTION>
September 30, 2000
------------------
(In Thousands - except share data)
Pro Forma Pro Forma
As Adjusted As Adjusted
Actual Pro Forma Pro Forma Fully Partially
(Unaudited) Step One(1) Step Two (2) Subscribed(3) Subscribed(4)
-----------
<S> <C> <C>
Notes Payable, net - Amended Notes $11,679 $14,679 - - -
New Notes - 5,000 - - -
</TABLE>
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<TABLE>
<CAPTION>
September 30, 2000
------------------
(In Thousands - except share data)
Pro Forma Pro Forma
Actual Pro Forma Pro Forma As Adjusted As Adjusted
----------- ----------- ------------ ------------- -------------
(Unaudited) Step One(1) Step Two (2) Fully Partially
Subscribed(3) Subscribed(4)
<S> <C> <C> <C> <C> <C>
Redeemable Preferred Stock - Series A 10,886 10,886 -- -- --
$.01 par value, 2,000,000 shares authorized
and 500,000 shares issued and outstanding
Shareholders' (deficit) equity:
Convertible Preferred Stock Series A, - - 5 5 5
$.01 par value, 2,000,000 shares authorized
and 500,000 shares issued and outstanding
Convertible Preferred Stock Series B, $.01 - -- 86 86 86
par value, 0, 0, 9,000,000 and 9,000,000
shares authorized actual, pro forma-step
one, pro forma-step two and pro forma
as adjusted respectively; 0, 0, 8,547,009,
and 8,547,009 shares issued and outstand-
ing actual, pro forma-step one, pro forma-
step two and pro forma as adjusted,
respectively(6);
Common Stock - $.01 par value, 15,000,000, 49 49 49 134 92
15,000,000, 40,000,000 and 40,000,000
shares authorized actual, pro forma step-one,
pro forma-step two, and pro forma as
adjusted respectively; 4,924,906,
4,924,906, 13,471,915 and 9,198.410 shares
issued and outstanding actual, pro forma
and pro forma as adjusted, fully subscribed
and partially subscribed, respectively;(5)
Additional Paid In Capital(2) 17,387 17,387 56,853 76,169 66,211
Accumulated Deficit(2) (32,980) (32,980) (41,972) (41,972) (41,972)
-------- -------- -------- -------- --------
Total Shareholders' (Deficit) Equity (15,544) (15,544) 15,021 34,422 24,422
-------- -------- -------- -------- --------
Total Capitalization $ 7,021 $ 15,021 $15,021 $34,422 $24,422
-------- -------- -------- -------- --------
</TABLE>
(1) The pro forma "Step One" adjustment gives effect to the final
drawdown of the $3,000,000 in October 2000 of credit available
under the Soros Commitment, to present the full amount of the
Amended Notes of $15,000,000 net of unamortized discount. This
Pro forma adjustment also reflects our borrowing of $5,000,000
under the New Note.
(2) The pro forma "Step Two" adjustment reflects the conversion of
Notes after shareholder approval into Series B Preferred Stock
at a price of $2.34 per share, after giving effect to the
remaining unamortized discount of $321,000. In connection with
the conversion of the Amended Notes into Series B Preferred
Stock we recorded a beneficial conversion feature of
approximately $5,900,000. This amount is charged to additional
paid in capital and offset against accumulated deficit in
accordance with EITF 98-5. As a result of certain changes made
in connection with the transaction, it also reflects the
reclassification of the Series A Preferred Stock from
redeemable Preferred Stock into permanent equity, at a new
conversion price of $2.34.
In connection with the conversion of the Series A Preferred
Stock into permanent equity and the reduction of the
conversion price from $10.50 to $2.34 we recorded a charge
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<PAGE>
of approximately $7,771,000 to additional paid in capital. The
corresponding charge to accumulated deficit was broken out as
follows: $5,000,000 was classified as debt discount on the New
Note, $2,149,000 was classified as interest expense and
$622,000 was assigned to dividends.
(3) Pro forma As Adjusted "Fully Subscribed" gives effect to the
net proceeds of the sale of the entire 8,547,009 shares of
common stock resulting in estimated net proceeds of
$19,450,000.
(4) Pro forma As Adjusted "Partially Subscribed" assumes that no
rights are subscribed in this offering and that 4,273,504
shares of common stock are sold pursuant to the Standby
Commitment resulting in net proceeds of $9,450,000 to the
Company.
(5) The number of shares of common stock outstanding as of
September 30, 2000 excludes: 2,279,481 shares of common stock
reserved for issuance under our stock option plans; 375,000
shares of common stock reserved for issuance in connection
with warrants issued to Soros; 50,000 shares of common stock
reserved for issuance in connection with warrants issued to a
supplier; and 23,000 shares of common stock reserved for
issuance in connection with warrants and options issued in
connection with our initial public offering.
(6) Excludes shares reserved for issuance in connection with
accrued interest.
PLAN OF DISTRIBUTION
We are offering shares of our common stock directly to you pursuant to
this offering. We have not employed any brokers, dealers or underwriters in
connection with the solicitation or exercise of subscription privileges in this
offering and no commissions, fees or discounts will be paid in connection with
it. Certain of our officers and other employees may solicit responses from you,
but such officers and other employees will not receive any commissions or
compensation for such services other than their normal employment compensation.
We will pay the fees and expenses of [____________], as subscription
agent, and D.F. King & Co., Inc., as information agent, and also have agreed to
indemnify the subscription agent and the information agent from any liability
they may incur in connection with this offering.
On or about _____________, we will distribute the rights and copies of
this prospectus to the holder of record of our common stock on _________. If you
wish to exercise your rights and subscribe for newly-issued shares of our common
stock, you should follow the procedures described under "This offering -
Procedures to Exercise Rights." The subscription rights are transferable.
Shares of our common stock received through the exercise of
subscription rights will be traded on the NASDAQ SmallCap Market under the
symbol "BFLY" and on the Boston Stock Exchange under the symbol "BFL" as our
currently outstanding shares of common stock now trade.
LEGAL MATTERS
The validity of the issuance of the securities offered hereby has been
passed upon for us by Swidler Berlin Shereff Friedman, LLP, New York, New York.
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EXPERTS
The consolidated financial statements as of December 31, 1999 and for
the year then ended incorporated in this Prospectus by reference to the Current
Report on Form 8-K dated November 20, 2000 of Bluefly, Inc., have been so
incorporated in reliance on the report (which contains an explanatory paragraph
relating to increases in the levels of operating expenses and operating cash
outflows beyond those previously contemplated in anticipation of receipt of
additional financing and an explanatory paragraph relating to the revision of
Bluefly, Inc.'s financial statements for the redeemable preferred stock) of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in accounting and auditing.
The consolidated financial statements as of December 31, 1998 and for
the two years then ended incorporated in this Prospectus by reference to the
Current Report on Form 8-K dated November 20, 2000 of Bluefly, Inc., have been
so incorporated in reliance on the report of M.R. Weiser & Co. LLP, independent
accountants, given on the authority of said firm as experts in accounting and
auditing.
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Rights to Subscribe
to
8,547,009 Shares
---------------------------------
[Logo BLUEFLY]
Common Stock
----------------------------------
PROSPECTUS
---------------------------------
[______________], 2000
Preliminary Prospectus, dated
November [__], 2000
41
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Securities and Exchange Commission Registration Fee........ $ 5,280
Subscription Agent Fee..................................... [__________]
Information Agent Fee...................................... [__________]
Printing and Engraving Costs............................... [__________]
Legal Fees and Expenses.................................... [__________]
Accounting Fees and Expenses............................... [__________]
Miscellaneous.............................................. [__________]
--------------
Total ............................................ $[_________]
All of the above items, except the registration fee, are estimated. All
expenses incurred in connection with this offering will be borne by Bluefly,
Inc.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The indemnification of officers and directors of the Registrant
following the reincorporation described in the Prospectus will be governed by
Section 145 of the General Corporation Law of the State of Delaware (the "DGCL")
and the Restated 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
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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 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
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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.
ITEM 16. EXHIBITS
The following exhibits are filed as part of this Registration
Statement:
Exhibit Description
------- -----------
5.1 Opinion of Swidler Berlin Shereff Friedman, LLP
(to be filed by Amendment)
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of M.R. Weiser & Co. LLP
23.3 Consent of Swidler Berlin Shereff Friedman, LLP
(included in Exhibit 5.1)
99.1 Form of Subscription Certificate
99.2 Instructions to Stockholders
99.3 Notice of Guaranteed Delivery
99.4 Form of Letter to Shareholders
99.5 Form of Letter to Brokers
ITEM 17. UNDERTAKINGS
(b) 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:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
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<PAGE>
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this 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 this 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)
promulgated under the Securities Act of 1933 if, in the
aggregate, the changes in volume and price represent no more
than a twenty percent (20%) change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in this Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement;
Provided, however, that paragraphs (a)(1)(i) and (ii) shall not apply
if the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by Bluefly, Inc.
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered herein, and this 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 this offering.
(c) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934 that is incorporated by reference in this
Registration Statement shall be deemed to be a new
registration statement relating to the securities offered
herein, and this offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
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 of
1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by
a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is
asserted by such 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 of 1933 and will be governed by the final
adjudication of such issue.
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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
the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, hereunto duly
authorized, in the City of New York, State of New York, on this 20 day of
November, 2000.
BLUEFLY, INC.
By: /s/ E. Kenneth Seiff
----------------------------------
Name: E. Kenneth Seiff
Title: President, Chief
Executive Officer and
Director
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned whose
signature appears below constitutes and appoints E. Kenneth Seiff and Patrick C.
Barry and each of them (with full power of each of them to act alone), his true
and lawful attorneys-in-fact, with full power of substitution and resubstitution
for him and on his behalf, and in his name, place and stead, in any and all
capacities to execute and sign any and all amendments or post-effective
amendments to this registration statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact or any of them or their or his substitute or substitutes,
may lawfully do or cause to be done by virtue hereof and the Registrant hereby
confers like authority on its behalf.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ E. Kenneth Seiff November 20, 2000
----------------------------------------------
E. Kenneth Seiff President, Chief Executive Officer and
Director (Principal Executive Officer)
/s/ Patrick C. Barry Chief Financial Officer and Chief November 20, 2000
---------------------------------------------- Operating Officer (Principal Financial
Patrick C. Barry and Accounting Officer)
/s/ Red Burns November 20, 2000
---------------------------------------------- Director
Red Burns
/s/ Martin Miller November 20, 2000
---------------------------------------------- Director
Martin Miller
/s/ Robert G. Stevens Director November 20, 2000
----------------------------------------------
Robert G. Stevens
/s/ Neal Moszkowski Director November 20, 2000
----------------------------------------------
Neal Moszkowski
/s/ Mark H. Goldstein Director November 20, 2000
----------------------------------------------
Mark H. Goldstein
/s/ Ellin J. Saltzman November 20, 2000
---------------------------------------------- Director
Ellin J. Saltzman
</TABLE>
46
