<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______ to ______
Commission File Number: 333-22895
---------------------------------------
BLUEFLY, INC.
(Exact name of small business issuer 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, NY 10018
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (212) 944-8000
---------------------------------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
As of November 4, 1999, the issuer had outstanding 4,920,206 of shares of Common
Stock, $.01 par value.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
Reason For Amendment
This Form 10-QSB/A (this "Amendment") amends and supplements the Form 10-QSB
(the "Original 10-QSB") filed by Bluefly, Inc., a New York corporation (the
"Company"), on November 9, 1999. The sole purpose of this Amendment is to amend
and revise Part I Item 1 and Part II Item 6 of the Original Form 10-QSB to read
in their entirety as set forth below in connection with the Company's decision
to revise its consolidated financial statements for the nine months ended
September 30, 1999, to clarify the redemption features of the Series A
Convertible Preferred Stock. See Note 7 of the Consolidated Financial
Statements.
<PAGE>
BLUEFLY, INC.
TABLE OF CONTENTS
FORM 10QSB/A
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1999 (unaudited) and
December 31, 1998 3
Consolidated Statements of Operations for the nine months ended
September 30, 1999 and 1998 (unaudited) 4
Consolidated Statements of Operations for the three months ended
September 30, 1999 and 1998 (unaudited) 5
Consolidated Statements of Cash Flows for the nine months ended
September 30, 1999 and 1998 (unaudited) 6
Notes to Consolidated Financial Statements 8
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
BLUEFLY, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
---- ----
(Revised- See Note 7)
(Unaudited)
ASSETS
<S> <C> <C>
Current assets
Cash $12,847,000 $ 2,830,000
Funds deposited with factor -- 2,264,000
Inventories 4,454,000 429,000
Prepaid expenses and other current assets 875,000 527,000
Deferred income taxes 50,000 50,000
Current assets of discontinued operations -- 553,000
------------- ------------
Total current assets 18,226,000 6,653,000
Property and equipment, net 892,000 497,000
Other assets 37,000 15,000
------------- -----------
$19,155,000 $7,165,000
============= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $2,639,000 $605,000
Accrued expenses and other current liabilities 303,000 104,000
------------ -----------
Total current liabilities 2,942,000 709,000
Deferred income taxes 64,000 64,000
------------ -----------
3,006,000 773,000
------------ -----------
Commitments and contingencies (Note 5)
Redeemable Preferred stock -$.01 par value; 2,000,000 shares
authorized and 500,000 shares issued and outstanding in 1999
(liquidation preference: $20 per share plus
accrued dividends) 9,943,000 --
Shareholders' equity:
Common stock -$.01 par value; 15,000,000 authorized and
4,905,206 and 3,433,255 issued and outstanding,
respectively 49,000 34,000
Additional paid-in capital 17,699,000 10,395,000
Accumulated deficit (11,542,000) (4,037,000)
----------- -----------
6,206,000 6,392,000
----------- -----------
$19,155,000 $7,165,000
============= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
BLUEFLY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------------
1999 1998
---- ----
<S> <C> <C>
Net sales $1,909,000 $4,000
Cost of sales 1,454,000 53,000
------------ ------------
Gross profit (loss) 455,000 (49,000)
Selling, marketing and fulfillment expenses 6,301,000 329,000
General and administrative expenses 2,016,000 676,000
Internet start up costs -- 327,000
------------ ------------
Total (8,317,000) (1,332,000)
Operating loss from continuing operations (7,862,000) (1,381,000)
Interest income 294,000 111,000
------------ ------------
Loss from continuing operations (7,568,000) (1,270,000)
------------ ------------
Discontinued operations - Note 4
Income (loss) from operations 63,000 (1,029,000)
Estimated loss on disposal, including provision for operating
losses through disposal date, less applicable income
tax benefit of $0 -- (120,000)
------------ ------------
Income (loss) from discontinued operations 63,000 (1,149,000)
------------ ------------
Net loss $(7,505,000) $(2,419,000)
------------ ------------
Preferred stock dividends (140,000) --
------------ ------------
Net loss available to common shareholders $(7,645,000) $(2,419,000)
============ ============
Basic and diluted (loss) income per common share
Continuing operations (1.62) (.47)
Discontinued operations .01 (.38)
Estimated loss on disposal -- (.04)
-------- ---------
Net loss per common share $ (1.61) $ (.89)
========= =========
Weighted average shares outstanding 4,763,074 2,705,994
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
BLUEFLY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
-----------------------------------
1999 1998
---- ----
<S> <C> <C>
Net sales $873,000 4,000
Cost of sales 656,000 53,000
---------- ---------
Gross profit (loss) 217,000 (49,000)
Selling, marketing and fulfillment expenses 2,674,000 203,000
General and administrative expenses 1,003,000 230,000
Internet start up costs -- 224,000
---------- ---------
--
Total (3,677,000) (657,000)
Operating loss from continuing operations (3,460,000) (706,000)
Interest income 111,000 30,000
---------- ---------
Loss from continuing operations (3,349,000) (676,000)
---------- ---------
Discontinued operations - Note 4
Income from operations -- 51,000
Estimated loss on disposal, including provision for operating
losses through disposal date, less applicable income
tax benefit of $0 -- --
---------- ---------
Income from discontinued operations -- 51,000
---------- ---------
Net loss $(3,349,000) $(625,000)
---------- ---------
Preferred stock dividends (140,000) --
---------- ---------
Net loss available to common shareholders $(3,489,000) $(625,000)
============ ==========
Basic and diluted (loss) per common share
Continuing operations (.71) (.25)
Discontinued operations -- .02
Estimated loss on disposal -- --
---------- ---------
Net loss per common share $ (.71) $ (.23)
======== =======
Weighted average shares outstanding 4,901,749 2,717,788
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
BLUEFLY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities
Loss from continuing operations $(7,568,000) $ (1,270,000)
Adjustments to reconcile loss from continuing operations to net cash used in
operating activities:
Depreciation and amortization 83,000 62,000
Common stock issued for research and development 7,000 49,000
Changes in operating assets and liabilities:
(Increase) decrease in
Inventories (4,025,000) (266,000)
Prepaid expenses and other current assets (348,000) (154,000)
Other assets (22,000) --
Increase (decrease) in
Accounts payable, accrued expenses and other current liabilities 2,233,000 (648,000)
------------ ------------
Net cash used in operating activities - continuing operations (9,640,000) (2,227,000)
----------- ------------
Income (loss) from discontinued operations 63,000 (1,149,000)
Adjustments to reconcile income (loss) from discontinued operations to net cash
provided by operating activities:
Write-down of property and equipment -- 245,000
Write-down of prepaid expenses and other current assets -- 101,000
Write-down of other assets -- 119,000
Depreciation and amortization -- 44,000
Changes in operating assets and liabilities:
(Increase) decrease in
Inventories -- 1,293,000
Non-factored receivables 187,000 (31,000)
Prepaid expenses and other current assets -- 62,000
Increase (decrease) in --
Deferred tax asset -- 34,000
Income taxes receivable/payable 195,000 (4,000)
----------- ------------
Net cash provided by operating activities - discontinued operations 445,000 714,000
----------- ------------
Net cash used in operating activities (9,195,000) (1,513,000)
----------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
BLUEFLY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from investing activities - continuing operations
Purchase of property and equipment (478,000) (82,000)
Trademark costs -- (8,000)
Funds deposited with factor 2,264,000 429,000
---------- ----------
Net cash provided by investing activities - continuing operations 1,786,000 339,000
---------- ----------
Cash flows from investing activities - discontinued operations
Purchase of property and equipment -- (22,000)
Trademark costs -- (1,000)
---------- ----------
Net cash used in investing activities - discontinued operations -- (23,000)
---------- ----------
Net cash provided by investing activities 1,786,000 316,000
---------- ----------
Cash flows from financing activities - continuing operations
Net proceeds from warrant redemption and unit purchase option 7,067,000 --
Net proceeds from option exercises 245,000 --
Net proceeds from issuance of Preferred Stock 9,943,000 --
---------- ----------
Net cash provided by financing activities - continuing operations 17,255,000 --
---------- ----------
Cash flows from financing activities - discontinued operations
Net change in due to/from factor 171,000 1,487,000
---------- ----------
Net cash provided by financing activities - discontinued operations 171,000 1,487,000
---------- ----------
Net cash provided by financing activities 17,426,000 1,487,000
---------- ----------
Net increase in cash 10,017,000 290,000
Cash balance - December 31 2,830,000 55,000
---------- ----------
Cash balance - September 30 $12,847,000 $ 345,000
=========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ -- $ 32,000
=========== ==========
Income taxes $ 15,383 $ 3,000
=========== ==========
Non cash transactions:
Exchange of goods for services provided $ 19,000 $ --
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
BLUEFLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 1 - BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
Bluefly, Inc. (the "Company"). All significant intercompany balances and
transactions have been eliminated in consolidation. The consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-QSB and Rule 310 of Regulation S-B. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. The results of operations of any interim
period are not necessarily indicative of the results of operations to be
expected for the fiscal year. For further information, refer to the consolidated
financial statements and accompanying footnotes included in the Company's Form
10-KSB for the year ended December 31, 1998.
NOTE 2 - THE COMPANY
The Company is a leading Internet retailer of designer fashions and home
accessories at outlet store prices. The full service Web store ("Bluefly.com" or
"Web Site") sells over 200 brands of designer apparel, accessories and house and
home products at discounts of up to 75%. Bluefly.com, which launched in
September 1998, also offers information on current fashion trends.
In June 1998, the Company's Board of Directors voted to sell its golf sportswear
brand and to devote all of the Company's energy and resources to building
Bluefly.com. See Note 4.
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES
1. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. INVENTORIES
Inventories, which consist of finished goods, are valued at the lower of cost or
market. Cost is determined by the first-in, first-out ("FIFO") method.
8
<PAGE>
BLUEFLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
3. EARNINGS (LOSS) PER SHARE
The Company has adopted Statement of Financial Accounting Standards No. ("SFAS")
128, "Earnings Per Share." Basic earnings (loss) per share excludes dilution and
is computed by dividing earnings (loss) available to common shareholders by the
weighted average number of common shares outstanding for the period.
Diluted earnings (loss) per share is computed by dividing earnings (loss)
available to common shareholders by the weighted average number of common shares
outstanding for the period, adjusted to reflect potentially dilutive securities.
Due to the loss from continuing operations, options to purchase 631,816 shares
and Preferred Stock convertible into 952,381 shares were not included in the
computation of diluted earnings per share because the result of the exercise of
such would be antidilutive.
4. RECLASSIFICATIONS
Certain amounts in the consolidated financial statements of the prior period
have been reclassified to conform to the current period presentation for
comparative purposes.
NOTE 4 - DISCONTINUED OPERATIONS
The disposal of the golf sportswear division has been accounted for as a
discontinued operation and, accordingly, its net assets have been segregated
from continuing operations in the accompanying consolidated balance sheet, and
its operating results have been segregated and reported as discontinued
operations in the accompanying consolidated statements of operations and cash
flows.
Information relating to the discontinued operations of the golf sportswear
division for the nine months ended September 30, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
Net sales $ -- $3,696,000
Cost of sales -- 3,706,000
--------- ----------
Gross (loss) -- (10,000)
Income from adjustments to allowances and accruals 67,000 --
Selling, marketing, design and administrative 8,000 1,017,000
Write down of property and equipment -- 364,000
--------- ----------
Operating income (loss) 59,000 (1,391,000)
Other income 4,000 396,000
--------- ----------
Income (loss) before provision for income taxes 63,000 (995,000)
Provision for income taxes -- 34,000
--------- ----------
Income (loss) $ 63,000 $(1,029,000)
========= ===========
</TABLE>
9
<PAGE>
BLUEFLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 5 - COMMITMENTS AND CONTINGENCIES
MARKETING AND ADVERTISING COMMITMENTS
The Company has advertising and marketing commitments through December 31, 1999
of approximately $2.8 million. These amounts include payments due in connection
with the Company's online marketing relationships as well as print and radio
advertising commitments.
NOTE 6 - SHAREHOLDERS' EQUITY AND REDEEMABLE EQUITY
1. SERIES A CONVERTIBLE PREFERRED STOCK
On July 27, 1999, the Company entered into an Investment Agreement with an
investor group led by affiliates of Soros Private Equity Partners, LLC (the
"Soros Investment Agreement") pursuant to which it issued 500,000 shares of
Series A Convertible Preferred Stock (the "Series A Preferred Stock") for an
aggregate purchase price of $10 million. The Series A Preferred Stock is
convertible into shares of Common Stock at a rate of $10.50 per share, and bears
a cumulative compounding dividend of 8% per annum, payable upon conversion at
the Company's option in cash or in Common Stock. The Series A Preferred Stock
has a liquidation preference equal to the face value of the Series A Preferred
plus accrued dividends and ranks senior to the Common Stock with respect to the
payment of distributions on liquidation, dissolution or winding up of the
Company and with respect to the payment of dividends.
The Series A Preferred Stock may be converted into Common Stock at any time by
the holders thereof and will automatically be converted into Common Stock if the
closing price of the Common Stock is $31.50 or higher for 30 consecutive trading
days, or immediately prior to the consummation of a merger or sale of all or
substantially all of the assets of the Company pursuant to which shareholders of
the Company are to receive cash, securities and/or other property worth at least
$31.50 per share of Common Stock of the Company. Excluding shares of Common
Stock that may be issued as payment for accrued dividends, the 500,000 shares of
Series A Preferred Stock are convertible into 952,381 shares of Common Stock,
subject to customary anti- dilution provisions. The holders of the Series A
Preferred Stock have certain rights to appoint a designee to the Company's Board
of Directors. Certain actions of the Company may not be taken without the
approval of such designee. In addition, holders of the Series A Preferred Stock
have certain registration rights with respect to the Common Stock issuable upon
conversion of the Series A Preferred Stock and certain pre-emptive rights with
respect to future issuances of capital stock by the Company.
2. UNIT PURCHASE OPTIONS
In May 1997, the Company sold to the underwriter of the IPO, for an aggregate
purchase price of $100, 150,000 Unit Purchase Options ("UPO's"). Each UPO
entitles the holder thereof to purchase one Unit. The UPO's were exercisable
initially at a price of $8.00 per Unit during the four-year period commencing on
May 15, 1998. During the fourth quarter of 1998, 135,250 UPO's were exercised
and during the first quarter of 1999, 900 UPO's were exercised. As of September
30, 1999, there were 13,850 UPO's outstanding.
3. WARRANTS
In May 1997, the Company completed an initial public offering ("IPO") of equity
securities. Pursuant to the IPO, the Company sold 1,500,000 units ("Units"),
with each Unit consisting of one share of common stock and one redeemable common
stock purchase warrant ("Warrant"). In the first quarter of 1999, 1,412,374
Warrants were exercised, resulting in proceeds of $7,062,000. These Warrants
entitled the holders to purchase one share of Common Stock at $5.00 per share
during the four-year period commencing May 15, 1998; all Warrants became
exercisable on such date. The Company had the right to redeem the Warrants at
any time after they became exercisable, at a price of $.01 per Warrant, provided
that the market price of the stock exceeded $8.25 for a specific period of time,
and upon specific notice provisions. On December 21, 1998, the Company provided
notice of its election to redeem the Warrants. Substantially all of the Warrants
included in the Units were exercised prior to the redemption.
10
<PAGE>
BLUEFLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 7 - EFFECTS OF REVISED REPORTING OF REDEEMABLE EQUITY
As discussed in Note 6 above the Company issued 500,000 shares of Series A
Convertible Preferred Stock in July 1999. The Series A Convertible Preferred
Stock is subject to optional redemption upon a change in control of the Company
that results in the holders of the Series A Convertible Preferred Stock
receiving cash or marketable securities with an aggregate value of less than 3
times the conversion price of the Series A Preferred Stock.
Although the Company believes that the likelihood of redemption occurring is
remote, it has revised its financial statements as of September 30, 1999 and
December 31, 1999 to account for the Series A Convertible Preferred Stock,
pursuant to the SEC Accounting Series Release No. 268, as redeemable equity on
the accompanying balance sheet.
The revision of the financial statements for the matter described above had
no effect on the Company's net loss, total assets, total liabilities or cash
position. The Company's redeemable equity, total shareholders' equity at
September 30, 1999, as previously reported and as revised, are as follows:
<TABLE>
<CAPTION>
September 30, 1999
------------------
<S> <C>
Redeemable equity - previously reported $ --
Adjustment related to the presentation of the Series A
Convertible Preferred Stock as redeemable 9,943,000
-----------
As revised $ 9,943,000
===========
Shareholders' equity - previously reported $16,149,000
Adjustment related to the presentation of the Series A
Convertible Preferred Stock as redeemable (9,943,000)
-----------
As revised $ 6,206,000
===========
</TABLE>
11
<PAGE>
Part II Other Information
Item 6 Exhibits and Reports on Form 8-K
(a) EXHIBIT NO. DESCRIPTION
- --------------- -----------
3.5 Amended and Restated Bylaws of the Company
+10.18 Service Agreement by and between the Company and Marketing
Out Of the Box, Inc. dated August 16, 1999
27 Revised Financial Data Schedule.
+ Confidential treatment requested as to certain portions of this Exhibit.
Such portions have been redacted.
(b) Reports on Form 8-K.
The Company filed no reports on Form 8-K during the period covered by this
report.
12
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
BLUEFLY, INC.
By: /s/ E. Kenneth Seiff
--------------------
E. Kenneth Seiff
President
By: /s/ Patrick C. Barry
--------------------
Patrick C. Barry
Chief Financial Officer
May 15, 2000
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 12,847,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 4,454,000
<CURRENT-ASSETS> 18,226,000
<PP&E> 1,074,000
<DEPRECIATION> 182,000
<TOTAL-ASSETS> 19,155,000
<CURRENT-LIABILITIES> 2,942,000
<BONDS> 0
9,943,000
0
<COMMON> 49,000
<OTHER-SE> 6,157,000
<TOTAL-LIABILITY-AND-EQUITY> 19,155,000
<SALES> 1,909,000
<TOTAL-REVENUES> 1,909,000
<CGS> 1,454,000
<TOTAL-COSTS> 8,317,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (7,568,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,568,000)
<DISCONTINUED> 63,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,505,000)
<EPS-BASIC> (1.62)
<EPS-DILUTED> (1.62)
</TABLE>
