<PAGE>
As filed with the Securities and Exchange Commission on August 2, 1999
Registration No. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM S-3
REGISTRATION STATEMENT
Under
the Securities Act of 1933
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THE RIGHT START, INC.
(Exact name of registrant as specified in its charter)
California 95-3971414
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5388 Sterling Center Drive, Unit C, Westlake Village, California 91361
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code
(818) 707-7100
--------------
JERRY R. WELCH
5388 Sterling Center Drive, Unit C
Westlake Village, California 91361
(818) 707-7100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy to:
KENNETH J. BARONSKY
Milbank, Tweed, Hadley & McCloy LLP
601 South Figueroa Street, 30th Floor
Los Angeles, California 90017
(213) 892-4000
--------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on the Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
===============================================================================
<TABLE>
<CAPTION>
Title of
Each Class
of Proposed Proposed
Securities Maximum Maximum
to be Amount Offering Price Aggregate Amount of
Registered to be Registered Per Unit (1) Offering Price (1) Registration Fee
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common
Stock, no
par value
per
share.... 5,231,904 shares $7.7031 $40,301,880 $11,204
===============================================================================
</TABLE>
(1) Estimated solely for purposes of determining the registration fee, in
accordance with Rule 457(c), based on the average of the bid and asked
price on the Nasdaq National Market on July 28, 1999.
--------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the securities act of 1933, as amended, or until the registration statement
shall become effective on such date as the securities and exchange commission,
acting pursuant to said section 8(a), may determine.
===============================================================================
<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 soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED AUGUST 2, 1999
PROSPECTUS
5,231,904 Shares
The Right Start, Inc.
Common Stock
-----------
This prospectus is part of a registration statement that covers 5,231,904
shares of our common stock. Certain of our shareholders will, from time to
time, be offering and selling these shares of common stock. You should refer to
the "Selling Shareholders" section of this prospectus which begins on page 13.
The Company will not receive any proceeds from the sale of the common shares.
The Selling Shareholders received these shares of common stock pursuant to
private transactions undertaken by The Right Start, Inc. and its affiliates.
This registration is being undertaken pursuant to registration rights
agreements between the Company and the Selling Shareholders.
The common shares are traded on the Nasdaq National Market under the symbol
RTST. On July 28, 1999 the closing price of our common shares as reported on
the Nasdaq National Market was $8.1562 per share.
-----------
You should carefully consider the "Risk Factors" section of this prospectus,
which begins on page 4, in determining whether to purchase our common stock.
-----------
Neither the SEC nor any state securities commission has approved or
disapproved these shares, or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
-----------
The date of this prospectus is , 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ABOUT THIS PROSPECTUS...................................................... 2
WHERE YOU CAN FIND MORE INFORMATION........................................ 2
THE COMPANY................................................................ 3
SUMMARY FINANCIAL DATA..................................................... 3
RISK FACTORS............................................................... 4
USE OF PROCEEDS............................................................ 11
OUR CAPITAL STOCK.......................................................... 11
DIVIDEND POLICY............................................................ 13
SELLING SHAREHOLDERS....................................................... 13
PLAN OF DISTRIBUTION....................................................... 14
EXPERTS.................................................................... 15
LEGAL MATTERS.............................................................. 15
INCORPORATION BY REFERENCE................................................. 16
</TABLE>
You should rely only on the information contained or incorporated by
reference in this prospectus and in any accompanying prospectus supplement.
Neither The Right Start, Inc. nor any of the selling shareholders has
authorized any other person to provide you with information different from that
contained in this prospectus.
The shares of common stock are not being offered in any jurisdiction where
the offer is not permitted.
Neither the delivery of this prospectus nor any sale made hereunder shall,
under any circumstances, create any implication that there has been no change
in the affairs of the Company since the date hereof or that the information
contained herein is correct as of any time subsequent to its date.
The information contained in this prospectus is correct only as of the date
on the cover, regardless of the date this prospectus was delivered to you or
the date on which you acquired any of the shares.
This prospectus contains forward-looking statements based on our current
expectations, assumptions, estimates and projections about our company and our
industry. When used in this prospectus, the words "believes," "anticipates,"
"intends," "expects" and similar expressions are intended to identify such
forward-looking statements. You will find these forward-looking statements at
various places throughout this prospectus and the documents incorporated by
reference, including amendments. We advise you to closely consider information
contained in the "Risk Factors" section of this prospectus when evaluating such
forward-looking statements. These forward-looking statements involve risks,
uncertainties and assumptions. Actual results may differ materially from those
expressed in these forward-looking statements. You are cautioned not to unduly
rely on any forward-looking statements.
1
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
SEC utilizing a "shelf" registration process. Under this shelf registration
process, the Selling Shareholders may sell up to 5,231,904 shares of common
stock described in this prospectus in one or more offerings.
The Selling Shareholders received the shares registered under this
prospectus in private transactions undertaken by The Right Start, Inc. and its
affiliates. This offering is being undertaken pursuant to certain registration
rights agreements of the Company and the Selling Shareholders.
You should carefully read this prospectus together with additional
information described under the heading "Where You Can Find More Information."
To see more detail, you should read the exhibits filed with our registration
statement.
As used in this prospectus, unless the context requires otherwise, "we,"
"us," "our," or the "Company" means The Right Start, Inc. and its majority-
owned subsidiary, RightStart.com Inc.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports and other information with the
SEC. You may read and copy the Registration Statement and any other document
that we file at the SEC's public reference rooms located at Room 1024,
Judiciary Plaza, 450 Fifth Street N.W., Washington D.C. 20549; 7 World Trade
Center, Suite 1300, New York, New York 10048; and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Please call the SEC at 1-
800-SEC-0330 for further information on the public reference rooms. Our SEC
filings are also available to you free of charge at the SEC's web site at
http://www.sec.gov.
The common shares are traded on the Nasdaq National Market. Material filed
by the Company can be inspected at the offices of the National Association of
Securities Dealers, Inc., Reports Section, 1735 K Street, N.W., Washington,
D.C., 20006.
This prospectus is part of a Registration Statement on Form S-3 that we
filed with the SEC. Certain information in the Registration Statement has been
omitted from this prospectus in accordance with SEC rules. You may inspect the
Registration Statement and exhibits without charge at the office of the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549, and you may obtain copies from
the SEC at proscribed rates.
Statements contained in this prospectus as to the contents of any contract
or other document referred to are not necessarily complete and in each instance
you should refer to the copy of such contract or other document filed as an
exhibit to the Registration Statement.
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THE COMPANY
The Right Start, Inc. is a leading merchant of unique, high-quality products
for infants and young children up to age four. The company was founded in 1985
and capitalizes on the increasing number of baby boomers who have become
middle- to upper-income new parents. The company's products are currently
distributed through its 43 retail stores. Products offered are carefully
selected to meet parents' baby care needs in such categories as Travel,
Developmental Toys, Books/Music/Video, Feeding, Nursery, Health/Safety and
Bath/Potty. The company also owns a majority interest in RightStart.com Inc.
which owns and operates The Right Start catalog and an e-commerce Internet
site, www.rightstart.com. Both The Right Start catalog and www.rightstart.com
offer the company's products for infants and young children.
The Right Start, Inc. recently completed the sale of a minority interest in
RighStart.com Inc. to strategic investors. The strategic investors purchased an
aggregate of $15,000,000 of the convertible preferred stock of RightStart.com
Inc. The convertible preferred stock represents approximately 33 percent of the
outstanding equity of RightStart.com Inc. The proceeds from the financing will
be used to fund marketing and advertising expenditures, further website
development and for working capital of RightStart.com.
The Right Start, Inc. is organized as a California corporation with its
principal executive offices located at 5388 Sterling Center Drive, Unit C,
Westlake Village, California 91361. Our telephone number is (818) 707-7100.
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
Fiscal Year Ended Fiscal Year Ended 13 Weeks Ended
----------------------- -------------------- --------------------
January 30, January 31, Transition June 1, May 31, May 1, May 2,
1999 1998 Period (1) 1996 1995 1999 1998
----------- ----------- ---------- --------- --------- --------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Data:
Revenues
Net Sales............. $ 36,611 $ 38,521 $ 27,211 $ 40,368 $ 44,573 $ 10,721 $ 9,041
Net Income (loss)..... (5,680) (9,241) (5,378) (3,899) (2,106) 11 (1,207)
Basic and diluted loss
per share(2)........... (1.13) (2.01) (1.34) (1.19) (0.66) (.01) (.24)
Share Data:
Weighted Average Shares
Outstanding(2)......... 5,051,820 4,594,086 4,003,095 3,268,407 3,150,000 5,051,820 5,051,820
Balance Sheet Data:
Current Assets.......... $ 8,300 $ 8,908 $ 11,704 $ 8,353 $ 9,660 $ 8,547 $ 10,189
Total Assets............ 17,671 18,462 22,982 17,475 14,632 18,362 19,685
Current Liabilities..... 6,572 4,796 8,457 4,649 3,690 7,322 3,373
Long-Term Debt.......... -- 8,734 5,643 -- -- -- 8,758
Shareholders' Equity.... 7,861 3,307 7,172 11,902 10,694 7,741 5,950
</TABLE>
- --------
(1) In January 1997, the Company changed its fiscal year end from the fifty-two
or fifty-three week period ending on the Saturday closest to the last day
in May to the fifty-two or fifty-three week period ending on the Saturday
closest to the last day in January. The change in fiscal year end resulted
in a thirty-three week transition period from June 2, 1996 to February 1,
1997 (the "Transition Period"). The fiscal years ended January 30, 1999
("Fiscal 1998"), January 31, 1998 ("Fiscal 1997"), June 1, 1996 ("Fiscal
1996") and May 31, 1995 ("Fiscal 1995") were each fifty-two week periods.
(2) All share data has been adjusted to give effect to a one-for-two reverse
stock split undertaken by the Company on December 15, 1998.
3
<PAGE>
RISK FACTORS
You should consider carefully all the information included or incorporated
by reference in this prospectus and, in particular, should evaluate the
following risks before deciding to invest in shares of our common stock.
References to the company, our, we or us refer to The Right Start, Inc. and its
majority-owned subsidiary RightStart.com Inc.
We have a history of operating losses.
We reported losses from operations for the fiscal year ended January 30,
1999 of $2,379,000 and for the fiscal year ended January 31, 1998 of
$8,071,000. We reported income from operations of $105,000 for the 13-week
period ended May 1, 1999 and losses from operations of $906, 000 for the
thirteen-week period ended May 2, 1998. You should refer to the "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
section of the company's Annual Report on Form 10-K/A for the fiscal year ended
January 30, 1999 and our Quarterly Report on Form 10-Q/A for the thirteen week
period ended May 1, 1999. These reports are incorporated into this prospectus
by reference.
Since Fiscal 1997, our operating strategy has focused on opening and
operating new retail stores at street locations, while closing less profitable
retail stores at certain mall locations. The company closed nine mall stores
and opened eight street-location stores in 1998. There can be no assurance that
the company's retail store strategy will be profitable. Additionally, due to a
decline in responses to our catalog mailings, we cut circulation by 49% in
Fiscal 1998. We have attempted to exclude less profitable mailing lists from
our catalog sales. We are not certain that this targeting strategy will
increase overall profits from catalog sales. We may continue to have declining
catalog response rates. Furthermore, the costs of catalog production such as
printing and mailing have continued to increase over time, thereby decreasing
catalog profitability. There can be no assurance that catalog sales will be
profitable in the future. Additionally, because RightStart.com is a new
venture, the company has not yet been able to determine its profitability.
Specifically, our annual and quarterly results of operations may also fluctuate
as a result of other factors, including:
. the timing and number of new store openings;
. the amount of store pre-opening expenses;
. the impact of new store openings and Internet sales on the results of
existing stores and the catalog;
. the introduction of new products and changes in the mix of products
sold;
. the availability of and customer demand for particular products; and
. the success of Internet and catalog sales.
Thus, although the company reported a profit from operations for the 13-week
period ended May 1, 1999, there can be no assurance that the company's
operating strategy will be successful or that the company will not continue to
incur losses in subsequent periods. Losses could negatively affect working
capital and the extension of credit by the company's suppliers and impact the
company's ability to implement its retail expansion strategy.
We face risks associated with expanding into e-commerce.
We engage in sales of our products electronically over the Internet.
RightStart.com Inc. owns and operates the Internet portion of the company's
business. RightStart.com has been operating the www.rightstart.com website
since June 29, 1999. The company intends to use its valuable brand name, and
knowledge and expertise in children's specialty retailing, to operate
RightStart.com.
Because the Internet is still in a relatively early stage of development, we
have no guarantee that consumers will use extensively the Internet for retail
purchases or will utilize our website to purchase products
4
<PAGE>
for infants and young children. Consumer concerns about privacy and security
may hinder the growth of Internet retailing and use of our e-commerce website.
We may also fail to develop successful advertising strategies and/or beneficial
alliances necessary to increase consumer traffic to our website at reasonable
costs.
Our retail expansion strategy exposes us to risks of growth.
The company opened six new stores in fiscal 1997, eight new stores in fiscal
1998, four new stores to date in fiscal 1999 and currently plans to open up to
twenty additional new stores during the remainder of fiscal 1999. The company
expects to expend approximately $125,000 on fixed assets and $75,000 on
inventory for each new store it opens. Our ability to open and operate new
stores profitably is dependent on the identification and availability of
suitable locations, the negotiation of acceptable lease terms, our financial
resources, the successful hiring and training of store managers and our ability
to control the operational aspects of growth. The company intends to locate its
stores primarily in high traffic street locations. There can be no assurance
that we will be able to open and operate new stores on a timely and profitable
basis or that same store sales will increase in the future. We expect to fund
store openings from cash flow from operations and borrowings under our bank
facility.
The infants' and children's apparel industry is highly competitive.
The catalog and retail infants' and children's markets are highly
competitive. And, although the Internet children's market is newly developing,
such arena promises to be highly competitive as well. We compete with other
retail and online stores, including specialty stores, mass merchants, discount
chains, department stores, and a growing number of other mail order catalogs.
Some of our competitors have substantially greater financial, distribution and
marketing resources than we do and many of them sell a much broader range of
products. Additionally, new entrants into the mail order catalog industry have
increased competition. The catalog, retail and Internet businesses are likely
to become even more competitive in the future.
We depend on government agencies to protect our domain name.
RightStart.com owns the web domain name www.rightstart.com. Governmental
agencies and their designees regulate the acquisition and maintenance of domain
names. For example, in the United States, the National Science Foundation has
appointed Network Solutions, Inc. as the current exclusive registrar for the
".com", ".net" and ".org" generic top-level domains. Changes may occur in the
regulation of domain names in the United States and in foreign countries in the
near future. In the United States, such changes may include a transition from
the current system to a system which is controlled by a non-profit corporation.
Governing bodies may establish additional top-level domains, appoint additional
domain name registrars or modify the requirements for holding domain names. As
a result, we may not be able to acquire or maintain relevant domain names in
all jurisdictions in which we conduct business. Furthermore, the relationship
between regulations governing domain names and laws protecting trademarks and
similar proprietary rights is unclear. Therefore, we may not be able to prevent
third parties from using similar domain names that decrease the value of our
trademarks and other property rights.
We are liable for the content on our website.
We believe that our future success partially depends on our ability to
deliver original and compelling descriptions about our products on the Internet
as well as other information relevant to parents and childcare providers. As a
publisher of on-line content, we face potential liability for defamation,
negligence, copyright, patent or trademark infringement, or other similar
claims. Although we carry general liability insurance, our insurance may not
cover these types of claims or may not be enough to indemnify us for all our
liability. If faced with liability that is not covered by insurance or that
exceeds our insurance coverage, our reputation and business may suffer.
5
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Our success in selling products online depends on the viability of the
Internet.
Our company's success partially depends on its use of the Internet for
product sale. Certain issues concerning the commercial use of the Internet
remain unresolved. These critical issues which may affect the development of
our market on the Internet include:
. security;
. reliability;
. cost;
. ease of access;
. quality of service; and
. bandwidth availability
Our business will be adversely affected if the Internet develops more slowly
than expected as a commercial or business medium. In addition, companies that
control access to Internet transactions through network access or Web browsers
could promote our competitors or charge us a substantial fee for including us
in their product offerings. You should refer to the risk factor entitled "We
are dependent on third party service providers" for information on our
relationships with such third parties.
The success of our products also largely depends on the development of an
infrastructure for providing Internet access and services. The Internet could
become impracticable due to delays in the development or adoption of new
methods to handle greater Internet activity or due to greater governmental
regulation. We are not certain that the infrastructure necessary to make the
Internet a viable, long-term commercial marketplace will be developed. Even if
such an infrastructure develops, we are not certain that the Internet will
become a viable marketing and sales channel for our merchandise.
The recent growth in the use of the Internet also has caused frequent
periods of poor performance. As a result, routers and switches,
telecommunications links and other components of the infrastructure of Internet
service providers will need to be upgraded as e-commerce continues to expand.
Our ability to provide products to customers more quickly and increase the
scope of our service ultimately depends on the speed and reliability of the
networks operated by third parties. Consequently, the growth of the market for
our products offered on our website depends upon improvements being made to the
Internet to alleviate congestion. If the Internet does not continue as a
viable, long-term commercial marketplace, our business, results of operations
or financial condition may be materially adversely affected.
The rapid technological change and the emergence of new industry standards
and practices in the Internet and electronic commerce industries could render
our existing web-site and proprietary technology obsolete. Our performance will
depend, in part, on our ability to do the following:
. both license and internally develop leading technologies useful in our
business;
. enhance our existing services;
. develop new services and technologies to keep up with the increasingly
sophisticated and varied needs of prospective customers; and
. respond to technological advances and emerging industry standards and
practices in a cost effective and timely manner.
Developing our website and other proprietary technology involves significant
technical and business risks. We cannot give assurance that we will succeed in
using new technologies effectively or adapting our website and proprietary
technology to emerging industry standards. If for technical, legal, financial
or other reasons we cannot adapt in a timely manner to the changing market
conditions or customer requirements, or if our website
6
<PAGE>
does not achieve market acceptance, our business, results of operations and
financial condition could be materially adversely affected.
The risk of Internet credit card fraud exposes us to additional costs and
possible litigation.
Consumer concerns over the security of transactions conducted on the
Internet or the privacy of users of the Internet may inhibit the growth of
online commerce. To transmit securely confidential information such as customer
credit card numbers, we rely on encryption and authentication technology that
we license from third parties. Advances in computer capabilities, new
discoveries in the field of cryptography or other developments may compromise
or breach certain of the algorithms used by the company to protect customer
transaction data. Such a breach could have a material adverse effect on our
business, results of operations 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 need to spend significant
capital and other resources to prevent such security breaches or to alleviate
problems caused by such breaches.
Concerns over the security of Internet transactions and the privacy of users
may also inhibit the growth of the Internet generally, and the World Wide Web
in particular, especially as a means of conducting commercial transactions. To
the extent that we or third-party contractors store and transmit proprietary
information, such as credit card numbers, security breaches could expose us to
a risk of loss or litigation and possible liability. We cannot be certain that
our security measures will prevent security breaches. Our failure to prevent
such security breaches may have a material adverse effect on our business,
results of operations and financial condition.
We are dependent on third party service providers.
The Right Start and RightStart.com have entered into a number of service
agreements with third parties that provide software to operate our website,
catalog and store locations and maintenance and other services for the website,
the catalog and our stores. We have limited control over these other companies
and have no long-term relationships with any of them. Additionally, many
companies providing services to businesses engaging in e-commerce on the
Internet are start-up ventures without significant operating histories.
Although the company believes that its services providers are reputable and
dependable, there can be no assurance that such parties will continue to
perform such services or be replaced on terms favorable to the company.
Our operations depend on third parties for the following services:
. Internet/telecom access (hosting),
. delivery services,
. inventory storage and handling,
. credit card processing,
. software services, and
. shopping cart and other internet services
Our business relies on foreign product sources.
We import approximately five percent of our products, including most of our
private label products, directly from foreign manufacturers. In addition, a
significant number of products we purchase from domestic suppliers are
manufactured abroad. Historically, imported items have had higher gross profit
margins. Imports allow us to offer a large selection of unique goods. We expect
that we will become even more dependent on imported items. As a result, we are
subject to risks associated with relying on foreign manufacturers, such as:
. the inability to return products;
. fluctuations in currency exchange rates;
. economic and political instability;
. transportation delays;
7
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. restrictive actions by foreign governments;
. the laws and policies of the United States affecting importation of
goods, including duties, quotas and taxes;
. foreign trade and tax laws;
. foreign labor practices;
. trade infringement claims; and
. increased liability as importer of record.
The company's profitability is therefore dependent on its ability to manage
such risks while still offering an appealing product mix at profitable prices.
We are currently in compliance with import regulations in all material respects
and we have adopted specific procedures designed to comply with customs
regulations. However, our failure to comply with these regulations or the
occurrence of the risks listed above may interrupt or delay imports.
Additionally, if for any reason it becomes necessary to locate alternative
product sources, those products may be of less quality or more expensive than
the products we currently buy. We may also be affected if our suppliers face
similar problems with foreign manufacturers.
Our import operations are also constrained by bilateral and multilateral
trade agreements between the United States and a number of foreign countries.
These agreements restrict the amounts and types of items which may be imported
into the United States from these countries. These agreements also allow the
countries party to the agreements to restrict the amount of imports for certain
types of merchandise that are not currently subject to limits under the
agreement. In addition, we pay U.S. customs duties on our imported products.
These customs duties make up a significant portion of the cost of our
merchandise. There can be no assurance that the costs of imported goods will
not rise, thereby decreasing product sales profit margins.
Our business depends on reliable phone systems and computers.
Our businesses and revenues greatly depend upon third party
telecommunications and our own computer systems, substantially located in
Southern California, to place and fulfill customer orders. Systems and
operations may be damaged or interrupted due to fire, flood, power loss,
telecommunications failure, break-ins, earthquake and similar events. A natural
disaster or unanticipated problems in our California facilities could cause
interruptions or delays in our businesses or, cause us to lose data or render
us unable to accept or fulfill customer orders.
We do not have a formal disaster recovery plan to prevent delays arising
from our information systems, although the company, with its third party
service providers are developing a disaster recovery plan for the company's
Internet business. Also, our business and property insurance may not adequately
compensate our losses in the event of a disaster. If any of these events occur,
our reputation and business may be materially adversely affected.
If for any reason a major communications or computer system fails, our flow
of orders and shipments would be interrupted. For example, our website also
depends on our ability to rapidly expand our transaction-processing systems and
network infrastructure without system interruptions to accommodate significant
increases in visitors to the website and possible significant increases in
customer orders. An extended breakdown, however, may have a material adverse
effect on our revenues from store, catalog and Internet sales. We have no
totally adequate alternative if phone systems or our computers fail. However,
we do carry business interruption and casualty insurance against such risks,
but there can be no assurance that such insurance will be adequate to cover any
loss resulting from a communication failure or disruption.
Our success also depends on our ability to rapidly expand our operations in
order to accommodate significant increases in customer orders and demand. We
will continually invest in upgrading, enhancing and replacing our systems and
appropriately expanding the capacity of our transaction-processing systems and
network infrastructure to accommodate our anticipated growth. However, these
upgrades may result in periodic
8
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system interruptions. If we are not able to achieve or maintain high capacity
data transmission without system downtime, our business may be adversely
affected.
We are susceptible to changing economic conditions.
Our business depends heavily on well-to-do young parents and grandparents
whose income may be adversely affected by changes in the national economy. A
prolonged economic downturn throughout the United States may decrease sales of
the company's products and have a material adverse effect on our financial
condition and results of operations.
The price of our common stock may fluctuate.
Our common stock is quoted on The Nasdaq National Market. In the past, our
stock has experienced significant price and volume fluctuations. Such
fluctuations may adversely affect the market price of our common stock without
regard to our operating performance. We are likely to experience such price and
volume fluctuations in the future. In addition, other factors that could cause
the price of our common stock to fluctuate substantially include quarterly
fluctuations in our financial results, the registration of privately placed
securities of the company, the general economy and the financial markets.
Our operations depend on independent manufacturers.
We do not own or operate any manufacturing facilities. Instead we depend on
manufacturers and distributors to supply us enough products at competitive
prices. We currently buy our products from over 500 different vendors. We do
not buy more than 5% of our overall sales from any single vendor. If a
manufacturer cannot ship orders to us in a timely manner or meet our quality
standards, we may miss delivery deadlines. Our customers may subsequently
cancel orders, refuse to accept deliveries or insist on a discount. Any of
these circumstances may have a material adverse effect on our financial
conditions or results of operations.
We generally do not have long-term contracts with our independent
manufacturing sources. As such, we compete with other companies for production
facilities. We believe that we have close relationships with our manufacturing
sources. Our future success, however, partly depends on our ability to maintain
these types of relationships.
Our intellectual property may not be safeguarded or we may be subject to
product infringement claims.
Our copyright, service marks, trademarks, trade dress, trade secrets and
similar intellectual property are critical to our success. We rely on trademark
and copyright law to protect our proprietary rights. We also depend on trade
secret protection, confidentiality and license agreements with our employees,
customers, partners, subsidiary and others. However, a third party could copy
or otherwise obtain information from the company without authorization. For
example, employees or consultants could breach their confidentiality
agreements. In such a situation, we may not have adequate remedies for breach.
Our inability to protect our proprietary rights may materially adversely affect
our business.
We also may not be able to obtain effective trademark, service mark,
copyright and trade secret protection in every country in which we sell
products and services online. Thus, our efforts to protect our online
proprietary rights may be inadequate and our online business may be adversely
affected.
Other parties may make infringement or unfair competition claims against us.
These claims may affect our business. If we are forced to defend against such
claims, we may incur litigation costs. A lawsuit may also divert technical and
management personnel or cause product shipment delays. If a dispute does arise,
we may have to develop non-infringement technology or enter into royalty or
licensing agreements, even on unfavorable terms. If a product infringement
claim against us succeeds and we are not able to develop non-infringement
technology or license the infringement or similar technology on a timely basis,
our business may be adversely affected.
9
<PAGE>
We are subject to products liability claims.
Our products are used for and by small children and infants who may be
injured from usage. We may be subject to claims or lawsuits resulting from such
injuries. We believe we currently have adequate liability insurance. However,
we face the risk that claims or liabilities will exceed our insurance coverage.
Furthermore, we may not be able to maintain adequate liability insurance in the
future.
We are subject to government regulation.
Our products are subject to provisions of the Consumer Safety Act and the
regulations issued thereunder. These laws authorize the Consumer Product Safety
Commission to protect the public from products which present a substantial risk
of injury. The CPSC can require the manufacturer of defective products to
repurchase or recall such products. The CPSC may also impose fines or penalties
on the manufacturer. Similar laws exist in some states, cities and other
countries in which we market our products. A recall of any of our products may
materially adversely affect us, depending on the particular product.
Laws and regulations applicable to Internet communications and commerce are
more prevalent. The U.S. Congress recently enacted Internet laws on children's
privacy, copyrights, taxation and transmission of sexually explicit material.
The European Union recently enacted its own privacy regulations. Laws governing
the Internet, however, remains largely unsettled. It may take years to
determine whether and how existing laws, such as those governing intellectual
property, privacy, libel and taxation, apply to the Internet. The growth of the
market for Internet commerce may result in more stringent consumer protection
laws that place additional burdens on companies conducting business over the
Internet. The adoption of more laws may decrease the growth of the Internet.
Such a slowdown may decrease the demand for our Internet sales, increase our
cost of doing business or otherwise adversely affect our business, results of
operations and financial condition.
Also, our products and services will be available over the Internet in
multiple states. Such states may claim that we are required to qualify to do
business as a foreign corporation in their jurisdiction or pay state taxes
because we sell products to numerous customers who reside such states.
RightStart.com is currently qualified to do business in only Delaware and
California. We may be subject to taxes and penalties if we fail to qualify as a
foreign corporation in a jurisdiction where we are required to qualify. The
application of laws and regulations of states whose laws do not currently apply
to our business may have a material adverse effect on our business, results of
operations and financial condition.
The year 2000 problem may negatively affect our business.
The year 2000 problem is the result of older computer programs being written
using two digits (rather than four) to define the applicable year. Any of our
time-sensitive software programs may recognize a date using "00" as the year
1900 rather than the year 2000. This problem may result in miscalculations or
system failures.
We are trying to identify and resolve all potential issues relating to the
year 2000 problem. We believe that with certain modifications to existing
software and the installation of new software, our computer systems will be
year 2000 compliant. In order to address the right issues and plan solutions,
we have segregated our internal systems and individually assessed our state of
readiness as follows:
<TABLE>
<CAPTION>
Phase of Planning ("x" indicates phase is complete)
---------------------------------------------------------
System Awareness Assessment Renovation Validation Implementation
------ --------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Credit Card Processing.. x x x x x
Inventory Maintenance... x x x x
Accounting and
Reporting.............. x x x x x
Point of Sale ("POS")
Transactions........... x x
Internet Transactions... x x x x x
Non-computerized systems
(none are material to
our operations)........ x x
</TABLE>
10
<PAGE>
We are also working with third party vendors to implement solutions to our
year 2000 problems. We estimate that the maximum, worst-case cost of addressing
our year 2000 issues is about $125,000 for hardware and software but there can
be no assurance that such cost will not ultimately prove to be higher.
We are currently working with our software vendor to complete the
installation of the upgraded, year 2000 compliant version of our inventory
maintenance system. We are also working to with our POS vendor to make the
necessary changes for our point of sale system to be year 2000 compliant. If,
in a worst-case scenario, the necessary upgrades cannot be completed on time,
our contingency plans provide for the purchase and installation of replacement
point of sale system software.
If we or our suppliers fail to be year 2000 compliant, our business may be
materially affected. Also, we cannot predict the impact of the year 2000
problem on suppliers or other entities with whom we transact business. We
cannot be certain that these entities will be year 2000 compliant. Their
failure to solve their year 2000 issues may materially affect our business,
results of operations or financial condition.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares of
common stock by the selling shareholders. For more information, you should
refer to the "Plan of Distribution" section of this prospectus, which begins on
page .
OUR CAPITAL STOCK
Our Common Stock.
Our common stock, no par value per share, is traded on the Nasdaq National
Market under the symbol "RTST."
Each holder of our common stock is entitled to one vote per share registered
in his or her name on our books on all matters submitted to a vote of our
shareholders. However, California law permits shareholders to cumulate votes if
a shareholder notifies the Company of his desire to do so at the meeting where
the shareholder vote is to occur. If a motion to cumulate votes is made, all
shareholders will vote cumulatively.
All issued and outstanding shares of common stock are validly issued, fully
paid and non-assessable. Holders of common stock are entitled to all dividends
that are declared from time to time by the board of directors out of funds
legally available for that purpose, subject to the rights of holders of the
Company's preferred stock (described below). For more information, we refer you
to "Dividend Policy." Upon dissolution, holders of common stock are entitled to
share pro rata in our assets remaining after payment in full of all of our
liabilities and obligations, including payment of the liquidation preference,
if any, of any preferred stock then outstanding.
Our Preferred Stock.
The Right Start, Inc. has issued three series of preferred stock. The
issuance of preferred stock by the board of directors may affect the right of
the holders of common stock. A summary of the terms of each outstanding series
of preferred stock is set forth below. We caution you to refer to the
Certificate of Determination governing each series of The Right Start's
preferred stock for a complete understanding of the terms of such securities.
Series A Mandatorily Redeemable Preferred Stock.
As of the date of this Prospectus, we have issued 30,000 shares of Series A
Mandatorily Redeemable Preferred Stock, par value $.01 per share (the "Series A
Preferred Stock"). No additional shares of Series A Preferred Stock have been
authorized for issuance.
11
<PAGE>
The Series A Preferred Stock ranks senior to our common stock and of equal
priority with our Series B preferred stock and Series C preferred stock with
respect to liquidation. However, if the Series A Preferred Stock is not
Redeemed by June 1, 2002, it will rank senior with respect to liquidation to
the Series B Preferred Stock and the Series C Preferred Stock. In the event of
liquidation, each holder of the Series A preferred stock will receive a
preferred liquidation payment equal to $100 per share.
So long as any Series A preferred stock remains outstanding, no dividend
will be declared or paid upon, nor will any distribution be made upon, any
common stock, other than a dividend or distribution payable in shares of common
stock.
Consent of the holders of at least a majority of the Series A, B and C
Preferred Stock voting together as a single class is required for the following
(such consent may not be unreasonably withheld):
. Any sale by The Right Start, Inc. of a substantial portion of its
assets;
. Any merger of The Right Start, Inc. with another entity;
. Each amendment to The Right Start, Inc.'s articles of incorporation; and
. Any action that creates any new class or series of shares having
preference over or being on a parity with the Series A, B or C Preferred
Stock or creates any contractually subordinated debt of The Right Start,
Inc.
Except for such consent rights and voting rights as may be provided by
applicable law and the right to vote as a separate series on all modifications
of the rights, privileges or terms of the Series A preferred stock, the Series
A preferred stock will have no voting rights as a separate series.
Series B Convertible Preferred Stock.
As of the date of this Prospectus, we have issued 30,000 shares of Series B
Convertible Preferred Stock, par value $.01 per share (the "Series B Preferred
Stock"). No additional shares of Series B Preferred Stock have been authorized
for issuance.
The Series B preferred stock ranks senior to our common stock and of equal
priority with our Series A Preferred Stock and Series C Preferred Stock with
respect to liquidation. However, if the Series A Preferred Stock is not
Redeemed by June 1, 2002, it will rank senior with respect to liquidation to
the Series B Preferred Stock and the Series C Preferred Stock. In the event of
liquidation, each holder of the Series B Preferred Stock will receive a
preferred liquidation payment equal to $100 per share.
The Series B preferred stock is convertible in whole or in part at any time
at the option of the holders into shares of the company's common stock at a per
share rate equal to the Series B Preferred Stock liquidation preference divided
by $3.00, subject to adjustment for the following:
. a dividend or distribution of shares of common stock to holders of
common stock; and
. a subdivision or combination of the outstanding shares of common stock.
Consent of the holders of at least a majority of the Series A, B and C
Preferred Stock voting together as a single class is required for the following
(such consent may not be unreasonably withheld):
. any sale by The Right Start, Inc. of a substantial portion of its
assets;
. any merger of The Right Start, Inc. with another entity;
. each amendment to The Right Start, Inc.'s articles of incorporation; and
. any action that creates any new class or series of shares having
preference over or being on a parity with the Series A, B or C Preferred
Stock or creates any contractually subordinated debt of The Right Start,
Inc.
12
<PAGE>
Except for such consent rights and voting rights as may be provided by
applicable law and the right to vote as a separate series on all modifications
of the rights, privileges or terms of the Series B preferred stock, the Series
B preferred stock will have no voting rights as a separate series.
Series C Convertible Preferred Stock.
As of the date of this Prospectus, we have issued 38,500 shares of Series C
Convertible Preferred Stock, par value $.01 per share (the "Series C Preferred
Stock"). No additional shares of Series C Preferred Stock have been authorized
for issuance.
The Series C preferred stock ranks senior to our common stock and of equal
priority with our Series A Preferred Stock and Series B Preferred Stock with
respect to liquidation. However, if the Series A Preferred Stock is not
Redeemed by June 1, 2002, it will rank senior with respect to liquidation to
the Series B Preferred Stock and the Series C Preferred Stock. In the event of
liquidation, each holder of the Series B Preferred Stock will receive a
preferred liquidation payment equal to $100 per share.
The Series C preferred stock is convertible in whole or in part at any time,
and from time to time, at the option of the holders into shares of the
company's common stock at a per share rate equal to the Series C Preferred
Stock liquidation preference divided by $2.00, subject to adjustment for the
following:
. a dividend or distribution of shares of common stock to holders of
common stock and
. a subdivision or combination of the outstanding shares of common stock.
Consent of the holders of at least a majority of the Series A, B and C
Preferred Stock voting together as a single class is required for the following
(such consent may not be unreasonably withheld):
. any sale by The Right Start, Inc. of a substantial portion of its
assets;
. any merger of The Right Start, Inc. with another entity;
. each amendment to The Right Start, Inc.'s articles of incorporation; and
. any action that creates any new class or series of shares having
preference over or being on a parity with the Series A, B or C Preferred
Stock or creates any contractually subordinated debt of The Right Start,
Inc.
Except for such consent rights and voting rights as may be provided by
applicable law and the right to vote as a separate series on all modifications
of the rights, privileges or terms of the Series C preferred stock, the Series
C preferred stock will have no voting rights as a separate series.
DIVIDEND POLICY
The company's credit facility with its bank prohibits it from paying
dividends without its lender's approval. Additionally, the company's board of
directors has not declared or paid dividends in the past and has no present
intention to declare or pay dividends in the future.
SELLING SHAREHOLDERS
The following table lists:
. the names of each of the selling shareholders;
. the number of shares of common stock owned by each of the selling
shareholders, as of July 1, 1999;
. the number of shares that may be offered and sold by each of the selling
shareholders; and
. the percentage of shares each selling shareholder will own after the
sale, assuming such shareholder sells all his or her shares.
13
<PAGE>
Except as noted below or in the document incorporated by reference, none of
the selling shareholders has had any position, office or other or other
material relationship with the Company within the past three years. Unless
otherwise indicated the address of each selling shareholder is 1800 Avenue of
the Stars, Second Floor, Los Angeles, California.
<TABLE>
<CAPTION>
Ownership of
Common Stock Shares Offered
Prior to Offering for Selling Ownership of
----------------- Shareholder's Common Stock
Selling Shareholders Number Percent Account After Offering(3)
- -------------------- --------- ------- -------------- -----------------
<S> <C> <C> <C> <C>
Arbco Associates, L.P.(1)... 1,056,025 18.9% 1,056,025 0
Kayne, Anderson Non-
Traditional Investments,
L.P.(1).................... 1,256,051 22.5% 1,256,051 0
Kayne Anderson Offshore
Limited.................... 197,100 3.8% 179,600 17,500
Opportunity Associates,
L.P.(1).................... 478,822 8.9% 460,836 17,986
Offense Group Associates,
L.P.(1).................... 1,117,612 19.8% 1,077,858 39,754
Richard A. Kayne(1)......... 89,750 1.8% 60,000 29,750
Fred Kayne(2)............... 703,211 13.2% 686,060 17,151
Fortune Fashions
6501 Flotilla Street
Commerce, CA 90040
Cahill, Warnock Strategic
Partners Fund, L.P.......... 315,833 6.2% 315,833 0
One South Street, Suite 2150
Baltimore, MD 21202
Strategic Associates, L.P.
One South Street, Suite 2150
Baltimore, MD 21202......... 17,500 * 17,500 0
</TABLE>
- --------
* Less than one percent.
(1) Richard A. Kayne is the President and Chief Executive Officer, and Jerry R.
Welch is Managing Director, of Kayne, Anderson Investment Management, Inc.,
which is the general partner of each of Arbco Associates, L.P., Kayne,
Anderson Non-Traditional Investments, L.P., Opportunity Associates, L.P.
and Offense Group Associates, L.P. Mr. Welch is the Chairman of the Board
of Directors, President and Chief Executive Officer of the Company. Mr.
Richard Kayne is also a director of the Company.
(2) Mr. Fred Kayne is a director of the Company.
(3) Amounts assume each Selling Shareholder sells all of its shares offered
hereby.
PLAN OF DISTRIBUTION
The company will not receive any proceeds from the sale of its common shares
offered hereby. The selling shareholders may sell their shares from time to
time either directly or through broker-dealers or underwriters. The brokers or
underwriters may act solely as agents or may acquire the common shares as
principals. The brokers or underwriters may receive the usual and customary
compensation or specifically negotiated underwriting discounts, concessions or
commissions from each of the selling shareholders and/or purchasers of the
shares for whom they act as agent.
The shares may be distributed in one or more transactions. Such transactions
may take place:
(i) on the Nasdaq National Market, as block trades or ordinary broker's
transactions; or
(ii) through privately negotiated transactions; or
(iii) through underwritten pubic offerings; or
(iv) through a combination of any of the above methods, at those prices
that are obtainable.
14
<PAGE>
The selling shareholders may pay brokerage fees or commissions in the usual
or customary form or specially negotiated brokerage fees in connection with
such sales.
Each of the selling shareholders will receive from the sale of the shares as
net proceeds the purchase price of the shares sold less the amount of any
underwriter's fees. The selling shareholders and any dealers or agents that
participate in the distribution of the shares may be deemed to be
"underwriters" within the meaning of the Securities Act. However, the company
and such persons disclaim that such person is an underwriter of the shares.
To the extent required, any time an offer of shares is made the following
information will be set forth in an accompanying prospectus supplement:
. the specific shares to be sold,
. the names of each of the selling shareholders,
. the purchase price of the shares,
. the public offering price of the shares,
. the names of any agent, dealer or underwriter involved in the sale, and
. any applicable commission or discount received by any agent, dealer or
underwriter in connection with the sale.
The prospectus supplement may be in the form of a post-effective amendment
to the Registration Statement. The prospectus supplement will be filed with the
SEC.
The company will indemnify each of the selling shareholders against certain
liabilities, including liabilities arising under the Securities Act of 1933, as
amended. We will also contribute to payments the selling shareholders may be
required to make under the Securities Act of 1933, as amended.
To comply with the securities laws of certain jurisdictions, the common
shares will be offered or sold in such jurisdictions only through licensed
brokers or dealers. Also, in certain jurisdictions the common shares may not be
offered or sold unless they have been registered or qualified for sale or are
exempt from registration or qualification.
The Securities Exchange Act of 1934 and its rules and regulations apply to
each selling shareholder and any other persons participating in the
distribution. In particular, Regulation M of the Securities Exchange Act of
1934 may limit the timing of purchases and sales made by each selling
shareholder and any other person. Such rules, regulations and limitations may
affect the marketability of the shares offered hereby.
EXPERTS
The financial statements incorporated in this Prospectus by reference to the
Annual Report on Form 10-K/A for the year ended January 30, 1999, have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
LEGAL MATTERS
Milbank, Tweed, Hadley & McCloy LLP of Los Angeles, California will give an
opinion with respect to the validity common shares offered hereby.
15
<PAGE>
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we file later
with the SEC will automatically update and supersede previously filed
information, including information contained in this document.
We incorporate by reference the documents listed below and any future
filings we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934 until this offering has been completed:
(1) The Company's Annual Report on Form 10-K/A for the fiscal year ended
January 30, 1999;
(2) The Company's Quarterly Report on Form 10-Q for the thirteen week
period ended May 1, 1999; and
(3) The description of the common stock in the Company's Registration
Statement on Form 8-A dated September 18, 1991.
If this prospectus modifies any documents incorporated by reference into
this prospectus, this prospectus supersedes such document. Also, if a document
incorporated herein by reference that we file later with the SEC modifies a
document already incorporated by reference into this prospectus, then the later
filed document will supersede the previously filed information. However, any
statement that is modified in this way will not be considered to be a part of
this prospectus.
You may request free copies of any of the documents incorporated by
reference into the prospectus that are not delivered with the prospectus by
writing or telephoning us at the following address:
The Right Start, Inc.
5334 Sterling Center Drive
Westlake Village, California 91361
Attention: Secretary
(818) 707-7100
16
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The expenses relating to the registration of the common shares will be borne
by the Company. Such expenses are estimated to be as follows:
<TABLE>
<S> <C>
SEC Registration Fee............................................. $11,204
Printing Expenses................................................ 6,700
Legal Fees and Expenses (including Blue Sky)..................... 30,000
Accounting Fees and Expenses..................................... 5,000
Miscellaneous.................................................... 9,096
-------
Total........................................................ $62,000
=======
</TABLE>
Item 15. Indemnification of Directors and Officers
Section 317 of the California General Corporation Law authorizes the Company
to indemnify its officers and directors, including indemnification for
liabilities (and reimbursement for expenses incurred) arising under the
Securities Act of 1933, as amended. The Amended and Restated Articles of
Incorporation of the Company authorizes the Company to indemnify any present or
former officer, director or agent who breaches his or her duties to the Company
or its shareholders. The indemnification can exceed the amount allowed by
California law, subject to certain limitations. The Company has entered into
indemnification agreements with all of its directors and executive officers.
Under the indemnification agreements:
. the Company must indemnify such individuals to the fullest extent
permitted by applicable law,
. the Company must advance costs and expenses incurred by the officer or
director in defending or investigating an action. If the Company
advances such payments and such person is not entitled to
indemnification, then he or she must repay such amounts to the Company,
. an officer or director may petition the court to require the Company to
pay the amounts agreed to in the agreements and
. if such officer or director is successful in making such a request to
the court, he or she is entitled to the court costs incurred.
The benefits of the indemnification agreements are not available if the
officer or director:
(1) has other indemnification insurance for the claim, or the matters
giving rise to the claim; or
(2) has committed an act, transaction or omission for which he or she
may not be relieved of liability under California General Corporations Law
or federal securities laws.
In accordance with Section 204(a)(10) of the California General Corporation
Law, the Amended and Restated Articles of Incorporation of the Company provide
that a director is not liable to the Company or its shareholders for monetary
damages to the fullest extent permissible under California law. However, under
California law, the Company may not limit the liability of a director for:
(i) acts or omissions that show intentional misconduct or a knowing and
culpable violation of law,
(ii) acts or omissions that a director believes to be against the best
interest of the Company or its shareholders or that involve bad faith,
(iii) any transaction from which a director derived an improper personal
benefit,
(iv) acts or omissions that show a reckless disregard for the director's
duty to the Company or its shareholders in circumstances where the director
was, or should have been, aware, in the ordinary course of performing a
director's duties, of a risk of serious injury to the Company or its
shareholders,
II-1
<PAGE>
(v) acts or omissions that show an unexcused pattern of inattention that
amounts to an abandonment of the director's duty to the Company or its
shareholders,
(vi) any improper transactions between a director and the Company where
the director has a material financial interest, or
(vii) any unlawful distributions to the shareholders of the Company
(viii) any unlawful loan of money or property to any director or officer
of the Company
(ix) any unlawful guarantee of the obligation of any director or officer
of the Company
The Company currently maintains directors' and officers' liability
insurance.
Item 16. Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
5.1 Opinion of Milbank, Tweed, Hadley & McCloy LLP
23.1 Consent of PricewaterhouseCoopers LLP
Consent of Milbank, Tweed, Hadley & McCloy LLP (included with
23.2 Exhibit 5.1)
24.1 Power of Attorney (included on signature page)
</TABLE>
Item 17. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post- effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective Registration Statement;
(iii) To include any material information with respect to the Plan
of Distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the Registration Statement is on Form S-3, Form S-8 or Form F-3 and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-2
<PAGE>
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Securities
Exchange Act) that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issues.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Act, the Registrant certifies
that it has reasonable grounds to believe that it meets all of the requirements
for filing of Form S-3 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Westlake Village, State of California, on July 30, 1999.
The Right Start, Inc.
/s/ Jerry R. Welch
By: _________________________________
Jerry R. Welch,
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Jerry R. Welch Chairman of the Board, July 30, 1999
____________________________________ President and Chief
Jerry R. Welch Executive Officer
/s/ Richard A. Kayne Director July 30, 1999
____________________________________
Richard A. Kayne
/s/ Fred Kayne Director July 30, 1999
____________________________________
Fred Kayne
/s/ Andrew Feshbach Director July 30, 1999
____________________________________
Andrew Feshbach
Director July 30, 1999
____________________________________
Robert R. Hollman
/s/ Howard M. Zelikow Director July 30, 1999
____________________________________
Howard M. Zelikow
/s/ Gina M. Engelhard Chief Financial Officer July 30, 1999
____________________________________ (Principal Financial and
Gina M. Engelhard Accounting Officer)
</TABLE>
II-4
<PAGE>
Exhibit 5.1
August 2, 1999
The Right Start, Inc.
5388 Sterling Center Drive, Unit C
Westlake Village CA 91361
Dear Ladies and Gentlemen:
We have acted as special counsel to The Right Start, Inc., a California
corporation (the "Company"), in connection with a Registration Statement on Form
S-3 filed by the Company with the Securities and Exchange Commission on August
2, 1999 (as amended, the "Registration Statement"), in connection with the
proposed sale of 5,231,904 shares (the "Shares") of the Company's common stock,
no par value per share, of which all such Shares are to be sold to the public
from time to time by the Selling Shareholders named in the Registration
Statement pursuant to Rule 415 under the Securities Act of 1933, as amended, in
the manner described in the Registration Statement.
We have examined the Registration Statement and such other documents and
have reviewed such questions of law as we have considered necessary and
appropriate as a basis for the opinions herein expressed.
Based on the foregoing, it is our opinion that the Shares to be sold by the
Selling Shareholders pursuant to the Registration Statement have been duly
authorized and validly issued and are fully paid and non-assessable.
The foregoing opinion is limited to matters involving the laws of the State
of California, and we do not express any opinion as to the laws of any other
jurisdiction.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name, whenever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and any amendments thereto. This opinion is furnished to you in connection with
the registration of the Shares, is solely for your benefit and may not be relied
upon by, nor copies delivered to, any other person or entity without our prior
written consent in each instance.
Sincerely,
/s/ Milbank, Tweed, Hadley & McCloy LLP
KJB/NJW
<PAGE>
Exhibit 23.1
Consent of Independent Accountants
----------------------------------
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated March 12, 1999, except as to Note 3,
which is as of April 29, 1999 relating to the financial statements and financial
statement schedule, which appears in The Right Start, Inc.'s Annual Report on
Form 10-K/A for the year ended January 30, 1999. We also consent to the
reference to us under the heading "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Los Angeles, California
July 28, 1999
