Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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BLUEFLY, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3612110
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
42 West 39th Street
New York, New York 10018
(212) 944-8000
(Address, Including Zip Code, and Telephone Number, Including Area
Code, of the Registrant's Principal Executive Offices)
E. Kenneth Seiff
Chief Executive Officer
Bluefly, Inc.
42 West 39th Street
New York, New York 10018
(212) 944-8000
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
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Copies to:
Richard A. Goldberg, Esq.
Swidler Berlin Shereff Friedman, LLP
The Chrysler Building
New York, New York 10174
(212) 973-0111
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED (1) SHARE (2) PRICE (2) FEE
Common Stock, $0.01 par value 1,543,209 $ 3.82 $ 5,891,238.38 $ 476.60
Common Stock, $0.01 par value 2,223,301 $ 3.82 $ 8,493,009.82 $ 687.08
1. Pursuant to Rule 416 promulgated under the Securities Act of 1933, this
Registration Statement shall also cover any additional shares of the
Registrant's Common Stock which become issuable by reason of any stock
dividend or stock split.
2. Estimated solely for the purpose of computing the registration fee
required by Section 6(b) of the Securities Act and computed pursuant to
Rule 457 under the Securities Act based upon the average of the high and
low prices of the Common Stock on January 13, 2004, as reported on the
Nasdaq SmallCap Market.
3. Includes: (i) 385,801 shares that are issuable upon the exercise of
warrants that were issued in January 2004 with an exercise price of
$3.96 per share, (ii) 1,500,000 shares issuable upon the conversion of
outstanding shares of the Registrant's Series A Preferred Stock, (iii)
37,500 shares that are issuable upon the exercise of a stock option
issued in March 2001 with an exercise price of $1.34 per share, (iv)
50,000 shares that are issuable upon the exercise of a warrant issued in
September 2000 with an exercise price of $3.72 per share and (v) 250,000
shares that are issuable upon exercise of warrants issued in December
2003 with an exercise price of $2.34 per share.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
The information in this prospectus is not complete and may be changed.
These securities may not be sold pursuant to this prospectus until the
registration statement filed with the securities and exchange commission is
effective. This prospectus is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.
SUBJECT TO COMPLETION, DATED JANUARY __, 2004
PROSPECTUS
3,766,510 SHARES OF COMMON STOCK
BLUEFLY, INC.
This prospectus relates to the resale of up to 3,766,510 shares of our
common stock by the selling stockholders listed in this Prospectus under the
section "Selling Stockholders." These shares include: (i) 1,543,209 shares that
were sold by us at the price of $3.24 per share in a private placement that
closed on January 12, 2004, (ii) 385,801 shares that are issuable upon the
exercise of warrants that were issued in the same private placement with an
exercise price of $3.96 per share, (iii) 1,500,000 shares issuable upon the
conversion of outstanding shares of our Series A Preferred Stock, (iv) 37,500
shares that are issuable upon the exercise of a stock option granted in March
2001 with an exercise price of $1.34 per share, (v) 50,000 shares that are
issuable upon the exercise of warrants granted in September 2000 with an
exercise price of $3.72 per share and (vi) 250,000 shares that are issuable upon
exercise of warrants granted in December 2003 with an exercise price of $2.34
per share.
The prices at which the selling stockholders may sell the shares will be
determined by the prevailing market price for the shares or in negotiated
transactions. We will not receive any of the proceeds from the sale of the
shares by the selling stockholders.
Our common stock is quoted on the Nasdaq SmallCap Market under the
symbol "BFLY." On January 13, 2004, the last sale price of our common stock was
$3.84 per share.
Our address is 42 West 39th Street, New York, New York 10018, and the
phone number of our executive offices is (212) 944-8000.
The terms "Company," "Bluefly," "Registrant," "we," "us," and "our" in
this prospectus refer to Bluefly, Inc. and its subsidiary.
THE SHARES OFFERED IN THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK. YOU
SHOULD CAREFULLY CONSIDER THE RISK FACTORS COMMENCING ON PAGE 3 IN DETERMINING
WHETHER TO PURCHASE THE SHARES.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 2004
TABLE OF CONTENTS
WHERE YOU CAN FIND MORE INFORMATION....................1
DOCUMENTS INCORPORATED BY REFERENCE....................1
FORWARD-LOOKING STATEMENTS.............................2
THE COMPANY............................................2
RECENT DEVELOPMENTS....................................2
RISK FACTORS...........................................3
USE OF PROCEEDS.......................................12
SELLING STOCKHOLDERS..................................12
PLAN OF DISTRIBUTION..................................14
EXPERTS...............................................15
LEGAL MATTERS.........................................16
We have not authorized any person to make a statement that differs from
what is in this prospectus. If any person does make a statement that differs
from what is in this prospectus, you should not rely on it. This prospectus is
not an offer to sell, nor is it seeking an offer to buy, these securities in any
state in which the offer or sale is not permitted. The information in this
prospectus is complete and accurate as of its date, but the information may
change after that date.
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in or
incorporated by reference in this prospectus. If given or made, such information
or representations must not be relied upon as having been authorized by us or
the selling stockholders. This prospectus does not constitute an offer to sell,
or a solicitation of an offer to sell, or a solicitation of an offer to buy,
such securities by anyone in any jurisdiction where, or to any person to whom,
it is unlawful to make such offer or solicitation. Neither the delivery of this
prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that there has been no change in our affairs since the date as
of which information is given in this prospectus.
Until , 2004 (40 days after the commencement of this offering),
all dealers that buy, sell or trade shares of our common stock, whether or not
participating in this offering, may be required to deliver a prospectus. This
delivery requirement is in addition to the obligation of dealers to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
WHERE YOU CAN FIND MORE INFORMATION
Because we are subject to the informational requirements of the Exchange
Act, we file reports, proxy statements and other information with the Securities
and Exchange Commission (SEC). You may read and copy these reports, proxy
statements and other information at the public reference facilities maintained
by the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. You may
also obtain copies of those materials at prescribed rates from the public
reference section of the SEC at 450 Fifth Street, Washington, D.C. 20549. The
public may obtain information on the operation of the public reference room by
calling the SEC at (800) SEC-0330. In addition, we are required to file
electronic versions of those materials with the SEC through the SEC's EDGAR
system. The SEC maintains a web site at http://www.sec.gov that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the SEC. We have filed with the SEC a
registration statement on Form S-3 under the Securities Act with respect to the
securities offered with this prospectus. This prospectus does not contain all of
the information in the registration statement, parts of which we have omitted,
as allowed under the rules and regulations of the SEC. You should refer to the
registration statement for further information with respect to us and our
securities. Statements contained in this prospectus as to the contents of any
contract or other document are not necessarily complete and, in each instance,
we refer you to the copy of each contract or document filed as an exhibit to the
registration statement. Copies of the registration statement, including
exhibits, may be inspected without charge at the SEC's principal office in
Washington, D.C., and you may obtain copies from this office upon payment of the
fees prescribed by the SEC. We will furnish without charge to each person to
whom a copy of this prospectus is delivered, upon written or oral request, a
copy of the information that has been incorporated by reference into this
prospectus (except exhibits, unless they are specifically incorporated by
reference into this prospectus). You should direct any requests for copies to:
Bluefly, Inc., 42 West 39th Street, New York, New York 10018, Attention: General
Counsel, Telephone: (212) 944-8000.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to incorporate by reference certain of our
publicly-filed documents into this prospectus, which means that information
included in these documents is considered part of this prospectus. We
incorporate by reference in this prospectus the information contained in the
following documents:
. our Annual Report on Form 10-K for the year ended December 31,
2002, filed with the SEC on March 28, 2003;
. our Proxy Statement dated July 2, 2003, filed with the SEC on
July 2, 2003 in connection with our Annual Meeting of
Stockholders held on August 1, 2003;
. our Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 2003, filed with the SEC on April 30, 2003;
. our Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 2003, filed with the SEC on August 8, 2003;
. our Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2003, filed with the SEC on November 12, 2003;
. our Current Report on Form 8-K, filed with the SEC on July 17,
2003;
. our Current Report on Form 8-K, filed with the SEC on October
20, 2003;
. our Current Report on Form 8-K, filed with the SEC on November
21, 2003;
. our Current Report on Form 8-K, filed with the SEC on January
12, 2004;
. our Current Report on Form 8-K, filed with the SEC on January
16, 2004;
. the description of our common stock in our registration
statement on Form 8-A filed with the SEC on April 22, 1997,
including any amendments or reports filed for the purpose of
updating such description; and
. all documents that we subsequently file with the SEC under
Sections 13(a), 13(c), 14 or 15 of the Exchange Act until all of
the securities that may be offered with this prospectus are
sold.
We will furnish without charge to you, on written or oral request, a
copy of any or all of the documents incorporated by reference, other than the
exhibits to those documents. You may obtain copies of those documents from us,
free of cost, by contacting us at the address or telephone number provided in
"Where You Can Find More Information" immediately above.
Information that we file later with the SEC and that is incorporated by
reference in this prospectus will automatically update information contained in
this prospectus or that was previously incorporated by reference into this
prospectus. You will be deemed to have notice of all information incorporated by
reference in this prospectus as if that information was included in this
prospectus.
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FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this prospectus and in
documents that we incorporate by reference into this prospectus. These
forward-looking statements are subject to risks and uncertainties. Actual
results may differ materially from those expressed in these forward-looking
statements.
Forward-looking statements include information concerning our possible
or assumed future results of operations as well as statements that include the
words "believe," "expect," "anticipate," "intend" or similar expressions. You
should understand that certain important factors, including those set forth in
"Risk Factors" below and elsewhere in this prospectus and the documents that we
incorporate by reference into this prospectus, could affect our future results
of operations and could cause those results to differ materially from those
expressed in our forward-looking statements. In connection with these forward-
looking statements, you should carefully review the risks set forth in this
prospectus and the documents we incorporate by reference into this prospectus.
THE COMPANY
We are a leading Internet retailer of designer fashion and home
accessories at discount prices. We sell over 350 brands of designer apparel,
accessories and home products at discounts up to 75% off retail value. In the 12
months of calendar year 2003, we offered over 80,000 different types of items
for sale in categories such as men's, women's and accessories as well as house
and home accessories. Since its inception, www.bluefly.com has served over
500,000 customers and shipped to over 20 countries.
We were incorporated in 1991 under the laws of the state of New York as
Pivot Corporation. In 1994, we changed our name to Pivot Rules, Inc. In May of
1997, we completed our initial public offering, and our common stock is listed
on the Nasdaq SmallCap Market under the symbol "BFLY." In May of 1998, our Board
of Directors approved the development of the Bluefly.com Web site (the "Web
site"). In June 1998, we discontinued our golf sportswear division, Pivot Rules,
in order to devote all of our energy and resources to building Bluefly.com. We
launched our Web site in September 1998. In October 1998, shortly after selling
the Pivot Rules brand and trademarks, we changed our name to Bluefly, Inc. to
match the name of our Web site. On February 2, 2001, we reincorporated in
Delaware through a merger with a wholly owned subsidiary. Our executive offices
are located at 42 West 39th Street, New York, New York 10018, and our telephone
number is (212) 944-8000. Our Internet address is www.bluefly.com.
RECENT DEVELOPMENTS
On January 12, 2004, we completed a private placement (the "New
Financing") pursuant to which we raised $5,000,000 through the sale of 1,543,209
shares of our common stock and warrants to purchase an additional 385,801 shares
of our common stock at an exercise price of $3.96 per share. The proceeds of the
New Financing are expected to be used for general corporate purposes. The offer
and sale of the shares of our common stock issued in the New Financing, and the
shares of our common stock issuable upon the exercise of the warrants issued in
the New Financing, are covered by this Prospectus.
In January 2004, we also extended the maturity dates on the Convertible
Promissory Notes issued to Soros in July and October 2003 (the "Notes"). The
Notes originally matured in January and April 2004, respectively, and the Notes
will now mature on March 1, 2005.
On December 4, 2003, we announced that our net sales for the month of
November 2003 increased by approximately 16%, to approximately $3.6 million from
more than $2.1 million for November 2002.
On November 25, 2003, we announced that we had opened a brick and mortar
outlet store in New York City for the Holiday season.
On November 13, 2003, we announced that our net sales for the month of
October 2003 increased by more than 63%, to approximately $4.1 million from
approximately $2.5 million for October 2002.
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RISK FACTORS
Before you invest in our common stock, you should be aware of various
risks, including those described below. You should carefully consider these risk
factors, together with all of the other information included in this prospectus,
including the documents incorporated in this prospectus by reference, before you
decide whether to purchase shares of our common stock. The risks set out below
may not be exhaustive.
We Have A History Of Losses And Expect That Losses Will Continue In The
Future. As of September 30, 2003, we had an accumulated deficit of $92,447,000.
We incurred net losses of $6,480,000 for the nine months ended September 30,
2003 and losses of $6,479,000 and $25,006,000 for the years ended December 31,
2002 and 2001, respectively. We have incurred substantial costs to develop our
Web site and infrastructure. In order to expand our business, we intend to
invest in sales, marketing, merchandising, operations, information systems, site
development and additional personnel to support these activities. We therefore
expect to continue to incur substantial operating losses for the foreseeable
future. Our ability to become profitable depends on our ability to generate and
sustain substantially higher net sales while maintaining reasonable expense
levels, both of which are uncertain. If we do achieve profitability, we cannot
be certain that we would be able to sustain or increase profitability on a
quarterly or annual basis in the future.
We Are Making A Substantial Investment In Our Business And May Need To
Raise Additional Funds. We may need additional financing to effect our business
plan. We raised $5 million in additional capital in January 2004. See "Recent
Developments." We anticipate, based on current plans and assumptions relating to
our operations, our loan facility, working capital and cash generated from
operations, should be sufficient to satisfy our cash requirements through the
end of fiscal 2004. However, we may seek additional debt and/or equity financing
in order to maximize the growth of our business. The environment for raising
investment capital has been difficult and there can be no assurance that
additional financing or other capital will be available upon terms acceptable to
us, or at all. The inability to obtain additional financing, if capital is
needed, would have a material adverse effect on our business, prospects,
financial condition and results of operations. See "- Certain Events Could
Result In Significant Dilution Of Your Ownership Of Common Stock."
We Have Granted Liens On Substantially All Of Our Assets. Under the
terms of our loan facility, our lender provides us with certain credit
accommodations, including loans and advances, factor-to-factor guarantees,
letters of credit in favor of suppliers or factors and purchases of payables
owed to our suppliers. Pursuant to the loan facility, we gave a first priority
lien to our lender on substantially all of our assets, including our cash
balances. In connection with the loan facility, we entered into a reimbursement
agreement with affiliates of Soros Private Equity Partners, LLC that
collectively own a majority of our capital stock (collectively, "Soros"),
pursuant to which Soros agreed to guarantee a portion of the loan facility, we
agreed to reimburse Soros for any amounts it paid to our lender pursuant to such
guarantee and we granted Soros a subordinated lien on substantially all of our
assets, including our cash balances, in order to secure our reimbursement
obligations. If we were unable to meet certain obligations under the loan
facility, our lender and Soros would be entitled, among other things, to sell
the assets on which liens have been granted to satisfy our obligations under the
loan facility and the reimbursement agreement. In addition, to the extent that
Soros is required to make any payments to our lender under its guarantee of our
obligations under the loan facility, we would be required to issue an additional
warrant to Soros, which could result in a significant dilution of your ownership
of our common stock. See "-- Certain Events Could Result In Significant Dilution
Of Your Ownership Of Our Common Stock."
We May Not Generate Sufficient Cash Flow To Pay Our Indebtedness Under
The Loan Facility. Our ability to make payments under our loan facility will
depend on our ability to generate cash in the future. To a certain extent, this
is subject to general economic, financial, competitive, legislative, regulatory
and other factors that are beyond our control. We cannot assure you that our
business will generate sufficient cash flow from operations to enable us to pay
our indebtedness under the loan facility throughout the term of the agreement. A
default under the loan facility could require us to issue an additional warrant
to Soros, which could result in a significant dilution of your ownership of our
common stock. See "Risk Factors - We Have Granted Liens On Substantially All Of
Our Assets" and "- Certain Events Could Result In Significant Dilution of Your
Ownership of Our Common Stock."
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We May Not Generate Sufficient Cash Flow To Comply With Our Financial
Covenants Under The Loan Facility. Our ability to comply with our financial
covenants under our loan facility depends on our ability to generate cash in the
future. To a certain extent, this is subject to general economic, financial,
competitive, legislative, regulatory and other factors that are beyond our
control. We cannot assure you that our business will generate sufficient cash
flow from operations to enable us to comply with our financial covenants under
the loan facility. A default under our loan facility could require us to issue
an additional warrant to Soros, which could result in a significant dilution of
your ownership of our common stock. See, "- We Have Granted Liens On
Substantially All Of Our Assets" and "- Certain Events Could Result In
Significant Dilution Of Your Ownership Of Our Common Stock."
Certain Events Could Result In Significant Dilution Of Your Ownership Of
Our Common Stock. As of January 13, 2004, there were outstanding options to
purchase 8,479,370 shares of our common stock issued under our 1997 and 2000
Stock Option Plans, warrants to purchase 981,644 shares of our common stock
issued to Soros, and additional warrants and options to purchase an aggregate of
337,500 shares of our common stock. The exercise of our outstanding options and
warrants would dilute the then existing stockholders' percentage ownership of
our stock, and any sales in the public market of our common stock underlying
such securities, including pursuant to this prospectus, could adversely affect
prevailing market price of our common stock.
Moreover, if our lender draws on Soros' guarantee of our loan facility
during the continuance of a default under the loan facility, or if at any time
the total amount outstanding under the loan facility exceeds 90% of the undrawn
amount of Soros' guarantee, we will be required to issue to Soros another
warrant (each a "Contingent Warrant") to purchase a number of shares of our
common stock equal to the quotient of (a) any amounts drawn under Soros'
guarantee and (b) 75% of the average closing price of our common stock on the
ten days preceding the date of issuance of such warrant. Each Contingent Warrant
will be exercisable for ten years from the date of issuance at an exercise price
equal to 75% of the average closing price of our common stock on the ten days
after the date of issuance.
Stockholders could also experience significant dilution as the result of
the conversion of, and/or anti-dilution adjustments to, our Series A, B, C, D
and E preferred stock. As of January 13, 2004: (i) the 460,000 shares of our
Series A preferred stock outstanding were convertible into an aggregate of
3,931,623 shares of our common stock (plus any shares of our common stock issued
upon conversion in payment of any accrued and unpaid dividends on our Series A
preferred stock); (ii) the 8,889,414 shares of our Series B preferred stock
outstanding were convertible into an aggregate of 27,370,037 shares of our
common stock (plus any shares of our common stock issued upon conversion in
payment of any accrued and unpaid dividends on our Series B preferred stock);
(iii) the 1,000 shares of our Series C preferred stock outstanding were
convertible into an aggregate of 1,315,788 shares of our common stock (plus any
shares of our common stock issued upon conversion in payment of any accrued and
unpaid dividends on our Series C preferred stock); (iv) the 7,136.548 shares of
our Series D preferred stock outstanding were convertible into an aggregate of
9,390,194 shares of our common stock (plus any shares of our common stock issued
upon conversion in payment of any accrued and unpaid dividends on our Series D
preferred stock); and (v) the 1,000 shares of our Series E preferred stock
outstanding were convertible into an aggregate of 1,315,788 shares of our common
stock (plus any shares of our common stock issued upon conversion in payment of
any accrued and unpaid dividends on our Series E preferred stock). Our Series B,
C, D and E Preferred Stock contain anti-dilution provisions pursuant to which,
subject to certain exceptions, in the event that we issue or sell our common
stock or new securities convertible into our common stock in the future for less
than $0.76 per share, the number of shares of our common stock to be issued upon
the conversion of such preferred stock would be increased to a number equal to
the face amount of such preferred stock divided by the price at which such
common stock or other new securities are sold.
In addition, Soros owns $4 million of convertible promissory notes
issued by us that bear interest at the rate of 12% per annum and are
convertible, at Soros' option, into our equity securities sold in any subsequent
round of financing at a price that is equal to the lowest price per share
accepted by any investor in such subsequent round of financing.
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Finally, stockholders could be subject to significant dilution to the
extent that we raise additional equity financing, as a result of both the
issuance of additional equity securities, the potential conversion of the
convertible promissory notes described above and the anti-dilution provisions of
our Series B, C, D and E preferred stock described above.
Our Limited Operating History Makes Forecasting Our Revenues Difficult.
Having launched Bluefly.com in September 1998, we have a limited operating
history and it is therefore difficult for us to forecast our revenues
accurately. We base our current and future expense levels and operating plans on
expected revenues, but in the short term a significant portion of our expenses
are fixed. Accordingly, we may be unable to adjust our spending in a timely
manner to compensate for any unexpected revenue shortfall. This inability could
have a negative impact on our operating results and cash flow in a given
quarter, and could also cause our operating results in some future quarter to
fall below the expectations of securities analysts and investors. In that event,
the trading price of our common stock could decline significantly.
We Purchase Product From Some Indirect Supply Sources, Which Increases
Our Risk of Litigation. We purchase merchandise both directly from brand owners
and indirectly from retailers and third party distributors. The purchase of
merchandise from parties other than the brand owners increases the risk that we
will mistakenly purchase and sell non-authentic or damaged goods. We have taken
steps to ensure that we sell only authentic, high quality name brand products
and to avoid selling any non-authentic or damaged goods. While we believe that
our procedures are effective, the possibility for error exists and therefore we
face potential liability under applicable laws, regulations, agreements and
orders for the sale of non authentic or damaged goods. Moreover, any claims by a
brand owner, with or without merit, could be time consuming, result in costly
litigation, generate bad publicity for us, and have a material adverse impact on
our business, prospects, financial condition and results of operations.
If Our Co-Location Facility Or Our Third Party Distribution Center
Fails, Our Business, Results of Operations and Financial Condition Will Be
Harmed. Our ability to receive and fulfill orders successfully and provide
high-quality customer service, largely depends on the efficient and
uninterrupted operation of our computer and communications hardware systems and
fulfillment center. Substantially all of our computer and communications
hardware is located at a single co-location facility in Secaucus, New Jersey.
Our inventory is held, and our customer orders are filled, at a third party
distribution center located in Martinsville, Virginia. These operations are
vulnerable to damage or interruption from fire, flood, power loss,
telecommunications failure, terrorist attacks, acts of war, break-ins,
earthquake and similar events. We do not presently have redundant systems in
multiple locations or a formal disaster recovery plan and our business
interruption insurance may be insufficient to compensate us for losses that may
occur. The occurrence of any of the foregoing could have a material adverse
effect on our business, prospects, financial condition and results of
operations.
Security Breaches To Our Systems And Database Could Harm Our Business. A
fundamental requirement for online commerce and communications is the secure
transmission of confidential information over public networks. We rely on
encryption and authentication technology licensed from third parties to provide
the security and authentication necessary to effect secure transmission of
confidential information, such as customer credit card numbers. In addition, we
maintain an extensive confidential database of customer profiles and transaction
information. There can be no assurance that advances in computer capabilities,
new discoveries in the field of cryptography, or other events or developments
will not result in a compromise or breach of the algorithms we use to protect
customer transaction and personal data contained in our customer database. A
party who is able to circumvent our security measures could misappropriate
proprietary information or cause interruptions in our operations. If any such
compromise of our security were to occur, it could have a material adverse
effect on our reputation, business, prospects, results of operations and
financial condition. In addition, we may be required to expend significant
capital and other resources to protect against such security breaches or to
alleviate problems caused by such breaches.
Brand Owners Could Establish Procedures To Limit Our Ability To Purchase
Products Indirectly. Brand owners have implemented, and are likely to continue
to implement, procedures to limit or control off-price retailers' ability to
purchase products indirectly. In addition, several brand owners in the U.S. have
distinctive legal rights rendering them the only legal importer of their
respective brands into the U.S. If we acquire such product indirectly from
distributors and other third parties who may not have complied with applicable
customs laws and regulations, such goods could be subject to seizure from our
inventory by U.S. Customs Service, and the importer
5
may have a civil action for damages against us. See "--We Do Not Have Long Term
Contracts With The Majority Of Our Vendors And Therefore The Availability Of
Merchandise Is At Risk."
Our Growth May Place A Significant Strain On Our Management And
Administrative Resources And Cause Disruptions In Our Business. Our historical
growth has placed, and any further growth is likely to continue to place, a
significant strain on our management and administrative resources. Any failure
to manage growth effectively could have a material adverse effect on our
business, financial condition and results of operations. To be successful, we
must continue to implement information management systems and improve our
operating, administrative, financial and accounting systems and controls. We
will also need to train new employees and maintain close coordination among our
executive, accounting, finance, marketing, merchandising, operations and
technology functions. In addition, as our workforce grows, our exposure to
potential employment liability issues increases, and we will need to continue to
improve our human resources functions in order to protect against such increased
exposure. Moreover, our business is dependent upon our ability to expand our
third-party fulfillment operations, customer service operations, technology
infrastructure, and inventory levels to accommodate increases in demand,
particularly during the peak holiday selling season. Our planned expansion
efforts in these areas could cause disruptions in our business. Any failure to
expand our third-party fulfillment operations, customer service operations,
technology infrastructure or inventory levels at the pace needed to support
customer demand could have a material adverse effect on our business, prospects,
financial condition and results of operations.
We Are Heavily Dependent On Third-Party Relationships. We are heavily
dependent upon our relationships with our fulfillment operations provider and
Web hosting provider, delivery companies like UPS and the United States Postal
Service, and credit card processing companies such as Paymentech and Cybersource
to service our customers' needs. To the extent that there is a slowdown in mail
service or package delivery services, whether as a result of labor difficulties,
terrorist activity or otherwise, our business, prospects, financial condition
and results of operations could be adversely impacted. The failure of our
fulfillment operations provider, credit card processors or Web hosting provider
to properly perform their services for us could have a material adverse effect
on our business, prospects, financial condition and results of operations. Our
business is also generally dependent upon our ability to obtain the services of
other persons and entities necessary for the development and maintenance of our
business. If we fail to obtain the services of any such person or entities upon
which we are dependent on satisfactory terms, or we are unable to replace such
relationship, it would have a material adverse impact on our business,
prospects, financial condition and results of operations.
We Are In Competition With Companies Much Larger Than Ourselves.
Electronic commerce generally and, in particular, the online retail apparel and
fashion accessories market, is a new, dynamic, high-growth market and is rapidly
changing and intensely competitive. Our competition for customers comes from a
variety of sources including:
. existing land based, full price retailers, such as Neiman
Marcus, Saks Fifth Avenue, Nordstrom, The Gap, and Macy's, which
are using the Internet to expand their channels of distribution;
. less established companies, such as eLuxury, which are building
their brands online;
. traditional direct marketers, such as L.L. Bean, Lands' End and
J. Crew;
. television direct marketers such as QVC; and
. traditional off price retail stores such as T.J. Maxx,
Marshalls, Ross, Filene's Basement and Loehmanns, which may or
may not use the Internet to grow their customer base.
We expect competition in our industry to intensify and believe that the
list of our competitors will grow. Many of our competitors and potential
competitors have longer operating histories, significantly greater resources,
greater brand name recognition and more firmly established supply relationships.
We believe that the principal competitive factors in our market include:
. brand recognition;
6
. merchandise selection;
. price;
. convenience;
. customer service;
. order delivery performance;
. site features; and
. content.
Although we believe we compare favorably with our competitors, we
recognize that this market is relatively new and is evolving rapidly. There can
be no assurance that we will be able to compete successfully against competitors
and future competitors, and competitive pressures faced by us may have a
material adverse effect on our business, prospects, financial condition and
results of operations.
We Do Not Have Long Term Contracts With The Majority Of Our Vendors And
Therefore The Availability Of Merchandise Is At Risk. Although we have
established and believe that we can maintain relationships with brand owners and
third-party distributors of merchandise who will offer competitive sources of
merchandise, there can be no assurance that we will be able to obtain the
quantity, selection or brand quality of items that we believe is necessary. We
have few agreements controlling the long-term availability of merchandise or the
continuation of particular pricing practices. Our contracts with suppliers
typically do not restrict such suppliers from selling products to other buyers.
There can be no assurance that our current suppliers will continue to sell
products to us on current terms or that we will be able to establish new or
otherwise extend current supply relationships to ensure product acquisitions in
a timely and efficient manner and on acceptable commercial terms. Our ability to
develop and maintain relationships with reputable suppliers and obtain high
quality merchandise is critical to our success. If we are unable to develop and
maintain relationships with suppliers that would allow us to obtain a sufficient
amount and variety of quality merchandise on acceptable commercial terms, our
business, prospects, financial condition and results of operation would be
materially adversely affected. See, " -- Brand Owners Could Establish Procedures
to Limit Our Ability to Purchase Products Indirectly."
We Need To Further Establish Brand Name Recognition. We believe that
further establishing, maintaining and enhancing our brand is a critical aspect
of our efforts to attract and expand our online traffic. The number of Internet
sites that offer competing services, many of which already have well established
brands in online services or the retail apparel industry generally, increases
the importance of establishing and maintaining brand name recognition. Promotion
of Bluefly.com will depend largely on our success in providing a high quality
online experience supported by a high level of customer service, which cannot be
assured. In addition, to attract and retain online users, and to promote and
maintain Bluefly.com in response to competitive pressures, we may find it
necessary to increase substantially our advertising and marketing expenditures.
If we are unable to provide high quality online services or customer support, or
otherwise fail to promote and maintain Bluefly.com, or if we incur excessive
expenses in an attempt to promote and maintain Bluefly.com, our business,
prospects, financial condition and results of operations would be materially
adversely affected.
We May Not Be Able To Implement Our Growth Strategy. Our future success,
and in particular our revenues and operating results, depend upon our ability to
successfully execute several key aspects of our business plan. We must
continually increase the dollar volume of transactions booked through
Bluefly.com, by generating significantly higher and continuously increasing
levels of traffic to Bluefly.com, increasing the percentage of visitors to our
online site who purchase products or increasing the amount purchased per visit,
or through some combination thereof. We must also achieve a high level of repeat
purchasers and/or new customers and gross margin. In addition, we must deliver a
high level of customer service and compelling content. There can be no assurance
that we will be effective in increasing:
7
. the net dollar volume of products purchased through Bluefly.com;
. traffic to Bluefly.com;
. the percentage of visitors who purchase products;
. the gross profit;
. the number of repeat purchasers; or
. the number of new customers.
The failure to do one or more of the foregoing would likely have a material
adverse effect on our business, prospects, financial condition and results of
operations.
Due To Our Use Of The Internet And Web Servers As Presentation Vehicles,
Our Success Depends On Continued Development And Maintenance Of These
Technologies By Other Companies. The Internet and other online services may not
be fully accepted as a viable commercial marketplace for a number of reasons,
including potentially inadequate development of the necessary network
infrastructure or delayed development of technologies that provide access to the
Internet and improve the performance of Internet services. To the extent that
the Internet and other online services, such as AOL, continue to experience
significant growth in their number of users, their frequency of use or an
increase in their bandwidth requirements, there can be no assurance that the
infrastructure for the Internet and other online services will have sufficient
bandwidth or other technical features to support the increased demands placed
upon them. In addition, the Internet or other online services could lose their
viability due to delays in the development or adoption of new standards and
protocols required to handle increased levels of Internet or other online
service activity, or due to increased governmental regulation. Changes in or
insufficient availability of telecommunications services to support the Internet
or other online services also could result in slower response times and
adversely affect usage of the Internet and other online services generally and
Bluefly.com in particular. If use of the Internet and other online services does
not continue to grow or grows more slowly than expected or if the infrastructure
for the Internet and other online services does not effectively support growth
that may occur, our business, prospects, financial condition and results of
operations would be materially adversely affected.
Unexpected Changes In Fashion Trends Can Affect Our Business. Fashion
trends can change rapidly, and our business is sensitive to such changes. There
can be no assurance that we will accurately anticipate shifts in fashion trends
and adjust our merchandise mix to appeal to changing consumer tastes in a timely
manner. If we misjudge the market for our products or are unsuccessful in
responding to changes in fashion trends or in market demand, we could experience
insufficient or excess inventory levels or higher markdowns, either of which
would have a material adverse effect on our business, financial condition and
results of operations.
We Will Be Subject To Cyclical Variations In The Apparel And E-Commerce
Markets. The apparel industry historically has been subject to substantial
cyclical variations. Furthermore Internet usage slows down in the summer months.
We and other apparel vendors rely on the expenditure of discretionary income for
most, if not all, sales. In the first three quarters of 2003, the retail apparel
market experienced sluggish growth, requiring many retailers to significantly
reduce prices and discount merchandise. While the fourth quarter of 2003 saw a
slight improvement in the retail apparel market, any future decrease in growth
rates or downturn, whether real or perceived, in economic conditions or
prospects could adversely affect consumer spending habits and, therefore, have a
material adverse effect on our business, prospects, financial condition and
results of operations. Alternatively, any improvement, whether real or
perceived, in economic conditions or prospects could adversely impact our
ability to acquire merchandise and, therefore, have a material adverse effect on
our business, prospects, financial condition and results of operations, as our
supply of merchandise is dependent on the inability of designers and retailers
to sell their merchandise in full-price venues. See "- We Do Not Have Long Term
Contracts With The Majority Of Our Vendors And Therefore The Availability of
Merchandise Is At Risk."
8
There Can Be No Assurance That Our Technology Systems Will Be Able To
Handle Increased Traffic; Implementation of Changes to Web Site. A key element
of our strategy is to generate a high volume of traffic on, and use of,
Bluefly.com. Accordingly, the satisfactory performance, reliability and
availability of Bluefly.com, transaction processing systems and network
infrastructure are critical to our reputation and our ability to attract and
retain customers, as well as maintain adequate customer service levels. Our
revenues will depend on the number of visitors who shop on Bluefly.com and the
volume of orders we can handle. Unavailability of our Web site or reduced order
fulfillment performance would reduce the volume of goods sold and could also
adversely affect consumer perception of our brand name. We may experience
periodic system interruptions from time to time. If there is a substantial
increase in the volume of traffic on Bluefly.com or the number of orders placed
by customers, we will be required to expand and upgrade further our technology,
transaction processing systems and network infrastructure. There can be no
assurance that we will be able to accurately project the rate or timing of
increases, if any, in the use of Bluefly.com or expand and upgrade our systems
and infrastructure to accommodate such increases on a timely basis. In addition,
we redesign and enhance various functions on our Web site on a regular basis,
and we may experience instability and performance issues as a result of these
changes.
We Operate In A Rapidly Changing, Highly Competitive Market And We May
Not Have Adequate Resources To Compete Successfully. To remain competitive, we
must continue to enhance and improve the responsiveness, functionality and
features of Bluefly.com. The online commerce industry is characterized by:
. rapid technological change;
. evolving user and customer requirements and preferences;
. frequent new product, service and technology introductions; and
. the emergence of new industry standards and practices.
Each of these characteristics could render the technology we use
obsolete. Our future success will depend, in part, on our ability to:
. license leading technologies useful in our business;
. enhance our Web site;
. develop new services and technologies that address the
increasingly sophisticated and varied needs of our prospective
customers; and
. respond to technological advances and emerging industry
standards and practices on a cost effective and timely basis.
If we are unable, for technical, legal, financial or other reasons, to
adapt in a timely manner in response to changing market conditions or customer
requirements, our business, prospects, financial condition and results of
operations would be materially adversely affected.
Our Business Will Suffer If Online Designer Apparel Commerce Is Not
Widely Accepted. Our future revenues and any future profits are dependent upon
the widespread acceptance and use of the Internet and other online services as
an effective medium of commerce by consumers. Rapid growth in the use of and
interest in the Web, the Internet and other online services is a recent
phenomenon, and there can be no assurance that acceptance and use will continue
to develop or that a sufficiently broad base of consumers will adopt, and
continue to use, the Internet and other online services as a medium of commerce
and, in particular, online designer apparel commerce. Demand and market
acceptance for recently introduced services and products over the Internet are
subject to a high level of uncertainty and there exist few proven services and
products. We rely, and will continue to rely, on consumers who have historically
used traditional means of commerce to purchase merchandise. Our success depends
on consumer acceptance and utilization of the Internet as a place to shop for
designer apparel.
9
We May Be Subject To Higher Return Rates. We recognize that purchases of
apparel and fashion accessories over the Internet may be subject to higher
return rates than traditional store bought merchandise. We have established a
liberal return policy in order to accommodate our customers and overcome any
hesitancy they may have with shopping via the Internet. If return rates are
higher than expected, our business, prospects, financial condition and results
of operations could be materially adversely affected.
Our Success Is Largely Dependent Upon Our Executive Personnel. We
believe our success will depend to a significant extent on the efforts and
abilities of our executive personnel. We have entered into employment agreements
with each of our executive officers. The employment agreements with our CEO and
CFO/COO expire on June 30, 2005. The employment agreement with our President
expires on March 1, 2007. We maintain a $1,200,000 key person life insurance
policy on our Chief Executive Officer. The loss of the services of any of our
executive officers could have a material adverse effect on our business,
prospects, financial condition and results of operations.
Our Success Is Dependent Upon Our Ability To Attract New Key Personnel.
Our operations will also depend to a great extent on our ability to attract new
key personnel with relevant experience and retain existing key personnel in the
future. The market for qualified personnel is extremely competitive. Our failure
to attract additional qualified employees could have a material adverse effect
on our business, prospects, financial condition and results of operations.
There Are Inherent Risks Involved In Expanding Our Operations. We may
choose to expand our operations by developing new Web sites, promoting new or
complementary products or sales formats, expanding the breadth and depth of
products and services offered, expanding our market presence through
relationships with third parties, adopting non-Internet based channels for
distributing our products, or consummating acquisitions or investments.
Expansion of our operations in this manner would require significant additional
expenses and development, operations and editorial resources and would strain
our management, financial and operational resources. There can be no assurance
that we would be able to expand our efforts and operations in a cost effective
or timely manner or that any such efforts would increase overall market
acceptance. Furthermore, any new business or Web site that is not favorably
received by consumer or trade customers could damage our reputation.
We May Be Liable For Infringing The Intellectual Property Rights Of
Others. Third parties may assert infringement claims against us. From time to
time in the ordinary course of business we have been, and we expect to continue
to be, subject to claims alleging infringement of the trademarks and other
intellectual property rights of third parties. These claims and any resulting
litigation, if it occurs, could subject us to significant liability for damages.
In addition, even if we prevail, litigation could be time consuming and
expensive and could result in the diversion of our time and attention. Any
claims from third parties may also result in limitations on our ability to use
the intellectual property subject to these claims unless we are able to enter
into agreements with the third parties making these claims.
We May Be Liable for Product Liability Claims. We sell products
manufactured by third parties, some of which may be defective. If any product
that we sell were to cause physical injury or injury to property, the injured
party or parties could bring claims against us as the retailer of the product.
Our insurance coverage may not be adequate to cover every claim that could be
asserted. If a successful claim were brought against us in excess of our
insurance coverage, it could have a material adverse effect on our business,
prospects, financial condition and results of operations. Unsuccessful claims
could result in the expenditure of funds and management time and could have a
negative impact on our business.
We Cannot Guarantee The Protection Of Our Intellectual Property. Our
intellectual property is critical to our success, and we rely on trademark,
copyright, domain names and trade secret protection to protect our proprietary
rights. Third parties may infringe or misappropriate our trademarks or other
proprietary rights, which could have a material adverse effect on our business,
prospects, results of operations or financial condition. While we enter into
confidentiality agreements with our employees, consultants and strategic
partners and generally control access to and distribution of our proprietary
information, the steps we have taken to protect our proprietary rights may not
prevent misappropriation. We are pursuing registration of various trademarks,
service marks and domain names in the United States and abroad. Effective
trademark, copyright and trade secret protection may not be available in every
country, and there can be no assurance that the United States or foreign
jurisdictions will afford us
10
any protection for our intellectual property. There also can be no assurance
that any of our intellectual property rights will not be challenged, invalidated
or circumvented. In addition, we do not know whether we will be able to defend
our proprietary rights since the validity, enforceability and scope of
protection of proprietary rights in Internet related industries is uncertain and
still evolving. Moreover, even to the extent that we are successful in defending
our rights, we could incur substantial costs in doing so.
Our Business Could Be Harmed By Consumers' Concerns About The Security
of Transactions Over the Internet. Concerns over the security of transactions
conducted on the Internet and commercial online services, the increase in
identity theft and the privacy of users may also inhibit the growth of the
Internet and commercial online services, especially as a means of conducting
commercial transactions. Moreover, although we have developed systems and
processes that are designed to protect consumer information and prevent
fraudulent credit card transactions and other security breaches, failure to
mitigate such fraud or breaches could have a material adverse effect on our
business, prospects, financial condition and results of operations.
We Face Legal Uncertainties Relating To The Internet In General and To
Our Industry In Particular And May Become Subject To Costly Government
Regulation. We are not currently subject to direct regulation by any domestic or
foreign governmental agency, other than regulations applicable to businesses
generally, and laws or regulations directly applicable to online commerce.
However, it is possible that laws and regulations may be adopted that would
apply to the Internet and other online services. Furthermore, the growth and
development of the market for online commerce may prompt calls for more
stringent consumer protection laws that may impose additional burdens on those
companies conducting business online. The adoption of any additional laws or
regulations may decrease the growth of the Internet or other online services,
which could, in turn, decrease the demand for our products and services and
increase our cost of doing business, or otherwise have a material adverse effect
on our business, prospects, financial condition and results of operations.
The applicability to the Internet of existing laws in various
jurisdictions governing issues such as property ownership, sales and other
taxes, libel and personal privacy is uncertain and may take years to resolve.
Any such new legislation or regulation, the application of laws and regulations
from jurisdictions whose laws do not currently apply to our business, or the
application of existing laws and regulations to the Internet and online commerce
could have a material adverse effect on our business, prospects, financial
condition and results of operations. If we were alleged to have violated
federal, state or foreign, civil or criminal law, even if we could successfully
defend such claims, it could have a material adverse effect on our business,
prospects, financial condition and results of operations.
We Face Uncertainties Relating To Sales And Other Taxes. We are not
currently required to pay sales or other similar taxes in respect of shipments
of goods into states other than Virginia, New Jersey and New York. However, one
or more states may seek to impose sales tax collection obligations on out of
state companies such as our company that engage in online commerce. In addition,
any new operation in states outside Virginia, New Jersey and New York could
subject shipments into such states to state sales taxes under current or future
laws. A successful assertion by one or more states or any foreign country that
the sale of merchandise by us is subject to sales or other taxes, could have a
material adverse effect on our business, prospects, financial condition and
results of operations.
Soros Owns A Majority Of Our Stock. As of January 13, 2004, through its
holdings of our common stock, as well as our preferred stock, and warrants
convertible into our common stock, Soros beneficially owned, in the aggregate,
approximately 87% of our common stock. The holders of our preferred stock vote
on an "as converted" basis with the holders of our common stock. By virtue of
its ownership of our preferred stock, Soros has the right to appoint two
designees to our Board of Directors, each of whom has seven votes on any matter
voted upon by our Board of Directors. Collectively, these two designees have 14
out of 20 possible votes on each matter voted upon by our Board of Directors. In
addition, we are required to obtain the approval of holders of our preferred
stock prior to taking certain actions. The holders of our preferred stock have
certain pre-emptive rights to participate in future equity financings and
certain anti-dilution rights that could result in the issuance of additional
securities to such holders. In view of their large percentage of ownership and
rights as the holders of our preferred stock, Soros effectively controls our
management and policies, such as the election of our directors, the appointment
of new management and the approval of any other action requiring the approval of
our stockholders, including any amendments to our certificate of incorporation,
a sale of all or substantially all of our assets or a merger. In addition,
11
Soros has demand registration rights with respect to the shares of our common
stock that it beneficially owns. Any decision by Soros to exercise such
registration rights and to sell a significant amount of our shares in the public
market, could have an adverse effect on the price of our common stock. See "-
Certain Events Could Result In Significant Dilution of Your Ownership Of Common
Stock."
Change Of Control Covenant And Liquidation Preference of Preferred
Stock. We have agreed with Soros, that for so long as any shares of our shares
of preferred stock held by it are outstanding, we will not take any action to
approve or otherwise facilitate any merger, consolidation or change of control,
unless provisions have been made for the holders of such preferred stock to
receive from the acquirer an amount in cash equal to the respective aggregate
liquidation preferences of such preferred stock. The aggregate liquidation
preference of our preferred stock is equal to the greater of (i) approximately
$48,300,000 (plus any accrued and unpaid dividends) and (ii) the amount that the
holders of shares of our preferred stock would receive if they were to convert
such shares into shares of our common stock immediately prior to liquidation.
The Holders Of Our Common Stock May Be Adversely Affected By The Rights
Of Holders Of Preferred Stock That May Be Issued In The Future. Our certificate
of incorporation and by laws, as amended, contain certain provisions that may
delay, defer or prevent a takeover. Our Board of Directors has the authority to
issue up to 15,528,350 additional shares of preferred stock, and to determine
the price, rights, preferences and restrictions, including voting rights, of
those shares, without any further vote or action by the stockholders.
Accordingly, our Board of Directors is empowered, without approval of the
holders of our common stock, to issue preferred stock, for any reason and at any
time, with such rates of dividends, redemption provisions, liquidation
preferences, voting rights, conversion privileges and other characteristics as
they may deem necessary. The rights of holders of our common stock will be
subject to, and may be adversely affected by, the rights of holders of any
preferred stock that may be issued in the future.
USE OF PROCEEDS
The proceeds from the sale of the common stock offered pursuant to this
prospectus are solely for the account of the selling stockholders. Accordingly,
we will not receive any proceeds from the sale of the shares from the selling
stockholders. However we would receive the proceeds of any exercise of the
warrants held by these selling stockholders to the extent that such warrants are
exercised for cash. In the event that all such warrants were exercised for cash,
the aggregate proceeds received by us would be approximately $2,349,000. There
can be no assurance concerning the number or the timing of the exercise of such
warrants by the selling stockholders at this date. In addition, because certain
of the warrants contain provisions allowing for a cashless exercise under
certain circumstances, there can be no assurance that we would receive all such
proceeds even if all such warrants are exercised.
SELLING STOCKHOLDERS
The following table sets forth certain information known to us with
respect to the beneficial ownership of our common stock by the selling
stockholders, as of January 13, 2004. The following table assumes that the
selling stockholders sell all of their shares. We are unable to determine the
exact number of shares that will actually be sold.
We have agreed to indemnify the selling stockholders for certain
liabilities arising out of the registration statement of which this prospectus
is a part and, with respect to the selling stockholders that were investors in
the New Financing, have also agreed to indemnify them for certain losses arising
out of any breach of our representations, warranties and covenants in the common
stock and warrant purchase agreement that we entered into with them in
connection with the New Financing. In addition, we have had the following
relationships with certain of the selling stockholders during the past three
years: (a) we paid Enable Capital, LLC, an affiliate of Enable Growth Partners,
LP, a fee of $194,000 in connection with the New Financing (in addition, we
entered into an agreement with Enable Capital, LLC, wherein Enable Capital, LLC
was a non-exclusive placement agent with respect to a prior transaction that was
never consummated); (b) Scott and James Ressler are principals of Ashley Reed
Trading, Inc. which has been one of our suppliers of inventory for the past
three years and received the warrants currently held by the Resslers in return
for an agreement to provide preferred pricing on inventory that we purchase from
Ashley Reed, Inc.; (c) The Wall Street Group, Inc. provided investor relations
services to us from March 2001 to September 2001 and received its stock option
as partial consideration for such services; and (d) Quantum Industrial Partners
LDC and SFM Domestic Investments LLC are part of the Soros group that owns a
12
majority of our capital stock, has the right to designate two members of our
Board of Directors and has entered into various financing arrangements with us
as described more fully in "Risk Factors."
Except as described above and in the documents incorporated by reference
into this prospectus, none of the selling shareholders listed in the table have
held any position or office or have had a material relationship with us or any
of our affiliates within the past three years, other than as described above,
elsewhere in this Prospectus or in the documents incorporated herein by
reference.
The percentage of shares beneficially owned is based on 14,471,375
shares outstanding at January 13, 2004 determined in accordance with Rule 13d-3
of the Exchange Act, and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under such rule, beneficial
ownership includes any shares as to which the individual has sole or shared
voting power or investment power and also any shares which the individual has
the right to acquire within sixty days of such date through the exercise of any
warrants or other right. Unless otherwise indicated in the footnotes, each
person has sole voting and investment power (or shares such powers with his or
her spouse) with respect to the shares shown as beneficially owned.
SHARES BENEFICIALLY
NUMBER OF SHARES BENEFICIALLY OWNED AFTER OFFERING (Assuming
OWNED PRIOR TO THE OFFERING All Shares Being Offered Are Sold)
----------------------------- SHARES BEING ----------------------------------
NAME OF SELLING STOCKHOLDER NUMBER PERCENT OFFERED NUMBER PERCENT
---------------------------------------- ----------- ------------ ------------ ---------------- ---------------
Longview Fund, LP....................... 385,802 (1) 2.65% 385,802 (1) -- --
Longview Equity Fund, LP................ 771,605 (2) 5.28% 771,605 (2) -- --
Longview International Equity Fund, LP.. 347,222 (3) 2.39% 347,222 (3) -- --
Alpha Capital Aktiengesellscft.......... 154,321 (4) 1.06% 154,321 (4) -- --
Gamma Opportunity Capital Partners, LP.. 77,160 (5) * 77,160 (5) -- --
Enable Growth Partners, LP.............. 57,870 (6) * 57,870 (6) -- --
Genesis Microcap Inc.................... 67,515 (7) * 67,515 (7) -- --
Barucha LLC............................. 28,935 (8) * 28,935 (8) -- --
J.M. Hull Associates, LP................ 38,580 (9) * 38,580 (9) -- --
The Wall Street Group, Inc. ............ 37,500 (10) * 37,500 (10) -- --
Scott Ressler........................... 150,000 (11) 1.03% 150,000 (11) -- --
James Ressler........................... 150,000 (12) 1.03% 150,000 (12) -- --
Quantum Industrial Partners LDC......... 48,188,318 (13) 83.99% 1,452,472 (14) 46,735,846 81.46%
SFM Domestic Investments LLC............ 1,576,833 (15) 9.93% 47,528 (16) 1,529,305 9.63%
TOTAL................................. 52,031,661 87.45% 3,766,510 48,265,151 82.12%
* Represents beneficial ownership of less than 1% of common stock.
1. Includes warrant to purchase 77,160 shares at a price of $3.96 per share.
2. Includes warrant to purchase 154,321 shares at a price of $3.96 per share.
3. Includes warrant to purchase 69,444 shares at a price of $3.96 per share.
4. Includes warrant to purchase 30,864 shares at a price of $3.96 per share.
5. Includes warrant to purchase 15,432 shares at a price of $3.96 per share.
6. Includes warrant to purchase 11,574 shares at a price of $3.96 per share.
7. Includes warrant to purchase 13,503 shares at a price of $3.96 per share.
8. Includes warrant to purchase 5,787 shares at a price of $3.96 per share.
9. Includes warrant to purchase 7,716 shares at a price of $3.96 per share.
10. Includes option to purchase 37,500 shares at a price of $1.34 per share.
11. Includes warrant to purchase 25,000 shares at a price of $3.72 per share and
warrant to purchase 125,000 shares at a price of $2.34 per share.
12. Includes warrant to purchase 25,000 shares at a price of $3.72 per share and
warrant to purchase 125,000 shares at a price of $2.34 per share.
13. Represents: 3,806,923 shares of our common stock issuable upon conversion of
445,410 shares our Series A preferred stock; 26,503,095 shares of our common
stock issuable upon conversion of 8,607,843 shares of our Series B preferred
stock; 1,274,078 shares of our common stock issuable upon conversion of
968.3 shares of our Series C preferred stock; 9,092,525 shares of our common
stock issuable upon conversion of 6,910.319 shares of our Series D preferred
stock; 5,287,082 shares of our common stock; 1,274,078 shares of our common
13
stock issuable upon conversion of 968.3 shares of our Series E preferred
stock; and 950,537 shares of our common stock issuable upon exercise of
warrants.
14. Represents 1,452,472 shares of our common stock issuable upon conversion of
shares of our Series A Preferred Stock.
15. Represents: 124,700 shares of our common stock issuable upon conversion of
14,590 shares of our Series A preferred stock; 866,942 shares of our common
stock issuable upon conversion of 281,571 shares of our Series B preferred
stock; 41,710 shares of our common stock issuable upon conversion of 31.7
shares of our Series C preferred stock; 297,669 shares of our common stock
issuable upon conversion of 226.229 shares of our Series D preferred stock;
172,995 shares of our common stock; 41,710 shares of our common stock
issuable upon conversion of 31.7 shares of our Series E preferred stock; and
31,107 shares of our common stock issuable upon exercise of warrants.
16. Represents 47,528 shares of our common stock issuable upon conversion of
shares of our Series A Preferred Stock.
We assume that the selling stockholders will seek to sell all of the shares
offered under this prospectus, but we are unable to determine the exact number
of shares that will actually be sold or whether and to what extent any of the
selling stockholders will exercise any warrants or options that they may hold.
PLAN OF DISTRIBUTION
We are registering the resale of the shares of our common stock on
behalf of the selling stockholders'. As used in this prospectus, the term
selling stockholders includes pledgees, transferees or other
successors-in-interest selling shares received from the selling stockholders as
pledgors, borrowers or in connection with other non-sale-related transfers after
the date of this prospectus. This prospectus may also be used by transferees of
the selling stockholders, including broker-dealers or other transferees who
borrow or purchase the shares to settle or close out short sales of shares of
common stock. The selling stockholders will act independently of us in making
decisions with respect to the timing, manner, and size of each sale or non-sale
related transfer. We will not receive any of the proceeds of this offering.
However we would receive the proceeds of any exercise of the warrants held by
these selling stockholders to the extent that such warrants are exercised for
cash. In the event that all such warrants were exercised for cash, the aggregate
proceeds received by us would be approximately $2,349,000. There can be no
assurance concerning the number or the timing of the exercise of such warrants
by the selling stockholders at this date. In addition, because certain of the
warrants contain provisions allowing for a cashless exercise under certain
circumstances, there can be no assurance that we would receive all such proceeds
even if all such warrants are exercised.
This prospectus covers the selling stockholders resale of up to
3,766,510 shares of common stock.
The shares of our common stock covered by this prospectus may be offered
and sold from time to time by the selling stockholders. The selling stockholders
may sell the shares on the Nasdaq SmallCap Market, or in private sales at
negotiated prices.
The selling shareholders may sell shares of common stock from time to
time in one or more transactions:
. at fixed prices that may be changed;
. at market prices prevailing at the time of sale; or
. at prices related to such prevailing market prices or at
negotiated prices.
The selling shareholders may offer their shares of common stock in one
or more of the following transactions:
. on any national securities exchange or quotation service on
which the common stock may be listed or quoted at the time of
sale, including the Nasdaq SmallCap Market;
. in the over-the-counter market;
. in privately-negotiated transactions;
. through options;
14
. by pledge to secure debts and other obligations;
. by a combination of the above methods of sale; or
. to cover short sales made pursuant to this prospectus.
To the extent required, this prospectus may be amended or supplemented
from time to time to describe a specific plan of distribution. In effecting
sales, broker-dealers engaged by the selling stockholders may arrange for other
broker- dealers to participate in the resales.
The selling stockholders may enter into hedging transactions with
broker-dealers in connection with distributions of the shares or otherwise. In
such transactions, broker-dealers or other financial institutions may engage in
short sales of the shares in the course of hedging the positions they assume
with selling stockholders. The selling stockholders may also sell shares short
and deliver the shares to close out such short positions. The selling
stockholders may also enter into option or other transactions with
broker-dealers, which require the delivery to the broker-dealer of the shares.
The broker-dealer may then resell or otherwise transfer such shares pursuant to
this prospectus. The selling stockholders may also pledge or loan the shares to
a broker-dealer. The broker-dealer may sell the shares so loaned, or upon a
default, the broker-dealer may sell the pledged shares pursuant to this
prospectus. In addition, any shares that qualify for sale pursuant to Rule 144
may be sold under Rule 144 rather than pursuant to this prospectus.
In effecting sales, broker-dealers or agents engaged by the selling
stockholders may arrange for other broker-dealers or agents to participate.
Broker-dealers or agents may receive compensation in the form of commissions,
discounts or concessions from selling stockholders. Broker-dealers or agents may
also receive compensation from the purchasers of the shares for whom they act as
agents or to whom they sell as principals, or both. We will pay all expenses
incident to the offering and sale of the shares to the public other than any
commissions and discounts of underwriters, dealers or agents and any transfer
taxes.
The selling stockholders and any underwriter, broker-dealer or agent who
participate in the distribution of such shares may be deemed to be underwriters
under the Securities Act of 1933, and any discount, commission or concession
received by such persons might be deemed to be an underwriting discount or
commission under the Securities Act of 1933.
In order to comply with the securities laws of certain states, if
applicable, the shares must be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
We have advised the selling stockholders that the anti-manipulation
rules of Regulation M under the Exchange Act may apply to sales of shares in the
market and to the activities of the selling stockholders and their affiliates.
In addition, we will make copies of this prospectus available to the selling
stockholders and we have informed them of the need for delivery of copies of
this prospectus to purchasers at or prior to the time of any sale of the shares
offered hereby. The selling stockholders may indemnify any broker-dealer that
participates in transactions involving the sale of the shares against certain
liabilities, including liabilities arising under the Securities Act of 1933.
At the time a particular offer of shares is made, if required, a
prospectus supplement will be distributed that will set forth the number of
shares being offered and the terms of the offering, including the name of any
underwriter, dealer or agent, the purchase price paid by any underwriter, any
discount, commission and other item constituting compensation, any discount,
commission or concession allowed or reallowed or paid to any dealer, and the
proposed selling price to the public.
EXPERTS
The consolidated financial statements as of December 31, 2002 and 2001
and for each of the three years in the period ended December 31, 2002
incorporated by reference in this prospectus have been so incorporated in
15
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon by Swidler Berlin Shereff Friedman, LLP, our counsel.
16
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The Registrant will pay all expenses incident to the offering and sale
to the public of the shares being registered other than any commissions and
discounts of underwriters, dealers or agents and any transfer taxes. Such
expenses are set forth in the following table. All of the amounts shown are
estimates except the Securities and Exchange Commission (SEC) registration fee.
SEC registration fee $ 1,163.68
Legal fees and expenses 25,000.00
Accounting fees and expenses 30,000.00
Miscellaneous expenses 10,000.00
----------
Total $66,163.68
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The indemnification of officers and directors of the Registrant is
governed by Section 145 of the General Corporation Law of the State of Delaware
(the "DGCL") and the Certificate of Incorporation (the "Charter") and By-Laws
(the "By-laws") of the Registrant. Subsection (a) of DGCL Section 145 empowers a
corporation to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that the person is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by the person in
connection with such action, suit or proceeding if the person acted in good
faith and in a manner the person reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe the person's conduct was
unlawful.
Subsection (b) of DGCL Section 145 empowers a corporation to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that the
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or settlement
of such action or suit if the person acted in good faith and in a manner the
person reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Delaware Court
of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
DGCL Section 145 further provides that to the extent that a present or
former director or officer is successful, on the merits or otherwise, in the
defense of any action, suit or proceeding referred to in subsections (a) and (b)
of Section 145, or in defense of any claim, issue or matter therein, such person
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith. In all cases in
which indemnification is permitted under subsections (a) and (b) of Section 145
(unless ordered by a court), it shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
present or former director, officer, employee or agent is proper in the
circumstances because the applicable standard of conduct has been met by the
party to be indemnified. Such determination must be made, with respect to a
person who is a director or officer at the time of such determination, (1) by a
majority vote of the directors who are
II-1
not parties to such action, suit or proceeding, even though less than a quorum,
or (2) by a committee of such directors designated by majority vote of such
directors, even though less than a quorum, or (3) if there are no such
directors, or if such directors so direct, by independent legal counsel in a
written opinion, or (4) by the stockholders.
The statute authorizes the corporation to pay expenses incurred by an
officer or director in advance of the final disposition of a proceeding upon
receipt of an undertaking by or on behalf of the person to whom the advance will
be made, to repay the advances if it shall ultimately be determined that he was
not entitled to indemnification. DGCL Section 145 also provides that
indemnification and advancement of expenses permitted thereunder are not to be
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any By-law, agreement, vote of
stockholders or disinterested directors, or otherwise. DGCL Section 145 also
authorizes the corporation to purchase and maintain liability insurance on
behalf of its directors, officers, employees and agents regardless of whether
the corporation would have the statutory power to indemnify such persons against
the liabilities insured.
The Charter provides that no director of the Registrant shall be
personally liable to the Registrant or its stockholders for monetary damages for
breach of fiduciary duty as a director, provided that this provision shall not
eliminate or limit the liability of a director (a) for any breach of such
person's duty of loyalty to the Registrant or its stockholders, (b) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (c) under section 174 of the DGCL or (d) for any transaction
from which the director derived any improper personal benefits.
The Charter and By-laws also provide that, to the extent not prohibited
by law, the Registrant shall indemnify any person who is or was made, or
threatened to be made, a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
including, without limitation, an action by or in the right of the Registrant to
procure a judgment in its favor, by reason of the fact that such person, or a
person of whom such person is the legal representative, is or was a director or
officer of the Registrant, or, at the request of the Registrant, is or was
serving as a director or officer of any other corporation or in a capacity with
comparable authority or responsibilities for any partnership, joint venture,
trust, employee benefit plan or other enterprise, against any judgments, fines,
penalties, excise taxes, amounts paid in settlement and costs, charges and
expenses (including attorneys' fees, disbursements and other charges).
Additionally, the Charter and By-laws provide that the Registrant shall
reimburse or advance to any director or officer entitled to indemnification the
funds necessary for payment of expenses, including attorneys' fees and
disbursements, incurred in connection with any Proceeding, in advance of the
final disposition of such Proceeding and that such any such advancement shall,
if required by the DGCL, by paid by the Registrant only upon receipt by the
Registrant of an undertaking, by or on behalf of such director or officer to
repay any amount so advanced if it shall ultimately be determined by final
judicial decision from which there is no further right of appeal that such
director or officer is not entitled to be indemnified for such expenses.
The Charter and By-laws authorize the Registrant to purchase and
maintain insurance on behalf of any person who is or was a director or officer
of the Registrant, or is or was serving at the request of the Registrant as a
director or officer of any other entity, against any liability asserted against
such person and incurred by such person in any such capacity, or arising out of
such person's status as such, whether or not the Registrant would have the power
to indemnify such person against such liability under applicable provisions of
the Restated Certificate of Incorporation, the by-laws of the Registrant or
under Section 145 of the DGCL or any other provision of law.
ITEM 16. EXHIBITS
5.1 Opinion of Swidler Berlin Shereff Friedman, LLP
23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
23.2 Consent of Counsel (included as Exhibit 5.1).
24.1 Power of Attorney (included in signature page).
II-2
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being
made, a post- effective amendment to this registration statement:
1. To include any prospectus required by Section 10(a)(3)
of the Securities Act;
2. To reflect in the prospectus any facts or events arising
after the effective date of the registration statement
(or the most recent post-effective amendment thereof)
which, individually, or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would
not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration
statement; and
3. To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
provided, however, that the undertakings set forth in clauses
(i) and (ii) above shall not apply if the information required
to be included in a post- effective amendment by these clauses
is contained in periodic reports filed by the registrant
pursuant to Section 13 or Section 15(d) of the Exchange Act that
are incorporated by reference in this registration statement.
2. That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. To remove from registration by means of a post-effective
amendment any of the securities being registered, which remain, unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on January 16, 2004.
BLUEFLY, INC.
By: /s/ E. Kenneth Seiff
---------------------------------
E. Kenneth Seiff
Chief Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints E. Kenneth Seiff and Patrick C.
Barry, and each of them, his true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, for him and in his name, place,
and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) and additions to this Registration Statement on Form
S-3, and any subsequent registration statements pursuant to Rule 462(b) under
the Securities Act of 1933, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or his substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ E. Kenneth Seiff Chief Executive Officer January 16, 2004
--------------------------- (Principal Executive Officer)
E. Kenneth Seiff
/s/ Patrick C. Barry Chief Financial Officer January 16, 2004
--------------------------- (Principal Financial and
Patrick C. Barry Accounting Officer)
/s/ Melissa Payner-Gregor President and Director January 16, 2004
---------------------------
/s/ Melissa Payner-Gregor
/s/ Josephine Esquivel Director January 16, 2004
---------------------------
/s/ Josephine Esquivel
/s/ Alan Kane Director January 16, 2004
---------------------------
/s/ Alan Kane
/s/ Martin Miller Director January 16, 2004
---------------------------
/s/ Martin Miller
/s/ Neal Moszkowski Director January 16, 2004
---------------------------
/s/ Neal Moszkowski
/s/ Robert G. Stevens Director January 16, 2004
---------------------------
/s/ Robert G. Stevens
/s/ David Wassong Director January 16, 2004
---------------------------
/s/ David Wassong
II-4
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION
5.1 Opinion of Swidler Berlin Shereff Friedman, LLP
23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
23.2 Consent of Counsel (included as Exhibit 5.1).
24.1 Power of Attorney (included in signature page).