================================================================================
REGISTRATION NO. 333-136866
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------
BLUEFLY, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3612110
(State or Other Jurisdiction (I.R.S. Employer
of 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)
Melissa Payner-Gregor
Chief Executive Officer
Bluefly, Inc.
42 West 39th Street
New York, New York 10018
(212) 944-8000
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
----------
Copies to:
Richard A. Goldberg, Esq.
Dechert LLP
30 Rockefeller Plaza
New York, New York 10112
(212) 698-3500
----------
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 this Form is a registration statement pursuant to General Instruction I.D. or
a post-effective amendment thereto that shall become effective upon filing with
the Commission pursuant to Rule 462(e) under the Securities Act, check the
following box. [ ]
If this Form is a post-effective amendment to a registration statement filed
pursuant to General Instruction I.D. filed to register additional securities or
additional classes of securities pursuant to Rule 413(b) under the Securities
Act, check the following box. [ ]
================================================================================
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.
EXPLANATORY NOTE
This Amendment No. 2 to the Registrant's Registration Statement on Form
S-3 (File No. 333-136866) is being filed to incorporate by reference the
Registrant's Current Report on Form 8-K filed on October 3, 2006, and to file an
updated Exhibit 5.1. No other changes have been made to the prospectus included
in this Registration Statement.
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 OCTOBER 18, 2006
PROSPECTUS
111,372,291 SHARES OF COMMON STOCK
BLUEFLY, INC.
This prospectus relates to the resale, from time to time, of up to
111,372,291 shares of our common stock by the selling stockholders listed in
this prospectus under the section "Selling Stockholders."
The prices at which the selling stockholders may sell the shares will
be determined by the prevailing market price for the shares or in negotiated
transactions. We will not receive any of the proceeds from the sale of the
shares by the selling stockholders. However, as described in greater detail in
this prospectus under the section "Use of Proceeds," we may receive the proceeds
from the exercise of warrants issued to certain of the selling stockholders.
Our common stock is quoted on the Nasdaq Capital Market under the
symbol "BFLY," and on the Boston Stock Exchange under the symbol "BFL." On
October 16, 2006, the last sale price of our common stock was $0.96 per share.
THE SHARES OFFERED IN THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK.
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS COMMENCING ON PAGE 3 IN
DETERMINING WHETHER TO PURCHASE THE SHARES.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 2006
TABLE OF CONTENTS
THE COMPANY....................................................................2
RECENT DEVELOPMENTS............................................................3
RISK FACTORS...................................................................4
FORWARD-LOOKING STATEMENTS....................................................11
USE OF PROCEEDS...............................................................11
SELLING STOCKHOLDERS..........................................................11
PLAN OF DISTRIBUTION..........................................................16
EXPERTS.......................................................................18
LEGAL MATTERS.................................................................18
WHERE YOU CAN FIND MORE INFORMATION...........................................18
DOCUMENTS INCORPORATED BY REFERENCE...........................................18
We have not authorized any person to make a statement that differs from
what is in this prospectus. If any person does make a statement that differs
from what is in this prospectus, you should not rely on it. This prospectus is
not an offer to sell, nor is it seeking an offer to buy, these securities in any
state in which the offer or sale is not permitted. The information in this
prospectus is complete and accurate as of its date, but the information may
change after that date.
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in or
incorporated by reference in this prospectus. If given or made, such information
or representations must not be relied upon as having been authorized by us or
the selling stockholders. This prospectus does not constitute an offer to sell,
or a solicitation of an offer to sell, or a solicitation of an offer to buy, any
securities other than the securities covered by this prospectus, nor does it
constitute an offer to, or solicitation of, any person in any jurisdiction
where, or to any person to whom, it is unlawful to make such offer or
solicitation. Neither the delivery of this prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that there has
been no change in our affairs since the date as of which information is given in
this prospectus.
PROSPECTUS SUMMARY
This summary does not contain all of the information you should
consider before investing in our common stock. Prior to deciding to invest in
our common stock, you should read this entire prospectus carefully, including
the section entitled "Risk Factors" and other information incorporated herein by
reference. Unless otherwise specified, references in this prospectus to the
terms "Company," "Bluefly," "Registrant," "we," "us," and "our" in refer to
Bluefly, Inc. and its subsidiary.
THE COMPANY
We are a leading online retailer of designer brands, fashion trends and
superior value. During 2005, we offered over 37,000 different styles for sale in
categories such as men's, women's and accessories as well as house and home
accessories, from over 350 brands at discounts up to 75% off retail value. We
launched the Bluefly.com Web site in September 1998. Since its inception,
www.bluefly.com has served over 865,000 customers and shipped to over 17
countries.
Our common stock is listed on the Nasdaq Capital Market under the
symbol "BFLY" and on the Boston Stock Exchange under the symbol "BFL" and we are
incorporated in Delaware. Our executive offices are located at 42 West 39th
Street, New York, New York 10018, and our telephone number is (212) 944-8000.
Our Internet address is www.bluefly.com. We make available, free of charge,
through our Web site, our annual report on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K, and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as soon as reasonably practicable after
we electronically file such material with, or furnish it to, the SEC.
2
RECENT DEVELOPMENTS
In June 2006, we entered into a Stock Purchase Agreement (the "Purchase
Agreement") with affiliates of Soros Fund Management LLC, ("Soros"), private
funds associated with Maverick Capital, Ltd. ("Maverick") and investment
entities and accounts managed and advised by Prentice Capital Management, LP
("Prentice" and, together with Maverick, the "Investors"), pursuant to which,
among other things, we agreed to sell to Maverick and Prentice an aggregate of
60,975,610 shares of our common stock, par value $.01 per share (the "Common
Stock"), at a price of $0.82 per share, in a private placement (the "Private
Placement") for an aggregate of $50 million, half of which was agreed to be
purchased by each Investor. The purchase price represented an 11% premium over
the closing price of the Company's Common Stock as of the date that the
definitive agreement was signed and announced. The Private Placement was
consummated on June 15, 2006. At the closing, 203,016 shares were purchased by a
holder of our Series D Convertible Preferred Stock in connection with the
exercise of its preemptive rights. This amount reduced on a pro rata basis the
amount of shares Maverick and Prentice otherwise would have been entitled to
purchase under the Purchase Agreement.
In connection with the Private Placement, Soros converted all of its
outstanding Series A, Series B, Series C, Series D, Series E and Series F
Convertible Preferred Stock (collectively, the "Preferred Stock") into
44,729,960 shares of the Company's Common Stock in accordance with the terms of
such Preferred Stock. Approximately 566 shares of the Series D Convertible
Preferred Stock, which were held by investors other than Soros, automatically
converted into an aggregate of 1,073,936 shares of Common Stock in accordance
with the terms of the Series D Convertible Preferred Stock. As a result of the
Private Placement, and in accordance with the terms of the anti-dilution
provisions contained in the Certificate of Powers, Designations, Preferences and
Rights of Series F Convertible Preferred Stock, the conversion price of the
Series F Convertible Preferred Stock was adjusted to $0.82 per share.
On the date of the closing of the Private Placement (the "Closing
Date"), we paid Soros $25 million in cash, which represented $4,000,000 of the
principal and $1,488,375 of accrued but unpaid interest on the outstanding
convertible notes held by Soros and substantially all of the accrued but unpaid
dividends on the shares of Preferred Stock that were converted by Soros in
connection with the Private Placement. We will use the remaining $25 million in
proceeds for general corporate purposes. Net proceeds to the Company were
approximately $23 million. Following the closing of the Private Placement, the
only Preferred Stock outstanding is approximately 857 shares of Series F
Convertible Preferred Stock, which are held by investors other than Soros. We
may use up to $1 million of the proceeds from the Private Placement to redeem
such shares of Series F Convertible Preferred Stock, to the extent our Board of
Directors determines to do so.
Under the terms of the Purchase Agreement, we agreed to use our
commercially reasonable best efforts to register the resale of the shares of
Common Stock sold in the Private Placement within 120 days of the Closing Date,
and to cause a registration statement covering such shares to be declared
effective within 180 days of the Closing Date.
RISK FACTORS
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.
----------
Our principal executive office is located at 42 West 39th Street, New
York, New York 10018, and our telephone number is (212) 944-8000.
3
RISK FACTORS
Before you invest in our Common Stock, you should be aware of the risks
described below, which we believe to be the material risks involved with an
investment in our Common Stock. You should carefully consider these risk
factors, together with all of the other information included in this prospectus,
including the documents incorporated in this prospectus by reference, before you
decide whether to purchase shares of our Common Stock.
We Have A History Of Losses And Expect That Losses Will Continue In The
Future. As of June 30, 2006, we had an accumulated deficit of $108,969,000. For
the six months ended June 30, 2006, we incurred a net loss of $5,165,000. We
also incurred net losses of $3,820,000, $3,791,000 and $6,369,000 for the years
ended December 31, 2005, 2004 and 2003, 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 may continue to incur substantial
operating losses. 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.
Soros, Maverick And Prentice Each Own A Large Amount Of Our Stock And
Therefore Can Exert Significant Influence Over Our Management And Policies. As
of August 22, 2006, Soros beneficially owned, in the aggregate, approximately
39% of our Common Stock, and Maverick and Prentice each owned approximately 24%
of our Common Stock. We entered into a voting agreement with Soros, Maverick and
Prentice (the "Voting Agreement"), pursuant to which Soros has the right to
designate three designees to our Board of Directors, and Maverick and Prentice
each have the right to designate one designee. The Voting Agreement also
provides that one designee of Soros and the designee of each of Maverick and
Prentice have the right to serve on the Compensation Committee and the
Governance and Nominating Committee of the Board of Directors. If we establish
an Executive Committee, the designees of Soros, Maverick and Prentice will be
entitled to serve on such committee. Soros, Maverick and Prentice also have a
right of first refusal (the "Right of First Refusal") to provide the financing
in any private placement of our Common Stock that we seek to consummate within
one year of the Closing Date on a pro rata basis.
In view of their large percentage of ownership, Soros, Maverick and
Prentice each have the ability to exert significant influence over 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.
Our Lenders Have Liens On Substantially All Of Our Assets And Could
Foreclose In The Event That We Default Under Our Loan Facility. Under the terms
of our loan facility, our lender has a first priority lien on substantially all
of our assets, including our cash balances. If we default under the loan
facility, our lender would be entitled, among other things, to foreclose on our
assets in order to satisfy our obligations under the loan facility.
Our Ability To Maintain Our Minimum Availability Requirement and Pay
Our Indebtedness Under Our Loan Facility Is Dependent Upon Meeting Our Business
Plan. We are required to pay interest under our loan facility on a monthly
basis. Assuming we meet our business plan, we will be able to pay our interest
as required. To a certain extent, however, our ability to meet our business
plan, is subject to general economic, financial, competitive, legislative,
regulatory and other factors that are beyond our control, and therefore we
cannot assure you that based on our business plan we will generate sufficient
cash flow from operations to enable us to pay our indebtedness under the loan
facility and maintain our minimum availability requirement throughout the term
of the agreement. If we fall short of our business plan and are unable to raise
additional capital, we could default under our loan facility. In the event of a
default under the loan facility, our lender would be entitled, among other
things, to foreclose on our assets (whether inside or outside a bankruptcy
proceeding) in order to satisfy our obligations under the loan facility. See
"Risk Factors - Our Lenders Have Liens On Substantially All Of Our Assets And
Could Foreclose In The Event That We Default Under Our Loan Facility."
If We Are Not Accurate In Forecasting Our Revenues, We May Be Unable To
Adjust Our Operating Plans In A Timely Manner. Because our business has not yet
reached a mature stage, it is difficult for us to
4
forecast our revenues accurately. We base our current and future expense levels
and operating plans on expected revenues, but in the short-term a significant
portion of our expenses are fixed. Accordingly, we may be unable to adjust our
spending in a timely manner to compensate for any unexpected revenue shortfall.
This inability could cause our operating results in some future quarter to fall
below the expectations of securities analysts and investors. In that event, the
trading price of our Common Stock could decline significantly. In addition, any
such unexpected revenue shortfall could significantly affect our short-term cash
flow and our net worth, which could require us to seek additional financing
and/or cause a default under our loan facility. See "Risk Factors - We Are
Making A Substantial Investment In Our Business And May Need To Raise Additional
Funds," "Risk Factors - Our Ability To Comply With Our Financial Covenants And
Pay Our Indebtedness Under Our Loan Facility Is Dependent Upon Meeting Our
Business Plan," and "Risk Factors - Soros, Maverick And Prentice Each Own A
Large Amount Of Our Stock And Therefore Can Exert Significant Influence Over Our
Management And Policies
Our National Advertising Campaign and Other Marketing Initiatives May
Not Be Successful. Our success depends on our ability to attract customers on
cost-effective terms. We have relationships with online services, search
engines, and other Web sites and e-commerce businesses to provide other links
that direct customers to our Web site. In addition, during 2005 we launched our
first national television and advertising campaign. Such campaigns are expensive
and may not result in the cost effective acquisition of customers. We are
relying on the campaign as a significant source of traffic to our Web site and
new customers. If these campaigns and initiatives are not successful, our
results of operations will be adversely affected.
Unexpected Changes In Fashion Trends Could Cause Us To Have Either
Excess or Insufficient Inventory. Fashion trends can change rapidly, and our
business is sensitive to such changes. There can be no assurance that we will
accurately anticipate shifts in fashion trends and adjust our merchandise mix to
appeal to changing consumer tastes in a timely manner. If we misjudge the market
for our products or are unsuccessful in responding to changes in fashion trends
or in market demand, we could experience insufficient or excess inventory levels
or higher markdowns, either of which would have a material adverse effect on our
business, financial condition and results of operations.
We Will Be Subject To Cyclical Variations In The Apparel And E-Commerce
Markets. The apparel industry historically has been subject to substantial
cyclical variations. Furthermore, Internet usage slows down in the summer
months. We and other apparel vendors rely on the expenditure of discretionary
income for most, if not all, sales. Economic downturns, whether real or
perceived, in economic conditions or prospects could adversely affect consumer
spending habits and, therefore, have a material adverse effect on our revenue,
cash flow and results of operations. Alternatively, any improvement, whether
real or perceived, in economic conditions or prospects could adversely impact
our ability to acquire merchandise and, therefore, have a material adverse
effect on our business, prospects, financial condition and results of
operations, as our supply of merchandise is dependent on the inability of
designers and retailers to sell their merchandise in full-price venues. See
"Risk Factors - We Do Not Have Long Term Contracts With The Majority Of Our
Vendors And Therefore The Availability of Merchandise Is At Risk."
We Purchase Product From Some Indirect Supply Sources, Which Increases
Our Risk of Litigation Involving The Sale Of Non-Authentic Or Damaged Goods. We
purchase merchandise both directly from brand owners and indirectly from
retailers and third party distributors. The purchase of merchandise from parties
other than the brand owners increases the risk that we will mistakenly purchase
and sell non-authentic or damaged goods, which could result in potential
liability under applicable laws, regulations, agreements and orders. Moreover,
any claims by a brand owner, with or without merit, could be time consuming,
result in costly litigation, generate bad publicity for us, and have a material
adverse impact on our business, prospects, financial condition and results of
operations.
If Our Co-Location Facility, Third Party Distribution Center Or Third
Party Call Center Fails, Our Business Could Be Interrupted For A Significant
Period Of Time. Our ability to receive and fulfill orders successfully and
provide high-quality customer service, largely depends on the efficient and
uninterrupted operation of our computer and communications hardware systems and
fulfillment center. Substantially all of our computer and communications
hardware is located at a single co-location facility owned by a third party in
New York City. Primarily all of our inventory is held, and our customer orders
are filled, at a third party distribution center located in Virginia, and a
large majority of our customer service representatives are employees of a third
party call center in
5
Ohio. These operations are vulnerable to damage or interruption from fire,
flood, storms, power loss, telecommunications failure, terrorist attacks, acts
of war, break-ins, earthquake and similar events. We do not presently have
redundant systems in multiple locations or a formal disaster recovery plan.
Accordingly, a failure at one of these facilities could interrupt our business
for a significant period of time, and our business interruption insurance may be
insufficient to compensate us for losses that may occur. Any such interruption
would negatively impact our sales, results of operations and cash flows for the
period in which it occurred, and could have a long-term adverse effect on our
relationships with our customers and suppliers.
Security Breaches To Our Systems And Database Could Cause Interruptions
to Our Business And Impact Our Reputation With Customers, And We May Incur
Significant Expenses to Protect Against Such Breaches. A fundamental requirement
for online commerce and communications is the secure transmission of
confidential information over public networks. There can be no assurance that
advances in computer capabilities, new discoveries in the field of cryptography,
or other events or developments will not result in a compromise or breach of the
algorithms we use to protect customer transaction and personal data contained in
our customer database. A party who is able to circumvent our security measures
could misappropriate proprietary information or cause interruptions in our
operations. If any such compromise of our security were to occur, it could have
a material adverse effect on our reputation with customers, thereby affecting
our long-term growth prospects. In addition, we may be required to expend
significant capital and other resources to protect against such security
breaches or to alleviate problems caused by such breaches.
Brand Owners Could Establish Procedures To Limit Our Ability To
Purchase Products Indirectly. Brand owners have implemented, and are likely to
continue to implement, procedures to limit or control off-price retailers'
ability to purchase products indirectly. In addition, several brand owners in
the U.S. have distinctive legal rights rendering them the only legal importer of
their respective brands into the U.S. If we acquire such product indirectly from
distributors and other third parties who may not have complied with applicable
customs laws and regulations, such goods could be subject to seizure from our
inventory by U.S. Customs Service, and the importer may have a civil action for
damages against us. See "Risk Factors - We Do Not Have Long Term Contracts With
The Majority of Our Vendors And Therefore The Availability Of Merchandise Is At
Risk."
Our Growth May Place A Significant Strain On Our Management And
Administrative Resources And Cause Disruptions In Our Business. Historically,
our growth has placed, and any further growth is likely to continue to place, a
significant strain on our management and administrative resources. To be
successful, we must continue to implement information management systems and
improve our operating, administrative, financial and accounting systems and
controls. We will also need to train new employees and maintain close
coordination among our executive, accounting, finance, marketing, merchandising,
operations and technology functions. Any failure to implement such systems and
training, and to maintain such coordination, could affect our ability to plan
for, and react quickly to, changes in our business and, accordingly, could cause
an adverse impact on our cash flow and results of operations in the periods
during which such changes occur. In addition, as our workforce grows, our
exposure to potential employment liability issues increases, and we will need to
continue to improve our human resources functions in order to protect against
such increased exposure. Moreover, our business is dependent upon our ability to
expand our third-party fulfillment operations, customer service operations,
technology infrastructure, and inventory levels to accommodate increases in
demand, particularly during the peak holiday selling season. Our planned
expansion efforts in these areas could cause disruptions in our business. Any
failure to expand our third-party fulfillment operations, customer service
operations, technology infrastructure or inventory levels at the pace needed to
support customer demand could have a material adverse effect on our cash flow
and results of operations during the period in which such failures occur and
could have a long-term effect on our reputation with our customers.
We Are Heavily Dependent On Third-Party Relationships, And Failures By
A Third Party Could Cause Interruptions To Our Business. We are heavily
dependent upon our relationships with our fulfillment operations provider, third
party call center and Web hosting provider, delivery companies like UPS, DHL and
the United States Postal Service, and credit card processing companies such as
Paymentech and Cybersource to service our customers' needs. To the extent that
there is a slowdown in mail service or package delivery services, whether as a
result of labor difficulties, terrorist activity or otherwise, our cash flow and
results of operations would be negatively impacted during such slowdown, and the
results of such slowdown could have a long-term negative effect on our
reputation with our customers. The failure of our fulfillment operations
provider, third party call
6
center, credit card processors or Web hosting provider to properly perform their
services for us could cause similar effects. Our business is also generally
dependent upon our ability to obtain the services of other persons and entities
necessary for the development and maintenance of our business. If we fail to
obtain the services of any such person or entities upon which we are dependent
on satisfactory terms, or we are unable to replace such relationship, we would
have to expend additional resources to develop such capabilities ourselves,
which could have a material adverse impact on our short-term cash flow and
results of operations and our long-term prospects.
We Are In Competition With Companies Much Larger Than Ourselves.
Electronic commerce generally and, in particular, the online retail apparel and
fashion accessories market, is a new, dynamic, high-growth market and is rapidly
changing and intensely competitive. Our competition for customers comes from a
variety of sources including:
o existing land-based, full price retailers, that are using the
Internet to expand their channels of distribution;
o less established online companies;
o internet sites;
o traditional direct marketers; and
o traditional off-price retail stores, which may or may not use the
Internet to grow their customer base.
Competition in our industry has intensified, and we expect this trend to
continue as the list of our competitors grows. Many of our competitors and
potential competitors have longer operating histories, significantly greater
resources, greater brand name recognition and more firmly established supply
relationships. We believe that the principal competitive factors in our market
include:
o brand recognition;
o merchandise selection;
o price;
o convenience;
o customer service;
o order delivery performance; and
o site features.
There can be no assurance that we will be able to compete successfully against
competitors and future competitors, and competitive pressures faced by us could
force us to increase expenses and/or decrease our prices at some point in the
future.
We Do Not Have Long Term Contracts With Our Vendors And Therefore The
Availability Of Merchandise Is At Risk. We do not have any 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. In addition, in order to
entice new vendors to open up relationships with us, we sometimes are required
to either make prepayments or agree to shortened payment terms. Our ability to
develop and maintain relationships with reputable suppliers and obtain high
quality merchandise is critical to our success. If we are unable to develop and
maintain relationships with suppliers that would allow us to obtain a sufficient
amount and variety of quality merchandise on acceptable commercial terms, our
ability to satisfy our customers' needs, and therefore our long-term growth
prospects, would be materially adversely affected. See "Risk Factors - Brand
Owners Could Establish Procedures to Limit Our Ability to Purchase Products
Indirectly."
7
We Need To Further Establish Brand Name Recognition. We believe that
further establishing, maintaining and enhancing our brand is a critical aspect
of our efforts to attract and expand our online traffic. The number of Internet
sites that offer competing services, many of which already have well established
brands in online services or the retail apparel industry generally, increases
the importance of establishing and maintaining brand name recognition. Promotion
of Bluefly.com will depend largely on our success in providing a high quality
online experience supported by a high level of customer service, which cannot be
assured. In addition, to attract and retain online users, and to promote and
maintain Bluefly.com in response to competitive pressures, we may find it
necessary to increase substantially our advertising and marketing expenditures.
If we are unable to provide high quality online services or customer support, or
otherwise fail to promote and maintain Bluefly.com, or if we incur excessive
expenses in an attempt to promote and maintain Bluefly.com, our long-term growth
prospects would be materially adversely affected.
There Can Be No Assurance That Our Technology Systems Will Be Able To
Handle Increased Traffic; Implementation Of Changes To Web Site. A key element
of our strategy is to generate a high volume of traffic on, and use of,
Bluefly.com. Accordingly, the satisfactory performance, reliability and
availability of Bluefly.com, transaction processing systems and network
infrastructure are critical to our reputation and our ability to attract and
retain customers, as well as maintain adequate customer service levels. Our
revenues will depend on the number of visitors who shop on Bluefly.com and the
volume of orders we can handle. Unavailability of our Web site or reduced order
fulfillment performance would reduce the volume of goods sold and could also
adversely affect consumer perception of our brand name. We may experience
periodic system interruptions from time to time. If there is a substantial
increase in the volume of traffic on Bluefly.com or the number of orders placed
by customers, we will be required to expand and upgrade further our technology,
transaction processing systems and network infrastructure. There can be no
assurance that we will be able to accurately project the rate or timing of
increases, if any, in the use of Bluefly.com or expand and upgrade our systems
and infrastructure to accommodate such increases on a timely basis. In order to
remain competitive, we must continue to enhance and improve the responsiveness,
functionality and features of Bluefly.com, which is particularly challenging
given the rapid rate at which new technologies, customer preferences and
expectations and industry standards and practices are evolving in the online
commerce industry. Accordingly, we redesign and enhance various functions on our
Web site on a regular basis, and we may experience instability and performance
issues as a result of these changes.
We May Be Subject To Higher Return Rates. We recognize that purchases
of apparel and fashion accessories over the Internet may be subject to higher
return rates than traditional store bought merchandise. We have established a
liberal return policy in order to accommodate our customers and overcome any
hesitancy they may have with shopping via the Internet. As a result, our reserve
for returns and credit card chargebacks for fiscal 2005, 2004 and 2003 has been
37.8%, 36.6% and 37.1%, respectively. For the six months ended June 30, 2006,
our reserve for returns and credit chard chargebacks was 40.0%. If return rates
are higher than expected, our business, prospects, financial condition, cash
flows and results of operations could be materially adversely affected.
Our Success Is Largely Dependent Upon Our Executive Personnel. We
believe our success will depend to a significant extent on the efforts and
abilities of our executive personnel. In particular, we rely upon their
strategic guidance, their relationships and credibility in the vendor and
financial communities and their ability to recruit key operating personnel. Our
current employment agreements with our Chief Executive Officer, Chief Financial
Officer and Chief Marketing Officer run through March 2007, July 2006 and
September 2008, respectively, however there can be no assurance that any of them
will not terminate their employment earlier. An extension of each of the
employment agreements of our Chief Executive Officer and Chief Financial Officer
is currently being negotiated. The loss of the services of any of our executive
officers could have a material adverse effect on our credibility in the vendor
communities and our ability to recruit new key operating personnel.
Our Success Is Dependent Upon Our Ability To Attract New Key Personnel.
Our operations will also depend to a great extent on our ability to attract new
key personnel with relevant experience and retain existing key personnel in the
future. The market for qualified personnel is extremely competitive. Our failure
to attract additional qualified employees could have a material adverse effect
on our prospects for long-term growth.
There Are Inherent Risks Involved In Expanding Our Operations. We may
choose to expand our operations by developing new Web sites, promoting new or
complementary products or sales formats, expanding the breadth and depth of
products and services offered, expanding our market presence through
relationships with third
8
parties, adopting non-Internet based channels for distributing our products, or
consummating acquisitions or investments. Expansion of our operations in this
manner would require significant additional expenses and development, operations
and editorial resources and would strain our management, financial and
operational resources. For example, we have historically expended significant
internal resources in connection with the redesign of our Web site and the
implementation of our online strategic alliances. Moreover, in the event that we
expand upon our efforts to open brick-and-mortar outlet stores, we will be
required to devote significant internal resources and capital to such efforts.
There can be no assurance that we would be able to expand our efforts and
operations in a cost-effective or timely manner or that any such efforts would
increase overall market acceptance. Furthermore, any new business or Web site
that is not favorably received by consumer or trade customers could damage our
reputation.
We May Be Liable For Infringing The Intellectual Property Rights Of
Others. Third parties may assert infringement claims against us. From time to
time in the ordinary course of business we have been, and we expect to continue
to be, subject to claims alleging infringement of the trademarks and other
intellectual property rights of third parties. These claims and any resulting
litigation, if it occurs, could subject us to significant liability for damages.
In addition, even if we prevail, litigation could be time-consuming and
expensive and could result in the diversion of our time and attention. Any
claims from third parties may also result in limitations on our ability to use
the intellectual property subject to these claims unless we are able to enter
into agreements with the third parties making these claims.
We May Be Liable for Product Liability Claims. We sell products
manufactured by third parties, some of which may be defective. If any product
that we sell were to cause physical injury or injury to property, the injured
party or parties could bring claims against us as the retailer of the product.
Our insurance coverage may not be adequate to cover every claim that could be
asserted. If a successful claim were brought against the Company in excess of
our insurance coverage, it could have a material adverse effect on our cash flow
and on our reputation with customers. Unsuccessful claims could result in the
expenditure of funds and management time and could have a negative impact on our
business.
We Cannot Guarantee The Protection Of Our Intellectual Property. Our
intellectual property is critical to our success, and we rely on trademark,
copyright, domain names and trade secret protection to protect our proprietary
rights. Third parties may infringe or misappropriate our trademarks or other
proprietary rights, which could have a material adverse effect on our business,
prospects, results of operations or financial condition. While we enter into
confidentiality agreements with our employees, consultants and strategic
partners and generally control access to and distribution of our proprietary
information, the steps we have taken to protect our proprietary rights may not
prevent misappropriation. We are pursuing registration of various trademarks,
service marks and domain names in the United States and abroad. Effective
trademark, copyright and trade secret protection may not be available in every
country, and there can be no assurance that the United States or foreign
jurisdictions will afford us any protection for our intellectual property. There
also can be no assurance that any of our intellectual property rights will not
be challenged, invalidated or circumvented. In addition, we do not know whether
we will be able to defend our proprietary rights since the validity,
enforceability and scope of protection of proprietary rights in Internet-related
industries is uncertain and still evolving. Moreover, even to the extent that we
are successful in defending our rights, we could incur substantial costs in
doing so.
Our Business Could Be Harmed By Consumers' Concerns About The Security
Of Transactions Over The Internet. Concerns over the security of transactions
conducted on the Internet and commercial online services, the increase in
identity theft and the privacy of users may also inhibit the growth of the
Internet and commercial online services, especially as a means of conducting
commercial transactions. Moreover, although we have 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
9
development of the market for online commerce may prompt calls for more
stringent consumer protection laws that may impose additional burdens on those
companies conducting business online. The adoption of any additional laws or
regulations may increase our cost of doing business and/or decrease the demand
for our products and services and increase our cost of doing business.
The applicability to the Internet of existing laws in various jurisdictions
governing issues such as property ownership, sales and other taxes, libel and
personal privacy is uncertain and may take years to resolve. Any such new
legislation or regulation, the application of laws and regulations from
jurisdictions whose laws do not currently apply to our business, or the
application of existing laws and regulations to the Internet and online commerce
could also increase our cost of doing business. In addition, if we were alleged
to have violated federal, state or foreign, civil or criminal law, we could face
material liability and damage to our reputation and, even if we successfully
defend any such claim, we would incur significant costs in connection with such
defense.
We Face Uncertainties Relating To Sales And Other Taxes. We are not
currently required to pay sales or other similar taxes in respect of shipments
of goods into states other than Virginia, Ohio, New Jersey and New York.
However, state taxation laws and regulations may change in the future, and one
or more states may seek to impose sales tax collection obligations on
out-of-state companies, such as our company, that engage in online commerce. In
addition, any new operation in states outside Virginia, Ohio, 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 subject us to material liabilities and, to the extent that we pass such
costs on to our customers, could decrease our sales.
The Holders Of Our Common Stock May Be Adversely Affected By The Rights
Of Holders Of Preferred Stock That May Be Issued In The Future. Our certificate
of incorporation and by-laws, as amended, contain certain provisions that may
delay, defer or prevent a takeover. Our Board of Directors has the authority to
issue up to 15,479,250 additional shares of Preferred Stock, and to determine
the price, rights, preferences and restrictions, including voting rights, of
those shares, without any further vote or action by the stockholders.
Accordingly, our Board of Directors is empowered, without approval of the
holders of Common Stock, to issue preferred stock, for any reason and at any
time, with such rates of dividends, redemption provisions, liquidation
preferences, voting rights, conversion privileges and other characteristics as
it may deem necessary or appropriate. The rights of holders of Common Stock will
be subject to, and may be adversely affected by, the rights of holders of any
preferred stock that may be issued in the future.
We Rely On The Effectiveness Of Our Internal Controls. Section 404 of
the Sarbanes-Oxley Act of 2002 requires that we establish and maintain an
adequate internal control structure and procedures for financial reporting and
assess on an on-going basis the design and operating effectiveness of our
internal control structure and procedures for financial reporting. Our
independent registered accounting firm will be required to audit the design and
operating effectiveness of our internal controls and attest to management's
assessment of the design and the effectiveness of our internal controls. The
first such audit will be required for our fiscal year ending December 31, 2008.
It is possible that, as we prepare for this audit, we could discover certain
deficiencies in the design and/or operation of our internal controls that could
adversely affect our ability to record, process, summarize and report financial
data. We have invested and will continue to invest significant resources in this
process. Because management's assessment of internal controls has not been
required to be reported in the past, we are uncertain as to what impact a
conclusion that deficiencies exist in our internal controls over financial
reporting would have on the trading price of our Common Stock.
10
FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this prospectus and in
documents that we incorporate by reference into this prospectus. These
forward-looking statements are subject to risks and uncertainties. Actual
results may differ materially from those expressed in these forward-looking
statements.
Forward-looking statements include information concerning our possible
or assumed future results of operations as well as statements that include the
words "believe," "expect," "anticipate," "intend" or similar expressions. You
should understand that certain important factors, including those set forth in
"Risk Factors" above and elsewhere in this prospectus and the documents that we
incorporate by reference into this prospectus, could affect our future results
of operations and could cause those results to differ materially from those
expressed in our forward-looking statements. In connection with these forward-
looking statements, you should carefully review the risks set forth in this
prospectus and the documents we incorporate by reference into this prospectus.
USE OF PROCEEDS
The proceeds from the sale of the Common Stock covered by 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, such shares include 706,644 shares issuable upon the
exercise of warrants held by selling stockholders. In the event that all of such
warrants are exercised for cash, the aggregate proceeds received by us would be
approximately $1,062,000. There can be no assurance concerning the number or the
timing of the exercise of such warrants by such selling stockholders at this
date. In addition, because such 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 such warrants are exercised. Any
proceeds realized from the exercise of such warrants will be used by us for
general working capital.
SELLING STOCKHOLDERS
This prospectus relates to the resale of up to 111,372,291 shares of
our Common Stock by the selling stockholders listed below. These shares include:
(a) 60,975,610 shares sold by us to the Investors in the Private Placement; (b)
4,273,504 shares sold by us to Soros in a rights offering in January 2001; (c)
43,229,960 shares issued to Soros in June 2006 upon conversion of previously
outstanding shares of Convertible Preferred Stock; (d) 100,000 shares issuable
upon the exercise of warrants with an exercise price of $0.88 per share issued
to Soros in March 2001 in connection with a private placement; (e) 160,000
shares issuable upon the exercise of warrants with an exercise price of $1.68
per share issued to Soros in March 2002 in connection with a private placement;
(f) 296,644 shares issuable upon the exercise of warrants with an exercise price
of $1.88 per share issued to Soros in May 2002 in connection with a private
placement; (g) 1,186,573 shares sold by us pursuant to a private placement in
May 2002; (h) 25,000 shares issuable upon the exercise of warrants with an
exercise price of $1.12 per share issued to Soros in January 2003 in connection
with a private placement; (i) 25,000 shares issuable upon the exercise of
warrants with an exercise price of $0.78 per share issued to Soros in March 2003
in connection with a private placement; (j) 1,000,000 shares issued in partial
payment of the placement agent fee incurred in connection with the Private
Placement; and (k) 100,000 shares issuable upon the exercise of a warrant issued
to a service provider in February 2006 with an exercise price of $1.00 per
share.
The table below sets forth certain information known to us, based upon
written representations from the selling stockholders, with respect to the
beneficial ownership of our Common Stock by the selling stockholders as of
August 22, 2006. The following table assumes that the selling stockholders sell
all of their shares being offered under this prospectus. We are unable to
determine the exact number of shares that will actually be sold.
In the table below, the percentage of shares beneficially owned is
based on 129,240,660 shares outstanding at August 22, 2006, determined in
accordance with Rule 13d-3 of the Exchange Act. Under such rule, beneficial
ownership includes any shares as to which the individual has sole or shared
voting power or investment power and also any shares which the individual has
the right to acquire within sixty days of such date through the exercise of any
warrants or other rights. 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.
11
SHARES BENEFICIALLY
OWNED AFTER OFFERING
NUMBER OF SHARES BENEFICIALLY (ASSUMING ALL SHARES BEING
OWNED PRIOR TO THE OFFERING OFFERED ARE SOLD)
-------------------------------- SHARES BEING --------------------------------
NAME OF SELLING STOCKHOLDER NUMBER PERCENT OFFERED NUMBER PERCENT
-------------------------------------------- ------------ ------------ ------------ ------------ ------------
Entities affiliated with Maverick
Capital, Ltd. (1)........................... 30,386,297 23.51% 30,386,297 -- --
Prentice Capital Partners, LP (2) .......... 816,784 0.63% 816,784 -- --
Prentice Capital Partners QP, LP (3) ....... 4,037,731 3.12% 4,037,731 -- --
Prentice Capital Offshore, Ltd. (4) ........ 9,051,470 7.00% 9,051,470 -- --
S.A.C. Capital Associates, LLC (5) ......... 11,438,618 8.85% 11,438,618 -- --
GPC XLIII, LLC (6) ......................... 2,003,065 1.55% 2,003,065 -- --
PEC I, LLC (7) ............................. 3,038,629 2.35% 3,038,629 -- --
Portside Growth and Opportunity Fund (8) ... 1,121,924(18) 0.86% 203,016 918,908(19) 0.71%
Allen & Company LLC (9) .................... 1,000,000 0.77% 1,000,000 -- --
Genesis Select Corporation (10) ............ 178,500(11) 0.14% 100,000 78,500 0.06%
Quantum Industrial Partners LDC(12) ........ 49,226,779(13) 37.91% 47,734,307 1,492,472(17) 1.15%
SFM Domestic Investments LLC(14) .......... 1,609,902(15) 1.25% 1,562,374 47,528(16) 0.04%
TOTAL ................................. 113,909,669 87.60% 111,372,291 2,537,408 1.95%
1. Consists of: (a) 5,790,048 shares held by Maverick Fund USA, Ltd.;
(b) 13,134,660 shares held by Maverick Fund, L.D.C.; and (c)
11,461,589 shares held by Maverick Fund II, Ltd. Maverick Capital,
Ltd. is an investment adviser registered under Section 203 of the
Investment Advisers Act of 1940 and, as such, has beneficial
ownership of the shares held by Maverick Fund USA, Ltd., Maverick
Fund, L.D.C. and Maverick Fund II, Ltd. through the investment
discretion it exercises over these accounts. Maverick Capital
Management, LLC is the General Partner of Maverick Capital, Ltd.
Lee S. Ainslie III is a manager of Maverick Capital Management,
LLC and is granted sole investment discretion pursuant to Maverick
Capital Management, LLC's regulations. The address for the
entities affiliated with Maverick Capital, Ltd. is 300 Crescent
Court, 18th Floor, Dallas, TX 75201.
2. Prentice Capital Management, LP has investment and voting power
with respect to the securities held by Prentice Capital Partners,
LP. Mr. Michael Zimmerman is the managing member of the general
partner of Prentice Capital Management, LP. Each of Prentice
Capital Management, LP and Mr. Zimmerman disclaim beneficial
ownership of any of these securities.
3. Prentice Capital Management, LP has investment and voting power
with respect to the securities held by Prentice Capital Partners
QP, LP. Mr. Michael Zimmerman is the managing member of the
general partner of Prentice Capital Management, LP. Each of
Prentice Capital Management, LP and Mr. Zimmerman disclaim
beneficial ownership of any of these securities.
4. Prentice Capital Management, LP has investment and voting power
with respect to the securities held by Prentice Capital Offshore,
Ltd. Mr. Michael Zimmerman is the managing member of the general
partner of Prentice Capital Management, LP. Each of Prentice
Capital Management, LP and Mr. Zimmerman disclaim beneficial
ownership of any of these securities.
5. Pursuant to an investment management agreement among S.A.C.
Capital Advisors, LLC, Prentice Capital Management, LP and Mr.
Zimmerman, Prentice Capital Management, LP manages an investment
account that contains certain securities, including those
referenced herein, held by S.A.C. Capital Associates, LLC (the
"Managed Account"). The securities in the Managed Account are held
in the name of S.A.C. Capital Associates, LLC. Prentice Capital
Management, LP has, except in limited circumstances, the power to
vote or to direct the vote and to dispose or to direct the
disposition of the securities in the Managed Account, including
the securities referenced herein. Each of S.A.C. Capital Advisors,
LLC, S.A.C. Capital Management, LLC (investment managers to S.A.C.
Capital Associates, LLC), S.A.C. Capital Associates, LLC and Mr.
Steven A. Cohen, who controls each of S.A.C. Capital Advisors, LLC
and S.A.C. Capital Management, LLC, disclaim beneficial ownership
of any of the securities held in the Managed Account, and each
disclaims group ownership with Prentice Capital Management, LP as
to the securities held in the Managed Account and as to any other
securities that are beneficially owned by Prentice Capital
Management, LP or its affiliates. Each of Prentice Capital
Management, LP and Michael Zimmerman disclaim beneficial ownership
of any securities held in the Managed Account except to the extent
of their pecuniary interest.
12
6. Prentice Capital Management, LP has investment and voting power
with respect to the securities held by GPC XLIII, LLC. Mr. Michael
Zimmerman is the managing member of the general partner of
Prentice Capital Management, LP. Each of Prentice Capital
Management, LP and Mr. Zimmerman disclaim beneficial ownership of
any of these securities.
7. Prentice Capital Management, LP has investment and voting power
with respect to the securities held by PEC I, LLC. Mr. Michael
Zimmerman is the managing member of the general partner of
Prentice Capital Management, LP. Each of Prentice Capital
Management, LP and Mr. Zimmerman disclaim beneficial ownership of
any of these securities.
8. Ramius Capital Group, L.L.C. ("Ramius Capital") is the investment
adviser of Portside Growth and Opportunity Fund and consequently
has voting control and investment discretion over securities held
by Portside. Peter A. Cohen, Morgan B. Stark, Thomas W. Strauss
and Jeffrey M. Solomon are the sole managing members of C4S & Co.,
L.L.C., the sole managing member of Ramius Capital. As a result,
Messrs. Cohen, Stark, Strauss and Solomon may be considered
beneficial owners of any shares deemed to be beneficially owned by
Ramius Capital. Messrs. Cohen, Stark, Strauss and Solomon disclaim
beneficial ownership of these shares.
9. Herbert A. Allen III, as President of Allen & Company LLC, may be
deemed to have voting and investment control over such securities
10. Alan Budd Zuckerman, as President of Genesis Select Corporation,
may be deemd to have voting and investment control over such
securities.
11. Includes 100,000 shares issuable upon exercise of a warrant at an
exercise price of $1.00 per share.
12. Quantum Industrial Partners LDC ("QIP") is an exempted limited
duration company formed under the laws of the Cayman Islands with
its principal address at Kaya Flamboyan 9, Willemstad, Curacao,
Netherlands Antilles. QIH Management Investor, L.P. ("QIHMI"), an
investment advisory firm organized as a Delaware limited
partnership, is a minority shareholder of, and is vested with
investment discretion with respect to portfolio assets held for
the account of QIP. The sole general partner of QIHMI is QIH
Management LLC, a Delaware limited liability company ("QIH
Management"). Soros Fund Management LLC, a Delaware limited
liability company ("SFM"), is the sole managing member of QIH
Management. George Soros is the Chairman of SFM and, in such
capacity, may be deemed to have voting and dispositive power over
securities held for the account of QIP.
13. Represents: (a) 48,599,355 shares of Common Stock; (b) warrant to
purchase 96,830 shares at an exercise price of $0.88 per share;
(c) warrant to purchase 58,098 shares at an exercise price of
$1.68 per share; (d) warrant to purchase 96,830 shares at an
exercise price of $1.68 per share; (e) warrant to purchase 287,250
shares at an exercise price of $1.88 per share; (f) warrant to
purchase 24,208 shares at an exercise price of $1.12 per share;
(g) warrant to purchase 24,208 shares at an exercise price of
$0.78 per share; and (h) 40,000 shares issuable in the aggregate
upon the exercise of options held for the benefit of QIP by an
employee of SFM and an advisor to QIP who serve on the Company's
Board of Directors.
14. SFM Domestic Investments LLC ("SFMDI") is a Delaware limited
liability company. George Soros is the sole managing member of
SFMDI and, in such capacity, may be deemed to have voting and
dispositive power over securities held for the account of SFMDI.
15. Represents: (a) 1,590,682 shares of Common Stock; (b) warrant to
purchase 3,170 shares at an exercise price of $0.88 per share; (c)
warrant to purchase 1,902 shares at an exercise price of $1.68 per
share; (d) warrant to purchase 3,170 shares at an exercise price
of $1.68 per share; (e) warrant to purchase 9,394 shares at an
exercise price of $1.88 per share; (f) warrant to purchase 792
shares at an exercise price of $1.12 per share; and (g) warrant to
purchase 792 shares at an exercise price of $0.78 per share.
16. The resale of these shares is covered by a separate Registration
Statement on Form S-3 (SEC File No. 333-111957).
17. 1,452,472 of these shares are covered by a separate Registration
Statement on Form S-3 (SEC File No. 333-111957)
18. Represents: (a) 338,852 shares of Common Stock; (b) warrant to
purchase 86,207 shares at an exercise price of $2.87 per share;
and (c) 696,865 shares of issuable upon conversion of 571.429
shares of the Company's Series F Convertible Preferred Stock
(which represents 66.7% of the currently outstanding shares of the
Company's Series F Convertible Preferred Stock).
19. The resale of these shares is covered by a separate Registration
Statement on Form S-3 (SEC File No. 333-127176).
MATERIAL RELATIONSHIPS WITH SELLING STOCKHOLDERS
13
INDEMNIFICATION PROVISIONS APPLICABLE TO ALL SELLING STOCKHOLDERS
We have agreed to indemnify each of the selling stockholders for
certain liabilities arising out of the registration statement of which this
prospectus is a part.
MATERIAL RELATIONSHIPS AND AGREEMENTS WITH MAVERICK, PRENTICE AND SOROS
As discussed in greater detail above under the section "Prospectus
Summary - Recent Developments," in June 2006, we entered into the Purchase
Agreement with Soros, Maverick and Prentice, pursuant to which, among other
things, we agreed to sell to Maverick and Prentice an aggregate of 60,975,610
shares of Common Stock in the Private Placement. At the closing of the Private
Placement, 203,016 shares of Common Stock were purchased by Portside Growth and
Opportunity Fund ("Portside") in connection with the exercise of its preemptive
rights. This amount reduced on a pro rata basis the amount of shares Maverick
and Prentice otherwise would have been entitled to purchase under the Purchase
Agreement.
We agreed with the selling stockholders that purchased shares in the
Private Placement that we would use our commercially reasonable best efforts to
register the resale of the shares of Common Stock sold in the Private Placement
within 120 days of the Closing Date, and to cause a registration statement
covering such shares to be declared effective within 180 days of the Closing
Date. We agreed to pay such selling stockholders' expenses in connection
therewith (exclusive of any selling commissions or similar fees). In addition,
we have agreed to indemnify Soros, Maverick and Prentice for any and all
liabilities, losses, damages, claims, costs and expenses, interest, awards,
judgments, penalties (including, without limitation, reasonable attorneys' fees
and expenses) actually suffered or incurred by them, arising out of or resulting
from any breach of our representations and warranties in the Purchase Agreement.
Notwithstanding the foregoing, we have no obligation to compensate any of such
selling stockholders for punitive damages and our liability to each selling
stockholder under such indemnification provision cannot exceed 100% of the
purchase price for the shares purchased by such selling stockholder in the
Private Placement.
We entered into the Voting Agreement, pursuant to which Soros has the
right to designate three designees to our Board of Directors and each of
Maverick and Prentice have the right to designate one designee, subject to
minimum ownership thresholds and subject to compliance with applicable Nasdaq
rules. The Voting Agreement also provides that one designee of Soros and the
designee of each of Maverick and Prentice will have the right to serve on the
Compensation Committee and the Governance and Nominating Committee of the Board
of Directors, subject to compliance with Nasdaq's rules regarding independent
directors serving on such committees, or Nasdaq's transitional rules, to the
extent applicable. If our Board of Directors establishes an Executive Committee,
the designees of Soros, Maverick and Prentice will be entitled to serve on such
committee.
Pursuant to the terms of the Purchase Agreement, Soros, Maverick and
Prentice each agreed that it will not, without the approval of a majority of the
independent directors of the Company (i) for a period of three years from the
closing date of the Private Placement, purchase or acquire, or agree to purchase
or acquire, any shares of our capital stock, subject to certain exceptions,
including exceptions for (x) the purchase of shares pursuant to their Right of
First Refusal and, (y) after eighteen months from the Closing Date, a purchase
by any Investor of shares of capital stock up to a level which does not equal or
exceed the lesser of (A) 30% of the outstanding shares of our Common Stock at
the time of such purchase, or (B) the ownership of Soros at the time of such
purchase; or a purchase by Soros of shares of capital stock in an amount up to
15% of the outstanding shares of Common Stock on the Closing Date, (ii) for a
period of five years from the Closing Date, except as provided in the Voting
Agreement or the Purchase Agreement, join a partnership, limited partnership,
syndicate or other group within the meaning of Section 13(d) of the Exchange
Act, including a group consisting of other Investors for the purpose of
acquiring, holding or voting any shares of capital stock of the Company, or
(iii) for a period of three years from the Closing Date, seek to commence a
proxy contest or other proxy solicitation for the purposes of modifying the
composition of the Board of Directors.
The Purchase Agreement further provides that, subject to certain
limited exceptions, Soros, Maverick and Prentice will not, for a period of six
(6) months after the Closing Date, sell, offer to sell, solicit offers to buy,
dispose of, loan, pledge or grant any right with respect to, any shares of
capital stock of the Company. Pursuant to the terms of an Agreement dated June
7, 2006 between us and Portside, Portside also agreed that it will not, for a
period of six
14
(6) months after the Closing Date, sell, offer to sell, solicit offers to buy,
dispose of, loan, pledge or grant any right with respect to, any shares of
capital stock of the Company.
The Purchase Agreement also provides the Right of First Refusal to
Soros, Maverick and Prentice to provide the financing in any private placement
of our Common Stock that we seek to consummate within one year of the Closing
Date. The Right of First Refusal is subject to certain maximum ownership
restrictions and certain other exceptions set forth in the Purchase Agreement.
The shares of Common Stock beneficially owned by Soros and included in
this prospectus (including shares issued upon the conversion of our Convertible
Preferred Stock and shares issuable upon exercise of warrants) were acquired by
it in various private placements from 1999 to 2003. As a result of these
financings, prior to the consummation of the Private Placement, Soros owned a
majority of our Common Stock, and following the Private Placement, it remains
our largest stockholder. As of August 22, 2006, Soros beneficially owned, in the
aggregate, approximately 39% of our Common Stock, and Maverick and Prentice each
owned approximately 24% of our Common Stock.
Historically, our credit facility has been secured, in part, by a $2
million letter of credit issued by Soros in favor of the lender. We paid Soros
an annual fee in connection with the issuance of such letter of credit, and
granted Soros a lien on all of our assets as security to Soros in the event that
the lender was to draw down on the letter of credit. In July 2006, the lender
agreed to release the Soros letter of credit and, accordingly, no further fees
are due to Soros, and Soros no longer has a lien on our assets.
MATERIAL RELATIONSHIPS AND AGREEMENTS WITH ALLEN & COMPANY LLC
We engaged Allen & Company LLC ("Allen") to serve as our financial
advisor and placement agent in connection with the Private Placement. Pursuant
to the terms of an Engagement Letter dated March 30, 2006 (the "Engagement
Letter"), we agreed to pay Allen a placement fee for such service in the
aggregate amount of 5% of the gross proceeds from the Private Placement. On June
5, 2006, we entered into a Fee Letter with Soros pursuant to which we and Soros
each agreed to pay one half of the placement fee payable to Allen as a result of
the consummation of the Private Placement. Accordingly, the total fee that we
were required to pay Allen in connection with the Private Placement was $1.25
million. On July 18, 2006, we entered into an amendment to the Engagement Letter
pursuant to which Allen agreed to accept 1,000,000 shares of Common Stock in
satisfaction of $1.0 million of the fee payable to it by us. Accordingly, we
paid $1.0 million of such fee through the issuance of 1,000,000 shares of our
Common Stock, and paid the remainder in cash. The re-sale by Allen of the shares
issued to it as partial payment for its fee are covered by the registration
statement of which this prospectus is a part.
MATERIAL RELATIONSHIPS AND AGREEMENTS WITH GENESIS SELECT CORPORATION
We have engaged Genesis Select Corporation ("Genesis") to provide
advisory services to us in connection with our investor relations efforts.
Pursuant to the terms of such engagement, we pay Genesis a monthly retainer, and
also issued to Genesis a warrant to purchase 100,000 shares of our Common Stock
at an exercise price of $1.00 per share. The re-sale by Genesis of the shares
issuable upon exercise of such warrant are covered by the registration statement
of which this prospectus is a part.
GENERAL
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.
15
PLAN OF DISTRIBUTION
We are registering the resale of the shares of our Common Stock on
behalf of the selling stockholders. As used in this prospectus, the term selling
stockholders includes pledgees, assignees, transferees or other
successors-in-interest selling shares received from the selling stockholders as
pledgors, borrowers or in connection with other non-sale-related transfers after
the date of this prospectus. This prospectus may also be used by transferees of
the selling stockholders, including broker-dealers or other transferees who
borrow or purchase the shares to settle or close out short sales of shares of
common stock. The selling stockholders will act independently of us in making
decisions with respect to the timing, manner, and size of each sale or non-sale
related transfer. Each selling stockholder (other than Genesis) has agreed that
it will not, for a period of six (6) months after the Closing Date, sell, offer
to sell, solicit offers to buy, dispose of, loan, pledge or grant any right with
respect to, any shares of capital stock of the Company.
This prospectus covers the selling stockholders resale of up to
111,372,291 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 Capital
Market, the Boston Stock Exchange, any other exchange or market on which the
shares of our Common Stock are then traded, or in private sales at negotiated
prices.
A selling stockholder may use any one or more of the following methods
when selling shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o settlement of short sales entered into after the date of this
prospectus;
o broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share;
o a combination of any such methods of sale;
o through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;
or
o any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), if available, rather
than under this prospectus.
Broker-dealers engaged by the selling stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the selling stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. Each selling stockholder does not expect these commissions and
discounts relating to its sales of shares to exceed what is customary in the
types of transactions involved.
In connection with the sale of our Common Stock or interests therein,
the selling stockholders may enter into hedging transactions with broker-dealers
or other financial institutions, which may in turn engage in short sales
16
of the Common Stock in the course of hedging the positions they assume. The
selling stockholders may also sell shares of our Common Stock short and deliver
these securities to close out their short positions, or loan or pledge the
Common Stock to broker-dealers that in turn may sell these securities. The
selling stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).
The selling stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
The Company is required to pay certain fees and expenses incurred by
the Company incident to the registration of the shares. The Company has agreed
to indemnify the selling stockholders against certain losses, claims, damages
and liabilities, including liabilities under the Securities Act.
Because selling stockholders may be deemed to be "underwriters" within
the meaning of the Securities Act, they will be subject to the prospectus
delivery requirements of the Securities Act. In addition, any securities covered
by this prospectus which qualify for sale pursuant to Rule 144 under the
Securities Act may be sold under Rule 144 rather than under this prospectus.
Each selling stockholder has represented to us that it has not entered into any
agreements, understandings or arrangements, directly or indirectly, with any
underwriter, broker-dealer or other person regarding the sale or other
distribution of the shares of Common Stock to be sold pursuant to this
prospectus. There is no underwriter or coordinating broker acting in connection
with the proposed sale of the resale shares by the selling stockholders.
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the shares to be sold pursuant to this
prospectus may not simultaneously engage in market making activities with
respect to our Common Stock for a period of two business days prior to the
commencement of the distribution. In addition, the selling stockholders will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including Regulation M, which may limit the timing of
purchases and sales of shares of our Common Stock by the selling stockholders or
any other person. We 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. We will make copies of this prospectus available to the
selling stockholders for the purpose of satisfying the prospectus delivery
requirements of the Securities Act. 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.
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.
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.
Certain of the selling stockholders may be affiliates of a
broker-dealer. Each of the selling stockholders has represented to us that it
purchased the securities to be resold pursuant to this prospectus in the
ordinary course of business and, at the time of the purchase of such securities,
had no agreements or understandings, directly or indirectly, with any person to
distribute such securities. We are not aware of any plans, arrangements or
undertakings between the selling stockholders and any underwriter, broker-dealer
or agent regarding the sale of the Common Stock covered by this prospectus by
the selling stockholders.
17
EXPERTS
The financial statements incorporated in this prospectus by reference
to the Annual Report on Form 10-K for the year ended December 31, 2005 have been
so incorporated in reliance on the report of PricewaterhouseCoopers LLP, an
independent registered public accounting firm, given on the authority of said
firm as experts in auditing and accounting.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be
passed upon by Dechert LLP, our special corporate counsel.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the information reporting requirements of the
Exchange Act and we file reports, proxy statements and other information with
the SEC. Our SEC filings and the registration statement and the exhibits and
schedules thereto may be inspected and copied at the SEC's Public Reference
Room, 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC also maintains an Internet site (http://www.sec.gov)
that contains our SEC filings.
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:
o our Annual Report on Form 10-K for the year ended December 31,
2005, filed with the SEC on February 28, 2006;
o our Quarterly Report on Form 10-Q for the quarter ended March 31,
2006, filed with the SEC on May 11, 2006;
o our Quarterly Report on Form 10-Q for the quarter ended June 30,
2006, filed with the SEC on August 4, 2006;
o our Proxy Statement, dated April 6, 2006, filed with the SEC on
April 6, 2006 in connection with our Annual Meeting of
Stockholders held on May 19, 2006;
o our Current Report on Form 8-K, filed with the SEC on February 21,
2006;
o our Current Report on Form 8-K, filed with the SEC on June 7,
2006;
o our Current Report on Form 8-K, filed with the SEC on August 2,
2006;
o our Current Report on Form 8-K, filed with the SEC on August 14,
2006;
o our Current Report on Form 8-K, filed with the SEC on October 3,
2006;
o 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
o 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 writing or telephoning us at Bluefly, Inc., 42 West 39th
Street, New York, New York 10018, Attention: Secretary, Telephone: (212)
944-8000.
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.
18
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 SEC registration fee.
SEC registration fee $ 11,559
Legal fees and expenses $ 17,500
Accounting fees and expenses $ 15,000
Miscellaneous expenses $ 6,000
------------
Total $ 50,059
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, be paid by the Registrant only upon receipt by the
Registrant of an undertaking, by or on behalf of such director or officer to
repay any amount so advanced if it shall ultimately be determined by final
judicial decision from which there is no further right of appeal that such
director or officer is not entitled to be indemnified for such expenses.
The Charter and By-laws authorize the Registrant to purchase and
maintain insurance on behalf of any person who is or was a director or officer
of the Registrant, or is or was serving at the request of the Registrant as a
director or officer of any other entity, against any liability asserted against
such person and incurred by such person in any such capacity, or arising out of
such person's status as such, whether or not the Registrant would have the power
to indemnify such person against such liability under applicable provisions of
the Restated Certificate of Incorporation, the by-laws of the Registrant or
under Section 145 of the DGCL or any other provision of law.
II-2
ITEM 16. EXHIBITS
5.1 Opinion of Dechert LLP
23.1 Consent of PricewaterhouseCoopers LLP, an independent registered public
accounting firm (filed as Exhibit 23.1 to the Form S-3, File No.
333-136866, filed by Bluefly, Inc. on August 24, 2006)*
23.2 Consent of Counsel (included as Exhibit 5.1)
24.1 Power of Attorney (filed as Exhibit 24.1 to the Form S-3, File No.
333-136866, filed by Bluefly, Inc. on August 24, 2006)*
----------
* Previously filed; incorporated herein by reference.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
i. To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
ii. To reflect in the prospectus any facts or events arising
after the effective date of the registration statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would
not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and
price represent no more than 20% change in the maximum
aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration
statement.
iii. To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
Provided however, that paragraphs (1)(i), (1)(ii) and (1)(iii)
of this section do not apply if the registration statement is
on Form S-3 or Form F-3 and the information required to be
included in a post-effective amendment by those paragraphs is
contained in reports filed with or furnished to the Commission
by the Registrant pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement, or is contained in a
form of prospectus filed pursuant to Rule 424(b) that is part
of the registration statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
3. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-3
4. That, for the purpose of determining liability under the
Securities Act of 1933 to any purchaser:
i. If the Registrant is relying on Rule 430B:
A. Each prospectus filed by the Registrant pursuant to Rule
424(b)(3) shall be deemed to be part of the registration
statement as of the date the filed prospectus was deemed
part of and included in the registration statement; and
B. Each prospectus required to be filed pursuant to Rule
424(b)(2), (b)(5), or (b)(7) as part of a registration
statement in reliance on Rule 430B relating to an
offering made pursuant to Rule 415(a)(1)(i), (vii), or
(x) for the purpose of providing the information
required by Section 10(a) of the Securities Act of 1933
shall be deemed to be part of and included in the
registration statement as of the earlier of the date
such form of prospectus is first used after
effectiveness or the date of the first contract of sale
of securities in the offering described in the
prospectus. As provided in Rule 430B, for liability
purposes of the issuer and any person that is at that
date an underwriter, such date shall be deemed to be a
new effective date of the registration statement
relating to the securities in the registration statement
to which that prospectus relates, and the offering of
such securities at that time shall be deemed to be the
initial bona fide offering thereof. Provided, however,
that no statement made in a registration statement or
prospectus that is part of the registration statement or
made in a document incorporated or deemed incorporated
by reference into the registration statement or
prospectus that is part of the registration statement
will, as to a purchaser with a time of contract of sale
prior to such effective date, supersede or modify any
statement that was made in the registration statement or
prospectus that was part of the registration statement
or made in any such document immediately prior to such
effective date; or
ii. If the Registrant is subject to Rule 430C, each
prospectus filed pursuant to Rule 424(b) as part of a
registration statement relating to an offering, other
than registration statements relying on Rule 430B or
other than prospectuses filed in reliance on Rule 430A,
shall be deemed to be part of and included in the
registration statement as of the date it is first used
after effectiveness. Provided, however, that no
statement made in a registration statement or prospectus
that is part of the registration statement or made in a
document incorporated or deemed incorporated by
reference into the registration statement or prospectus
that is part of the registration statement will, as to a
purchaser with a time of contract of sale prior to such
first use, supersede or modify any statement that was
made in the registration statement or prospectus that
was part of the registration statement or made in any
such document immediately prior to such date of first
use.
5. That, for the purpose of determining liability of the Registrant
under the Securities Act of 1933 to any purchaser in the initial
distribution of the securities: The undersigned Registrant
undertakes that in a primary offering of securities of the
undersigned Registrant pursuant to this registration statement,
regardless of the underwriting method used to sell the securities
to the purchaser, if the securities are offered or sold to such
purchaser by means of any of the following communications, the
undersigned Registrant will be a seller to the purchaser and will
be considered to offer or sell such securities to such purchaser:
i. Any preliminary prospectus or prospectus of the
undersigned Registrant relating to the offering required
to be filed pursuant to Rule 424;
ii. Any free writing prospectus relating to the offering
prepared by or on behalf of the undersigned Registrant
or used or referred to by the undersigned Registrant;
iii. The portion of any other free writing prospectus
relating to the offering containing material information
about the undersigned Registrant or its securities
provided by or on behalf of the undersigned Registrant;
and
II-4
iv. Any other communication that is an offer in the offering
made by the undersigned Registrant to the purchaser.
The undersigned Registrant hereby further undertakes that, for the
purposes of determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 that is incorporated by reference
in this registration statement shall be deemed to be a new registration
statement relating to the securities offered herein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
II-5
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 October 18, 2006.
BLUEFLY, INC.
By: /s/ Melissa Payner-Gregor
-------------------------------------
Melissa Payner-Gregor
Chief Executive Officer and President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
------------------------------------ ---------------------------------- ----------------
/s/ Melissa Payner-Gregor Chief Executive Officer, President October 18, 2006
------------------------------------ and Director (Principal Executive
Melissa Payner-Gregor Officer)
/s/ Patrick C. Barry Chief Financial Officer and Chief October 18, 2006
------------------------------------ Operating Officer (Principal
Patrick C. Barry Financial and Accounting Officer)
/s/ Alan Kane* Chairman of the Board October 18, 2006
------------------------------------
Alan Kane
/s/ Barry Erdos* Director October 18, 2006
------------------------------------
Barry Erdos
/s/ Christopher G. McCann* Director October 18, 2006
---------------------------
Christopher G. McCann
/s/ Martin Miller* Director October 18, 2006
------------------------------------
Martin Miller
/s/ Neal Moszkowski* Director October 18, 2006
------------------------------------
Neal Moszkowski
/s/ David Wassong* Director October 18, 2006
------------------------------------
David Wassong
/s/ Ann Jackson* Director October 18, 2006
------------------------------------
Ann Jackson
/s/ Michael Gross* Director October 18, 2006
------------------------------------
Michael Gross
*By: /s/ Patrick C. Barry
--------------------
Patrick C. Barry,
as Attorney-In-Fact
II-6
INDEX TO EXHIBITS
5.1 Opinion of Dechert LLP
23.1 Consent of PricewaterhouseCoopers LLP, an independent registered public
accounting firm (filed as Exhibit 23.1 to the Form S-3, File No.
333-136866, filed by Bluefly, Inc. on August 24, 2006)*
23.2 Consent of Counsel (included as Exhibit 5.1)
24.1 Power of Attorney (filed as Exhibit 24.1 to the Form S-3, File No.
333-136866, filed by Bluefly, Inc. on August 24, 2006)*
----------
* Previously filed; incorporated herein by reference.