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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2007
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______ to ______
Commission File Number: 001-14498
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BLUEFLY, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3612110
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
42 West 39th Street, New York, NY 10018
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (212) 944-8000
----------
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer" and "large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of May 9, 2007, the issuer had outstanding 130,927,212 shares of Common
Stock, $.01 par value.
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BLUEFLY, INC.
TABLE OF CONTENTS
PAGE
----
Part I. Financial Information
Item 1. Financial Statements
Condensed Balance Sheets as of March 31, 2007 (unaudited)
and December 31, 2006 3
Condensed Statements of Operations for the three months ended
March 31, 2007 and 2006 (unaudited) 4
Condensed Statements of Changes in Shareholders' Equity for the
three months ended March 31, 2007 (unaudited) 5
Condensed Statements of Cash Flows for the three months ended
March 31, 2007 and 2006 (unaudited) 6
Condensed Notes to Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
Item 4. Controls and Procedures 16
Part II. Other Information 16
Item 1. Legal Proceedings 16
Item 6. Exhibits 16
Signatures 17
2
Part I - FINANCIAL INFORMATION
Item 1. - Financial Statements
BLUEFLY, INC.
CONDENSED BALANCE SHEETS (Unaudited)
MARCH 31, DECEMBER 31,
2007 2006
------------- -------------
ASSETS
Current assets
Cash and cash equivalents $ 14,254,000 $ 20,188,000
Inventories, net 26,133,000 24,189,000
Accounts receivable, net of allowance for doubtful accounts 3,624,000 2,719,000
Prepaid inventory 378,000 616,000
Prepaid expenses 966,000 341,000
Other current assets 486,000 553,000
------------- -------------
Total current assets 45,841,000 48,606,000
Property and equipment, net 4,015,000 3,573,000
Other assets 236,000 251,000
------------- -------------
Total assets $ 50,092,000 $ 52,430,000
============= =============
Current liabilities
Accounts payable $ 5,331,000 $ 4,822,000
Allowance for sales returns 4,381,000 5,043,000
Accrued expenses and other current liabilities 1,509,000 1,908,000
Deferred revenue 2,580,000 2,830,000
------------- -------------
Total current liabilities 13,801,000 14,603,000
Total liabilities $ 13,801,000 $ 14,603,000
============= =============
Commitments and contingencies
Shareholders' equity
Series F Preferred stock - $.01 par value; 7,000 shares authorized,
571.43 issued and outstanding as of March 31, 2007 and December 31, 2006
(liquidation preference: $571,000 plus accrued dividends of $73,000, and
$62,000 as of March 31, 2007 and December 31, 2006, respectively) -- --
Common stock - $.01 par value; 152,000,000 and 92,000,000 shares
authorized as of March 31, 2007 and December 31, 2006, respectively,
131,036,059 and 130,484,854, issued as of March 31, 2007 and
December 31, 2006, respectively, 130,909,156 and 130,484,854 shares
outstanding as of March 31, 2007 and December 31, 2006, respectively 1,309,000 1,305,000
Treasury Stock (160,000) --
Additional paid-in capital 154,242,000 152,519,000
Accumulated deficit (119,100,000) (115,997,000)
------------- -------------
Total shareholders' equity 36,291,000 37,827,000
------------- -------------
Total liabilities and shareholders' equity $ 50,092,000 $ 52,430,000
============= =============
The accompanying notes are an integral part of these condensed financial
statements.
3
BLUEFLY, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
------------------------------
2007 2006
------------- -------------
Net sales $ 22,108,000 $ 16,876,000
Cost of sales 13,734,000 10,037,000
------------- -------------
Gross profit 8,374,000 6,839,000
Selling and fulfillment expenses 4,399,000 3,433,000
Marketing expenses 3,611,000 4,031,000
General and administrative expenses 3,586,000 2,427,000
------------- -------------
Total operating expenses 11,596,000 9,891,000
Operating loss (3,222,000) (3,052,000)
Interest and other income 195,000 45,000
Interest and other expense (76,000) (257,000)
------------- -------------
Net loss $ (3,103,000) $ (3,264,000)
Preferred stock dividends (11,000) (1,231,000)
------------- -------------
Net loss available to common shareholders $ (3,114,000) $ (4,495,000)
============= =============
Basic and diluted loss per common share $ (0.02) $ (0.22)
============= =============
Weighted average common shares outstanding
(basic and diluted) 129,629,498 20,367,508
------------- -------------
The accompanying notes are an integral part of these condensed financial
statements.
4
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 2005, 2006 AND
FOR THE THREE MONTHS ENDED MARCH 31, 2007 (Unaudited)
PREFERRED STOCK COMMON STOCK
$.01 PAR VALUE $.01 PAR VALUE
-------------------------------- -------------------------------
NUMBER OF NUMBER OF
SHARES AMOUNT SHARES AMOUNT
-------------- -------------- -------------- --------------
Balance at January 1, 2005 9,358,550 $ 94,000 15,241,756 $ 152,000
-------------- -------------- -------------- --------------
Sale of Series F Preferred Stock
($1,000 per share net of
expenses of $249,000) 7,000 - - -
Shares Of Series D Preferred Stock
Converted into Common Stock (823) $ - 1,454,645 15,000
Shares Of Series F Preferred Stock
Converted into Common Stock (1,720) $ - 765,481 8,000
Expense recognized in connection
with Issuance of Options - - - -
Exercise of Employee Options - - 1,597,284 16,000
Net Loss - - - -
-------------- -------------- -------------- --------------
Balance at December 31, 2005 9,363,007 94,000 19,059,166 $ 191,000
-------------- -------------- -------------- --------------
Conversion of Preferred Stock (9,362,436) (94,000) 48,545,527 485,000
Stock based compensation - - - -
Sale of Common Stock, net of
issuance expenses of
approximately $2.0 million - - 60,975,610 610,000
Issuance of Common Stock to
Placement Agent - - 1,000,000 10,000
Warrants Issued to Third-Party - - - -
Dividends Paid to Related
Party Shareholders - - - -
Deemed Dividends related to
beneficial conversion on
Series F Preferred Stock - - - -
Exercise of Employee Options - - 43,330 -
Issuance of Restricted Stock - - 861,221 9,000
Net Loss - - - -
-------------- -------------- -------------- --------------
Balance at December 31, 2006 571 $ - 130,484,854 $ 1,305,000
-------------- -------------- -------------- --------------
Stock based compensation - - - -
Issuance of Restricted Stock - - 414,942 4,000
Purchase of Treasury Stock - - - -
Exercise of Employee Options - - 7,500 -
Exercise of Related Party Warrant - - 1,860 -
Net Loss - - - -
-------------- -------------- -------------- --------------
Balance at March 31, 2007 571 $ - 130,909,156 $ 1,309,000
-------------- -------------- -------------- --------------
TREASURY STOCK
------------------------------- ADDITIONAL TOTAL
NUMBER OF PAID-IN ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY
-------------- -------------- -------------- -------------- --------------
Balance at January 1, 2005 - $ - $ 107,270,000 $ (96,127,000) $ 11,389,000
-------------- -------------- -------------- -------------- --------------
Sale of Series F Preferred Stock
($1,000 per share net of
expenses of $249,000) - - 6,751,000 - 6,751,000
Shares Of Series D Preferred Stock
Converted into Common Stock - - (15,000) - -
Shares Of Series F Preferred Stock
Converted into Common Stock - - (8,000) - -
Expense recognized in connection
with Issuance of Options - - 41,000 - 41,000
Exercise of Employee Options - - 1,488,000 - 1,504,000
Net Loss - - - (3,820,000) (3,820,000)
-------------- -------------- -------------- -------------- --------------
Balance at December 31, 2005 - - $ 115,527,000 $ (99,947,000) $ 15,865,000
-------------- -------------- -------------- -------------- --------------
Conversion of Preferred Stock - - (391,000) - -
Stock based compensation - - 4,454,000 - 4,454,000
Sale of Common Stock, net of
issuance expenses of
approximately $2.0 million - - 47,420,000 - 48,030,000
Issuance of Common Stock to
Placement Agent - - 1,070,000 - 1,080,000
Warrants Issued to Third-Party - - 67,000 - 67,000
Dividends Paid to Related
Party Shareholders - - (19,512,000) - (19,512,000)
Deemed Dividends related to
beneficial conversion on
Series F Preferred Stock - - 3,857,000 (3,857,000) -
Exercise of Employee Options - - 36,000 - 36,000
Issuance of Restricted Stock - - (9,000) - -
Net Loss - - - (12,193,000) (12,193,000)
-------------- -------------- -------------- -------------- --------------
Balance at December 31, 2006 - $ - $ 152,519,000 $ (115,997,000) $ 37,827,000
-------------- -------------- -------------- -------------- --------------
Stock based compensation - - 1,721,000 - 1,721,000
Issuance of Restricted Stock - - (4,000) - -
Purchase of Treasury Stock 126,903 (160,000) - - (160,000)
Exercise of Employee Options - - 6,000 - 6,000
Exercise of Related Party Warrant - - - - -
Net Loss - - - (3,103,000) (3,103,000)
-------------- -------------- -------------- -------------- --------------
Balance at March 31, 2007 126,903 $ (160,000) $ 154,242,000 $ (119,100,000) $ 36,291,000
-------------- -------------- -------------- -------------- --------------
The accompanying notes are an integral part of these condensed financial
statements.
5
BLUEFLY, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
------------------------------
2007 2006
------------- -------------
Cash flows from operating activities
Net loss $ (3,103,000) $ (3,264,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 423,000 353,000
Stock based compensation 1,721,000 612,000
Warrant issued to consultant -- 67,000
Provisions for returns (663,000) (629,000)
Bad debt expense 155,000 43,000
Reserve for inventory obsolescence 302,000 240,000
Warrant issued to supplier -- 92,000
Changes in operating assets and liabilities:
(Increase) decrease in
Inventories (2,246,000) (4,787,000)
Accounts receivable (1,060,000) (1,274,000)
Prepaid expenses (387,000) 960,000
Other current assets (93,000) 34,000
Increase (decrease) in
Accounts payable 509,000 2,063,000
Accrued expenses and other current liabilities (224,000) (186,000)
Interest payable to related party shareholders -- 149,000
Deferred revenue (250,000) 672,000
------------- -------------
Net cash used in operating activities (4,916,000) (4,855,000)
------------- -------------
Cash flows from investing activities
Purchase of property and equipment (850,000) (110,000)
------------- -------------
Net cash used in investing activities (850,000) (110,000)
------------- -------------
Cash flows from financing activities
Payments of capital lease obligation (14,000) (14,000)
Net proceeds from exercise of stock options 6,000 --
Purchase of Treasury Stock (160,000) --
------------- -------------
Net cash used in financing activities (168,000) (14,000)
------------- -------------
Net decrease in cash and cash equivalents (5,934,000) (4,979,000)
Cash and cash equivalents - beginning of period 20,188,000 9,408,000
------------- -------------
Cash and cash equivalents - end of period $ 14,254,000 $ 4,429,000
============= =============
Supplemental schedule of non-cash investing and financing activities:
Cash paid for interest $ 23,000 $ 49,000
============= =============
Warrant issued to consultant -- $ 67,000
============= =============
The accompanying notes are an integral part of these condensed financial
statements.
6
BLUEFLY, INC.
MARCH 31, 2007
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial statements include the accounts of Bluefly, Inc. (the
"Company"). The financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnote disclosures
required by accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of management, all
adjustments (consisting mainly of normal recurring accruals) considered
necessary for a fair statement have been included. The results of operations of
any interim period are not necessarily indicative of the results of operations
to be expected for the fiscal year due to seasonal and other factors. For
further information, refer to the financial statements and accompanying
footnotes included in the Company's Form 10-K for the year ended December 31,
2006.
The Company has sustained net losses and negative cash flows from operations
since the formation of Bluefly.com. The Company's ability to meet its
obligations in the ordinary course of business is dependent on its ability to
establish profitable operations, or find other sources to fund operations. The
Company believes that its current funds, together with working capital, and its
availability under its existing Credit Facility, will be sufficient to enable it
to meet its planned expenditures through at least the next 12 months.
NOTE 2 - THE COMPANY
The Company is a leading Internet retailer that sells over 350 brands of
designer apparel, accessories and home products at discounts of up to 75% off of
retail value. The Company's e-commerce Web site ("Bluefly.com" or "Web Site")
was launched in September 1998.
NOTE 3 - OFFER TO EXCHANGE
In January 2007, the Company commenced an exchange offer (the "Exchange Offer")
pursuant to which it offered eligible employees and non-employee directors the
opportunity to exchange, on a grant-by-grant basis: (a) their outstanding
eligible stock options that were vested as of August 31, 2006 for restricted
stock awards consisting of the right to receive restricted common stock of the
Company (the "Restricted Stock Awards"); and (b) their outstanding eligible
stock options that were not vested as of August 31, 2006 for deferred restricted
stock unit awards consisting of rights to receive common stock of the Company on
specified dates subsequent to vesting (the "Deferred Stock Unit Awards," and,
together with the Restricted Stock Awards, the "Replacement Awards").
In order to be eligible to participate in the Exchange offer, an option holder
was required to (a) have been an employee or non-employee director of the
Company on the date of the Exchange Offer, (b) have neither ceased to be an
employee or non-employee director, nor have submitted or received a notice of
termination of employment or resignation, prior to the expiration of the
Exchange Offer and (c) owned eligible options. Options eligible for exchange in
the Exchange Offer were outstanding options granted under the Company's three
stock based employee compensation plans (collectively the "Plans") that, in each
case, had an exercise price per share that was greater than $1.50.
The number of Replacement Awards an eligible participant was eligible to receive
in exchange for an eligible option was determined by a specific exchange ratio
applicable to that option, as set forth in the Offer to Exchange included as an
exhibit to the Schedule TO filed by the Company with the Securities and Exchange
Commission in connection with the Exchange Offer (the "Offer to Exchange").
Restricted Stock Awards granted pursuant to the Exchange Offer vest and become
free from restriction one year from the date of the exchange, except if the
grantee made an election under Section 83(b) of the Internal Revenue Code of
1986, as amended, in which case the restrictions on such Restricted Stock Award
lapsed with respect only to the number of shares needed to satisfy any
applicable tax withholding as of the date that the Company received such
election, as more fully described in the Offer to Exchange. The minimum period
for full vesting of Deferred Stock Unit Awards is two years from the date of
exchange. The length of the vesting schedule applicable to each Deferred Stock
Unit Award was based on the final vesting date of the eligible stock option as
follows:
7
BLUEFLY, INC.
MARCH 31, 2007
DEFERRED STOCK UNIT AWARDS VESTING SCHEDULE
--------------------------------------------------------------------------------
FINAL VESTING DATE OF TOTAL VESTING PERIOD PERCENTAGE OF DEFERRED
ELIGIBLE STOCK OPTION OF DEFERRED STOCK STOCK UNIT AWARDS
AS OF DATE OF CANCELLATION UNIT AWARDS QUARTERLY*
--------------------------- -------------------- ---------------------------
Prior to August 31, 2007 2 years 12 1/2%
On or after August 31, 2007 3 years 8 1/3%
*Deferred Stock Unit Awards vest in substantially equal quarterly installments
over the applicable vesting period, subject to the participant's continued
employment with (or service on the Board of Directors of) the Company.
The shares of common stock underlying the Deferred Stock Unit Award will be
delivered on the Delivery Date. The Delivery Date is the date on which the
earliest of the following occurs:
DELIVERY DATE
------------------------------------------------------------
o 2 years from the date of grant (with respect to
Deferred Stock Units Awards exchanged for eligible
stock options with a vesting date prior to August 31,
2007)
OR
3 years from the date of grant (with respect to
Deferred Stock Units Awards exchanged for eligible
stock options with a vesting date on or after August
31, 2007)
o Death
o The date on which the employee becomes disabled
Melissa Payner-Gregor, the Company's chief executive officer, and Patrick C.
Barry, the Company's chief financial officer, were not eligible to participate
in the Exchange Offer, but previously participated in an exchange in November
2006 through each of their employment agreements, which is described in the
Offer to Exchange.
Pursuant to the Exchange Offer, options to purchase an aggregate of 1,562,000
shares of Common Stock were exchanged in return for an aggregate of 472,471
Restricted Stock Awards and an aggregate of 394,405 Deferred Stock Unit Awards.
In connection with the Exchange Offer, the Company will recognize $916,000 of
expense over the next three years.
NOTE 4 - FINANCING AGREEMENT
The Company has a three year revolving credit facility (the "Credit Facility")
with Wells Fargo Retail Finance, LLC ("Wells Fargo"). Under the terms of the
Credit Facility, Wells Fargo provides the Company with a revolving credit
facility and issues letters of credit in favor of suppliers or factors. The
Credit Facility is secured by a lien on substantially all of the Company's
assets. Historically, the Credit Facility had also been secured by a $2,000,000
letter of credit issued by an affiliate of Soros Fund Management LLC ("Soros")
in favor of Wells Fargo (the "Soros LC"). In August 2006, Wells Fargo agreed to
release the Soros LC, and that it would no longer require an availability
reserve (although it has the right under the Credit Facility to establish
reserves in the future, as it deems appropriate). In return, the Company agreed
to maintain a minimum cash balance of $5,000,000. Availability under the Credit
Facility is determined by a formula that takes into account the amount of the
Company's inventory and accounts receivable. The maximum availability is
currently $7,500,000, but can be increased to $12,500,000 at the Company's
request, subject to certain conditions. As of March 31, 2007, total availability
under the Credit Facility was approximately $7,500,000, of which $2,800,000 was
committed, leaving approximately $4,700,000 available for further borrowings.
Interest accrues monthly on the average daily amount outstanding under the
Credit Facility during the preceding month at a per annum rate equal to the
prime rate plus 0.75% or LIBOR plus 2.75%. The Company also pays a monthly
commitment fee on the unused portion of the facility (i.e., $7,500,000 less the
amount of loans outstanding) equal to 0.35%. The Company also pays Wells Fargo
certain fees to open letters of credit and guarantees in an amount equal to a
certain percentage of the face amount of the letter of credit for each thirty
(30) days such letter of credit, or a portion thereof, remains open. For the
three months ended March 31, 2007, the Company incurred approximately $23,000 in
connection with these fees.
8
BLUEFLY, INC.
MARCH 31, 2007
Under the terms of the Credit Facility, Soros has the right to purchase all of
the Company's obligations from Wells Fargo at any time if the Company is then in
default under the Credit Facility.
NOTE 5 - LOSS PER SHARE
The Company has determined Loss Per Share in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." Basic
loss per share excludes dilution and is computed by dividing loss available to
common shareholders by the weighted average number of common shares outstanding
for the period.
Diluted loss per share is computed by dividing loss available to common
shareholders by the weighted average number of common shares outstanding for the
period, adjusted to reflect potentially dilutive securities. Due to the loss
from continuing operations, the following (i) options and warrants to purchase
shares of Common Stock, (ii) Preferred Stock convertible into shares of Common
Stock, (iii) Restricted Stock Awards that have not yet vested and (iv) Deferred
Stock Unit Awards ("DSUs") for shares that have not yet been delivered were not
included in the computation of diluted loss per share because the result of the
exercise of such inclusion would be antidilutive:
Security March 31, 2007 Exercise Prices March 31, 2006 Exercise Prices
---------------------------- --------------- --------------- ------------- ----------------
Options 3,784,538 $0.80 - $14.38 8,117,316 $0.69 - $16.47
Restricted Stock Awards/DSUs 10,671,614(3) -- -- --
Warrants 1,510,893 $0.78 - $3.96 1,945,893 $0.78 - $ 3.96
Preferred Stock 696,341(1) -- 42,683,619 --
Convertible Notes -- -- --(2) --
(1) At March 31, 2007, there were 571 shares of Series F Convertible Preferred
Stock outstanding that are convertible into approximately 696,341 shares of
Common Stock (excluding dividends).
(2) Represented debt issued in connection with the July 2003 financing and
October 2003 financing, which was convertible into equity securities of the
Company sold in any subsequent round of financing, at the holder's at a
price that is equal to the lowest price per share accepted by any investor
in such subsequent round of financing. Until such financing occurs, such
debt is not convertible into Common Stock. At March 31, 2006, such debt was
not convertible into Common Stock. In June 2006, all of the convertible
notes were repaid.
(3) Includes both Restricted Stock Awards and DSUs.
NOTE 6 - STOCK BASED COMPENSATION
The Company accounts for stock based compensation in accordance with the
provisions of Statement of Financial Accounting Standards No. 123 (revised
2004), "Share-Based Payment" ("SFAS No. 123(R)"), which requires that the costs
resulting from all share-based payment transactions be recognized in the
financial statements at their fair values. The Company adopted SFAS No. 123(R)
using the modified prospective application method under which the provisions of
SFAS No. 123(R) apply to new awards and to awards modified, repurchased, or
cancelled after the adoption date. Additionally, compensation cost for the
portion of the awards for which the requisite service has not been rendered that
are outstanding as of the adoption date is recognized in the Statement of
Operations over the remaining service period after the adoption date based on
the award's original estimate of fair value. Results for prior periods have not
been restated. Total share-based compensation expense recorded in the Statement
of Operations for the three months ended March 31, 2007 was $1,721,000.
STOCK OPTIONS
The fair value of options granted is estimated on the date of grant using a
Black-Scholes option pricing model. Expected volatilities are calculated based
on the historical volatility of the Company's Common Stock. Management monitors
share option exercise and employee termination patterns to estimate forfeiture
rates within the valuation model. The expected holding period of options
represents the period of time that options granted are expected to be
outstanding. The risk-free interest rate for periods within the expected life of
the option is based on the interest rate of U.S. Treasury notes in effect on the
date of the grant.
9
BLUEFLY, INC.
MARCH 31, 2007
The following table summarizes the Company's stock option activity:
NUMBER WEIGHTED
OF AVERAGE
SHARES EXERCISE PRICE
--------------- --------------
Balance at December 31, 2006 5,417,116 $ 1.68
---------------
Options granted - -
Options canceled (1,625,078) $ 3.07
Options exercised (7,500) $ 0.84
---------------
Balance at March 31, 2007 3,784,538 $ 1.09
Vested at December 31, 2006 3,682,877 $ 1.83
Vested at March 31, 2007 2,762,847 $ 1.08
During the first quarter of 2007, 2,036,644 options vested. Of these options
1,116,634 were canceled, primarily pursuant to the Exchange Offer. The total
fair value of the options vested (including those canceled) during the quarter
ended March 31, 2007 was approximately $2.5 million. There were no options
granted during the quarter. At March 31, 2007, the aggregate intrinsic value of
the fully vested options was $251,000 and the weighted average remaining
contractual life of the options was 5.8 years. The Company has not capitalized
any compensation cost, or modified any of its stock option grants during the
first quarter of 2007. Approximately 7,500 options with an intrinsic value of
approximately $3,200 were exercised during the first quarter of 2007. No options
were granted during the quarter. No cash was used to settle equity instruments
granted under the Plans during the first quarter of 2007.
As of March 31, 2007, the total compensation cost related to non-vested awards
not yet recognized was $804,000. Total compensation cost is expected to be
recognized over 2 years on a weighted average basis.
RESTRICTED STOCK AWARDS AND DEFERRED STOCK UNIT AWARDS
The following table is a summary of activity related to Restricted Stock Awards
and Deferred Stock Unit Awards for employees at March 31, 2007:
RESTRICTED DEFERRED STOCK
STOCK AWARDS UNIT AWARDS
---------------- ----------------
Balance at January 1, 2007 861,221 9,862,267
Shares/Units Granted 414,942 394,405
Shares/Units Forfeited -- --
Shares/Units Restriction Lapses 861,221 --
Balance at March 31, 2007 414,942 10,256,672
Weighted Average Grant Date Fair Value Per share $ 1.27 $ 0.95
Aggregate Grant Date Fair Value $ 1,102,363 $ 414,125
Vesting Service Period of Shares Granted 12 months 12-36 months
Number of shares/units vested at March 31, 2007 -- --
Number of shares/units unvested at March 31, 2007 414,942 10,256,672
For the quarter ended March 31, 2007 the Company recognized an expense of
approximately $1.5 million in connection with these awards.
As of March 31, 2007 the total compensation cost related to non-vested
restricted stock and deferred stock units not yet recognized was $9.8 million.
Total compensation cost is expected to be recognized over a two year period.
10
BLUEFLY, INC.
MARCH 31, 2007
NOTE 7 - NEW ACCOUNTING PRONOUNCEMENTS
In July 2006, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes--an
interpretation of FASB Statement No. 109" ("FIN 48"), which clarifies the
accounting for uncertainty in tax positions. This Interpretation requires an
entity to recognize the impact of a tax position in its financial statements if
that position is more likely than not to be sustained on audit based on the
technical merits of the position. The provisions of FIN 48 are effective as of
the beginning of fiscal year 2007, with the cumulative effect of the change in
accounting principle recorded as an adjustment to opening retained earnings.
The implementation of FIN 48 had no impact on the Company's financial statement
as the Company has no uncertain tax positions. The Company is primarily subject
to US federal and New York State income tax. Tax years subsequent to 2004 remain
open to review by US federal and state tax authorities.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Bluefly, Inc. is a leading Internet retailer that sells over 350 brands of
designer apparel, accessories and home furnishings at discounts of up to 75% off
of retail value. We launched our Web site in September 1998. Over the past five
years, our sales have grown at a compounded annual growth rate of almost 23%,
while our gross margin percentage has increased from 22.5% in the first quarter
of 2003 to 37.9% in the first quarter of 2007.
The increase in our margin and sales over the past few years is the direct
result of the merchandise strategy that we began to implement in spring 2004. As
part of that strategy, we are bringing current season merchandise and the latest
fashion trends to our customer for great value. While there will be some
fluctuation in our gross margin percentage from quarter to quarter as we further
develop our merchandising and marketing strategy, we believe that we will be
able to maintain margins in the 38% to 40% range.
We believe that there is an opportunity to accelerate the growth of our business
while continuing to provide our customers with the great values that they have
become accustomed to. In an effort to take advantage of this opportunity, we
have invested much more aggressively in marketing during the past 18 months.
Our net sales increased by 31% to $22,108,000 for the three months ended March
31, 2007 from $16,876,000 for the three months ended March 31, 2006. Our gross
margin decreased slightly to 37.9% for the three months ended March 31, 2007
from 40.5% for the three months ended March 31, 2006, but was still above our
levels of 36.2% for the three months ended March 31, 2005 and 34.0% for the
three months ended March 31, 2004. Our gross profit increased by 22% to
$8,374,000 for the three months ended March 31, 2007 from $6,839,000 for the
three months ended March 31, 2006. During the first quarter of 2007 we changed
our shipping method to better serve our customers. This negatively impacted the
gross margin percentage by approximately 1%. Accordingly, we will continue to
revaluate our options for a more cost beneficial solution. Our operating loss
increased slightly to $3,222,000 for the three months ended March 31, 2007, from
$3,052 ,000 for the three months ended March 31, 2006. This increase was
primarily a result of an increase in stock-based compensation as a result of
equity awards granted in the fourth quarter of 2006 as well as incremental
expense recorded in connection with the Offer to Exchange, recorded in
accordance with SFAS No. 123(R). These increases were partially offset by
decreased marketing expenditures in the first quarter of 2007.
Spending decreased in marketing expenses (excluding staff related costs) to
$3,182,000 for the first quarter of 2007 from $3,648,000 for the first quarter
2006, primarily as a result of the timing of our campaign.
Our reserve for returns and credit card chargebacks increased to 39.2% of gross
sales for the first quarter of 2007 compared to 38.1% for the first quarter of
2006. The increase was primarily caused by a shift in our merchandise mix
towards higher end products. However, we believe that this increase in return
rates has been more than offset by the higher gross margin dollars and average
order sizes that have been generated by this shift in merchandise mix.
A portion of our inventory includes merchandise that we either purchased with
the intention of holding for the appropriate season or were unable to sell
through in its entirety in a prior season and have determined to hold for the
next selling season,
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BLUEFLY, INC.
MARCH 31, 2007
subject (in some cases) to appropriate mark-downs. In recent years, we have
increased the amount of inventory purchased on a pack and hold basis in order to
take advantage of opportunities in the market.
At March 31, 2007, we had an accumulated deficit of $119,100,000. The net losses
and accumulated deficit resulted primarily from the costs associated with
developing and marketing our Web site and building our infrastructure, as well
as non-cash beneficial conversion charges resulting from decreases in the
conversion price of our Preferred Stock and the payment of dividends to holders
of Preferred Stock. 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. Therefore, we
may continue to incur substantial operating losses. Although we have experienced
revenue growth in recent years, this growth may not be sustainable and therefore
should not be considered indicative of future performance.
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2007 COMPARED TO THE THREE MONTHS ENDED
MARCH 31, 2006.
The following table sets forth our statement of operations data, for the three
months ended March 31st. All data is in thousands except as indicated below:
2007 2006 2005
---------------------- ---------------------- ----------------------
As a % As a % As a %
of Net of Net of Net
Sales Sales Sales
--------- --------- ---------
Net sales $ 22,108 100.0% $ 16,876 100.0% $ 13,502 100.0%
Cost of sales 13,734 62.1% 10,037 59.5% 8,617 63.8%
--------- --------- ---------
Gross profit 8,374 37.9% 6,839 40.5% 4,885 36.2%
Selling and fulfillment expenses 4,399 19.9% 3,433 20.3% 3,141 23.3%
Marketing expenses 3,611 16.3% 4,031 23.9% 894 6.6%
General and administrative expenses 3,586 16.2% 2,427 14.4% 1,586 11.7%
--------- --------- ---------
Total operating expenses 11,596 52.4% 9,891 58.6% 5,621 41.6%
Operating loss (3,222) (14.5)% (3,052) (18.1)% (736) (5.4)%
Interest (expense) and other income 119 0.5% (212) (1.3)% (157) (1.2)%
--------- --------- ---------
Net loss (3,103) (14.0)% (3,264) (19.4)% (893) (6.6)%
We also measure and evaluate ourselves against certain other key operational
metrics. The following table sets forth our actual results based on these other
metrics for the three months ended March 31st, as indicated below:
2007 2006 2005
---------- ---------- ----------
Average Order Size (including shipping & handling) $ 269.21 $ 243.92 $ 200.06
New Customers Added during the Period 49,385 38,688 36,765
Net sales: Gross sales for the three months ended March 31, 2007 increased by
approximately 33% to $36,367,000 from $27,245,000 for the three months ended
March 31, 2006. For the three months ended March 31, 2007, we recorded a
provision for returns and credit card chargebacks and other discounts of
$14,259,000, or approximately 39.2% of gross sales. For the three months ended
March 31, 2006, the provision for returns and credit card chargebacks and other
discounts was $10,369,000, or approximately 38.1% of gross sales. The increase
in this provision as a percentage of gross sales resulted from an increase in
the return rate. The increase was primarily caused by a shift in our merchandise
mix towards higher end products. However, we believe that this increase in
return rates has been more than offset by the higher gross margins and average
order sizes that have been generated by this shift in merchandise mix.
After the necessary provisions for returns, credit card chargebacks and
adjustments for uncollected sales taxes, our net sales for the three months
ended March 31, 2007 were $22,108,000. This represents an increase of
approximately 31% compared to the
12
BLUEFLY, INC.
MARCH 31, 2007
three months ended March 31, 2006, in which net sales totaled $16,876,000. The
growth in net sales resulted from both an increase in the number of new
customers acquired (over 27% higher compared to the first three months of 2006)
and an increase in average order size (over 10% higher compared to the first
three months of 2006). For the three months ended March 31, 2007, revenue from
shipping and handling (which is included in net sales) increased approximately
25% to $1,202,000 from $965,000 for the three months ended March 31, 2006.
Cost of sales: Cost of sales consists of the cost of product sold to customers,
in-bound and out-bound shipping costs, inventory reserves, commissions and
packing materials. Cost of sales for the three months ended March 31, 2007
totaled $13,734,000, resulting in gross margin of approximately 37.9%. Cost of
sales for the three months ended March 31, 2006 totaled $10,037,000, resulting
in gross margin of 40.5%. The gross margin was negatively effected by
approximately 1% due to a new shipping method that we used in the first quarter
of 2007. We will continue to evaluate our options in order to find a more cost
beneficial solution. Gross profit increased by approximately 22%, to $8,374,000
for the three months ended March 31, 2007 compared to $6,839,000 for the three
months ended March 31, 2006. The growth in gross profit was primarily the result
of increased average order size and growth in sales, which was driven by the
continuing success of our merchandising strategy, which focuses on negotiating
better prices with vendors as well as selling more in-season product. In-season
merchandise has more value to our customers and therefore commands higher
margins.
Marketing expenses: Marketing expenses decreased by 10% to $3,611,000 for the
three months ended March 31, 2007 from $4,031,000 for the three months ended
March 31, 2006.
Marketing expenses include expenses related to paid search, online and print
advertising, television, fees to marketing affiliates, direct mail campaigns as
well as staff related costs. As a percentage of net sales, our marketing
expenses decreased to 16.3% for the three months ended March 31, 2007 from 23.9%
for the three months ended March 31, 2006. Total expenses related to the
national print and television advertising campaign for the three months ended
March 31, 2007 totaled $1.9 million compared to $2.9 million for the three
months ended March 31, 2006, and some of this decrease is related to the timing
of the launch. The decrease in marketing expenses in the first quarter of 2007
compared to the first quarter of 2006 is attributable to an approximately
$981,000 decrease in costs related to the national advertising campaign. This
decrease was partially offset by the following increases: $254,000 related to
paid search, $65,000 in affiliate expenses, $54,000 in direct mail campaigns and
$43,000 related to comparison engines.
Selling and fulfillment expenses: Selling and fulfillment expenses increased by
28% in the first three months of 2007 compared to the first three months of
2006. Selling and fulfillment expenses were comprised of the following:
Percentage
Three Months Three Months Difference
Ended As a % of Ended As a % of increase
March 31, 2007 Net Sales March 31, 2006 Net Sales (decrease)
-------------- -------------- -------------- -------------- --------------
Operating $ 2,266,000 10.2% $ 1,750,000 10.4% 29%
Technology 1,167,000 5.3% 971,000 5.7% 20%
E-Commerce 966,000 4.4% 712,000 4.2% 36%
-------------- -------------- -------------- -------------- --------------
$ 4,399,000 19.9% $ 3,433,000 20.3% 28%
As a percentage of net sales, our selling and fulfillment expenses decreased to
19.9% for the three months ended March 31, 2007 from 20.3% for the three months
ended March 31, 2006.
Operating expenses include all costs related to inventory management,
fulfillment, customer service, and credit card processing. Operating expenses
increased in the first three months of 2007 by approximately 29% compared to the
first three months of 2006 as a result of variable costs associated with the
increased sales volume (e.g., picking and packing orders and processing returns)
and an increase in customer service and salary related expenses. Included in
operating expenses for 2006, was a refund from one of our credit card processors
due to the fact that it had charged us at incorrect rates during previous
periods.
Technology expenses consist primarily of staff related costs, amortization of
capitalized costs and Web site hosting. For the three months ended March 31,
2007, technology expenses increased by approximately 20% compared to the three
months ended March 31, 2006. This increase resulted from an increase in salary
related expenses, as well as an increase in software support, depreciation,
training and web hosting expenses. The increase was partially offset by a
decrease in consulting expenses as most
13
BLUEFLY, INC.
MARCH 31, 2007
of the consulting expenses incurred in the first quarter 2007 were related to
the development of our new Web site and capitalized accordingly. For the three
months ended March 31, 2007, approximately $534,000 of expenses was capitalized
in connection with the development of our new Web site.
E-Commerce expenses include expenses related to our photo studio, image
processing, and Web site design. For the three months ended March 31, 2007,
e-commerce expenses increased by approximately 36% as compared to the three
months ended March 31, 2006, primarily due to an increase in salary related
expenses as well as an increase in expenses associated with photo shoots,
supplies and research tools. In addition, for the three months ended March 31,
2007, equity based compensation increased compared to the three months ended
March 31, 2006, as a result of the Exchange Offer and new equity awards.
General and administrative expenses: General and administrative expenses include
merchandising, finance and administrative salaries and related expenses,
insurance costs, accounting and legal fees, depreciation and other office
related expenses. General and administrative expenses for the three months ended
March 31, 2007 increased by approximately 48% to $3,586,000 as compared to
$2,427,000 for the three months ended March 31, 2006. The increase in general
and administrative expenses was primarily the result of the recording of an
additional $999,000 of equity based compensation related to equity awards
granted during the fourth quarter of 2006 (stock based compensation expense was
approximately $1.5 million in the first quarter 2007 compared to $481,000 in the
first quarter 2006) as well as increased consulting and professional fees of
$33,000.
As a percentage of net sales, general and administrative expenses for the first
three months of 2007 increased to approximately 16.2% from 14.4% for the first
three months of 2006.
Loss from operations: Operating loss increased slightly in the first three
months of 2007 to $3,222,000 from $3,052,000 in the first three months of 2006.
Interest and other income: Other income for the three months ended March 31,
2007 increased to $195,000 from $45,000 for the three months ended March 31,
2006. These amounts related primarily to interest income earned on our cash
balances.
Interest and other expense: Interest expense for the three months ended March
31, 2007 totaled $76,000, compared to $257,000 for the three months ended March
31, 2006. Interest expense for the three months ended March 31, 2006 included
fees paid in connection with our Credit Facility, as well as interest expense on
our then outstanding promissory notes.
LIQUIDITY AND CAPITAL RESOURCES
General
At March 31, 2007, we had approximately $14.3 million in cash and cash
equivalents. Working capital at March 31, 2007 and 2006 was $32.0 million and
$15.7 million, respectively. Working capital at December 31, 2006 was $34.0
million. In addition, as of March 31, 2007, we had approximately $2.8 million
committed under the Credit Facility, leaving approximately $4.7 million of
availability.
We fund our operations through cash on hand, operating cash flow and the
proceeds of any equity or debt financing. Operating cash flow is affected by
revenue and gross margin levels, as well as return rates, and any deterioration
in our performance with respect to these financial measures would have a
negative impact on our liquidity. Total availability under the Credit Facility
is based primarily upon our inventory levels. In addition, both availability
under the Credit Facility and our operating cash flows are affected by the
payment terms that we receive from suppliers and service providers, and the
extent to which suppliers require us to request Wells Fargo to provide credit
support under the Credit Facility. In some instances, new vendors may require
prepayments. We may make prepayments in order to open up these new
relationships, or to gain access to inventory that would not otherwise be
available to us. In addition, we sometimes make prepayments in connection with
our advertising campaign, as in some circumstances we need to pay in advance of
production. As of March 31, 2007, we had approximately $378,000 of prepaid
inventory on our balance sheet.
Our inventory levels as of March 31, 2007 were approximately $4.8 million higher
than at March 31, 2006. The increase in inventory generally reflects a ramp up
in connection with our sales growth. However, the increased inventory level
could adversely affect our flexibility in taking advantage of other buying
opportunities that may become available in the near term.
14
BLUEFLY, INC.
MARCH 31, 2007
On June 15, 2006, we raised $50 million of additional capital through the sale
of 60,975,610 shares of our Common Stock. We used $25 million of the proceeds
from such sale to pay all accrued but unpaid dividends on the Preferred Stock
converted by Soros in connection with such sale and to payoff the convertible
promissory notes held by Soros. The remaining proceeds from the sale are being
used for general corporate purposes.
We believe that our current funds, together with operating cash flow, and
availability under our existing Credit Facility will be sufficient to enable us
to meet our planned expenditures through at least the next 12 months.
Credit Facility
In July 2005, we entered into a new three year revolving credit facility with
Wells Fargo. Pursuant to the Credit Facility, Wells Fargo provides us with a
revolving loan and issues letters of credit in favor of suppliers or factors.
The Credit Facility is secured by a lien on all of our assets. Historically, the
Credit Facility had also been secured by the Soros LC. In August 2006, Wells
Fargo agreed to release the Soros LC, and that it would no longer require an
availability reserve (although it has the right under the Credit Facility to
establish reserves in the future, as it deems appropriate). In return, we agreed
to maintain a minimum cash balance of $5,000,000. Availability under the Credit
Facility is determined by a formula that takes into account the amount of our
inventory and accounts receivable. The maximum availability is currently
$7,500,000, but can be increased to $12,500,000 at our request, subject to
certain conditions. As of March 31, 2007, total availability under the Credit
Facility was approximately $7,500,000 of which $2,800,000 was committed, leaving
approximately $4,700,000 available for further borrowings.
Interest accrues monthly on the average daily amount outstanding under the
Credit Facility during the preceding month at a per annum rate equal to the
prime rate plus 0.75% or LIBOR plus 2.75%. We also pay a monthly commitment fee
on the unused portion of the facility (i.e., $7,500,000 less the amount of loans
outstanding) equal to 0.35%. We also pay Wells Fargo certain fees to open
letters of credit and guarantees in an amount equal to a certain specified
percentage of the face amount of the letter of credit for each thirty (30) days
such letter of credit, or a portion thereof, remains open.
Under the terms of the Credit Facility, Soros has the right to purchase all of
our obligations from Wells Fargo at any time if we are then in default under the
Credit Facility.
Commitments and Long Term Obligations
As of March 31, 2007, we had the following commitments and long term
obligations:
Less than 1-3 3-5 More than 5
Total 1 year years years years
------------ ------------ ------------ ------------ ------------
Marketing and Advertising $ 671,000 671,000 -- --
Purchase Orders 14,058,000 14,058,000 -- -- --
Operating Leases 1,280,000 486,000 794,000 -- --
Technology Commitments 206,000 206,000 -- -- --
Employment Contracts 3,883,000 2,032,000 1,851,000 -- --
------------ ------------ ------------ ------------ ------------
Grand total $ 20,098,000 17,453,000 2,645,000 -- --
We believe that in order to grow the business, we will need to make additional
marketing and advertising commitments in the future. In addition, we expect to
hire and train additional employees for the operations and development of
Bluefly.com. However, our marketing budget and our ability to hire such
employees is subject to a number of factors, including our results of
operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have assessed our vulnerability to certain market risks, including interest
rate risk associated with financial instruments included in cash and cash
equivalents. Due to the short-term nature of these instruments we have
determined that the risks associated with interest rate fluctuations related to
these financial instruments do not pose a material risk to us.
15
BLUEFLY, INC.
MARCH 31, 2007
ITEM 4. CONTROLS AND PROCEDURES.
As of the end of the period covered by this Form 10-Q (the "Evaluation Date"),
we carried out an evaluation, under the supervision and with the participation
of our management, including our Chief Executive Officer along with our Chief
Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)). Based upon that evaluation, our Chief Executive Officer along
with our Chief Financial Officer concluded that, as of the Evaluation Date, our
disclosure controls and procedures were effective in ensuring that information
required to be disclosed by us in the reports that we file or submit under the
Exchange Act were recorded, processed, summarized and reported, within the time
periods specified in the Commission's rules and forms and are effective to
ensure that information required to be disclosed by us in the reports that we
file or submit under the Exchange Act is accumulated and communicated to our
management, including our principal executive and principal financial officers,
to allow timely decisions regarding required disclosure. There have been no
changes in our internal control over financial reporting that occurred during
the Company's most recent fiscal quarter that have materially affected, or are
reasonably likely to materially affect, the Company's internal control over
financial reporting.
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
This report may include statements that constitute "forward-looking" statements,
usually containing the words "believe", "project", "expect", or similar
expressions. These statements are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
inherently involve risks and uncertainties that could cause actual results to
differ materially from the forward-looking statements. The risks and
uncertainties are detailed from time to time in reports filed by us with the
Securities and Exchange Commission, including Forms 8-A, 8-K, 10-Q, and 10-K.
These risks and uncertainties include, but are not limited to, the following:
our history of losses and anticipated future losses; the success of our
advertising campaign; risks associated with Soros, private funds associated with
Maverick Capital Ltd. and private funds associated with and Prentice Capital
Management, LP each owning a significant portion of our stock; the potential
failure to forecast revenues and/or to make adjustments to our operating plans
necessary as a result of any failure to forecast accurately; unexpected changes
in fashion trends; cyclical variations in the apparel and e-commerce markets;
the risk of default by us under the Credit Facility and the consequences that
might arise from us having granted a lien on substantially all of our assets
under that agreement; risks of litigation for sale of unauthentic or damaged
goods and litigation risks related to sales in foreign countries; the dependence
on third parties and certain relationships for certain services, including our
dependence on U.P.S. (and the risks of a mail slowdown due to terrorist
activity) and our dependence on our third-party web hosting, fulfillment and
customer service centers; online commerce security risks; risks related to brand
owners' efforts to limit our ability to purchase products indirectly; management
of potential growth; the competitive nature of our business and the potential
for competitors with greater resources to enter the business; the availability
of merchandise; the need to further establish brand name recognition; risks
associated with our ability to handle increased traffic and/or continued
improvements to our Web site; rising return rates; dependence upon executive
personnel; the successful hiring and retaining of new personnel; risks
associated with expanding our operations; risks associated with potential
infringement of other's intellectual property; the potential inability to
protect our intellectual property; government regulation and legal
uncertainties; and uncertainties relating to the imposition of sales tax on
Internet sales.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We currently and from time to time are involved in litigation incidental to the
conduct of our business. However, we are not party to any lawsuit or proceeding
which in the opinion of management is likely to have a material adverse effect
on us.
ITEM 6. EXHIBITS
The following is a list of exhibits filed as part of this Report:
EXHIBIT NUMBER DESCRIPTION
-------------- ------------------------------------------------------------
10.1 Offer to Exchange, dated as of January 25, 2007
(incorporated by reference to Exhibit (a)(1)(A) to the
Schedule TO filed by the Company with the Securities and
Exchange Commission on January 25, 2007).
31.1 Certification Pursuant to Rule 13a-14(a)/15d-14(a)
31.2 Certification Pursuant to Rule 13a-14(a)/15d-14(a)
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
16
BLUEFLY, INC.
MARCH 31, 2007
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
BLUEFLY, INC.
By: /s/ Melissa Payner-Gregor
---------------------------
Melissa Payner-Gregor
Chief Executive Officer
By: /s/ Patrick C. Barry
---------------------------
Patrick C. Barry
Chief Financial Officer
May 9, 2007
17