Bluefly gears up to close $50 million stock sale; CTI Industries gets $5 million equity line

By Sheri Kasprzak

New York, June 7 - Online clothing retailer Bluefly, Inc. led PIPE activity Wednesday with news that it intends to close a $50 million stock offering later this month.

The offering is being conducted with Quantum Industrial Partners LDC; SFM Domestic Investments, LLC; Maverick Fund USA, Ltd.; Maverick Fund, LDC; Maverick Fund II, Ltd.; and Prentice-Bluefly, LLC.

The investors agreed to buy 60,975,610 shares at $0.82 each on June 15.

As of May 9, the company had 21,426,154 outstanding common shares.

The price per share is an 11% premium to the company's Monday closing stock price of $0.74.

On Wednesday, the stock gave up 5.56%, or 6 cents, to close at $1.02 (Nasdaq: BFLY).

At closing, Bluefly will pay Quantum and SFM all outstanding principal and interest on convertible notes. Of the proceeds, $25 million will be used to repay the notes. The rest of the proceeds will be used for working capital.

"Bluefly is now in an outstanding position to expand its growth," said Melissa Payner, Bluefly's chief executive officer, in a news release. "We believe this new capital will enable us to increase our marketing results without the need to raise additional capital prior to achieving profitability.

"The investment will provide Bluefly with a far simpler capital structure with conversion of nearly all of the preferred stock. We also have significantly strengthened our investor base with the addition of Maverick Capital and Prentice Capital."

"We are extremely excited about our investment in Bluefly," said Brian Zied of Maverick, in a statement. "Bluefly has generated a record of strong operating performance to date, and this transaction will provide the company capital to accelerate growth and progress toward profitability."

Even so, Bluefly sustained a net loss of $3.26 million for the quarter ended March 31. For the same quarter of 2005, the company incurred a net loss of $893,000.

"The company sustained net losses and negative cash flows from operations since the formation of Bluefly.com," said the earnings statement. "The company's ability to meet its obligations in the ordinary course of business is dependent on its ability to establish profitable operations and/or raise additional financing through public or private debt or equity financing, or 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 Dec. 31, 2006.

"The company is exploring possible additional equity financing opportunities to maximize the growth of its business or for use if anticipated operating results are not achieved. If such financings are not available on terms acceptable to the company, and/or the company does not achieve its sales plan, future operations will need to be modified, scaled back or discontinued."

Bluefly is based in New York.

Stocks continue slump

In the broader market Wednesday, stocks fell for the third straight session, with the Dow Jones Industrial Average closing below 11,000 for the first time since March.

"It's just getting more and more dismal, isn't it," said one sellside market source when asked about the impact of the broader stock market on PIPE activity. "Almost everything is getting hit at this point, so even the things that are getting put out there are looking less appealing."

The Dow fell 71.24 to close at 10,930.90; the Nasdaq composite index dropped 10.99 to end at 2,151.80; and the Standard & Poor's 500 composite index slipped 7.70 to close at 1,256.15.

Even oil prices, which had been climbing and giving promise to resources activity in Canada, took a dip on Wednesday, losing $1.68 to finish at $70.82 per barrel.

CTI gets equity line

Elsewhere in PIPE activity Wednesday, CTI Industries Corp. obtained a $5 million equity line from Cornell Capital Partners, LP.

Over the next two years, Cornell will buy shares of CTI at the lowest volume weighted average price for the five trading days before a draw. There is a 400,000-share limit on each draw unless CTI receives shareholder approval.

Newbridge Securities Corp. was the placement agent for the transaction.

On Wednesday, the company's stock lost 6 cents, or 1.87%, to close at $3.14 (Nasdaq: CTIB).

CTI, located in Barrington, Ill., develops novelty products.

Peace Arch's C$9.08 million deal

In Canada, Peace Arch Entertainment Group Inc. settled a C$9,075,000 PIPE.

The company sold 7.5 million shares at C$1.21 each to a group of institutional and private investors, led by Todd Wagner.

Westwind Partners Inc. was the placement agent.

Proceeds will be used for debt repayment related to the company's acquisition of kaBoom! Entertainment Inc., a Canadian home-entertainment distributor.

Peace Arch's stock ended the day up 4.52%, or 7 cents, at C$1.62 (Toronto: PAE).

"I have been impressed by Peace Arch's rapid implementation of its business plan over the past year, its diverse and high quality slate of film and television products, and its experienced management team," said Wagner, in a statement.

"We have worked hard over the past year to transform Peace Arch into a major competitor in the independent film and television business," said Gary Howsam, the company's CEO, in a news release. "We are very excited by this investment in Peace Arch by Todd Wagner. We look forward to exploring together strategic opportunities for mutual benefit and growth."

Peace Arch, located in Toronto, acquires, produces and distributes feature film and television programs.

Oceanlake's C$5.5 million offering

In other Canadian offerings, Oceanlake Commerce Inc. announced its intention to raise up to C$5.5 million and at least C$2 million in a private placement.

The offering includes up to 36,666,666 units and at least 13,333,333 units at C$0.15 each.

The units consist of one share and one half-share warrant. Each whole warrant is exercisable at C$0.22 for two years.

Kingsdale Capital Markets Inc. is the placement agent.

The stock gained a penny to end the session at C$0.14 (TSX Venture: OLI).

Toronto-based Oceanlake provides mobile internet products and services to mobile operators in Asia.

Cannasat to raise C$5 million

Cannasat Therapeutics Inc. priced a C$5 million private placement of 15,151,515 units at C$0.33 apiece.

The units are comprised of one share and one half-share warrant. The whole warrants are exercisable at C$0.40 for two years.

Dominick & Dominick Securities Inc. and Canaccord Capital Corp. are the agents.

Proceeds will be used for research and development and for working capital and general corporate purposes.

The company's stock lost 2 cents, or 5.88%, to end at C$0.32 (TSX Venture: CTH).

Toronto-based Cannasat is a research company focused on discovering the therapeutic benefits of cannabis and developing cannabis-based pharmaceutical products.

North American Scientific stock rises

A day after announcing a $23,969,271 private placement, North American Scientific, Inc.'s stock advance by more than 4%.

The stock gained 4.08%, or 8 cents, to close at $2.04 (Nasdaq: NASI).

The company's stock gained 7 cents, or 3.7%, to close at $1.96 on Tuesday when the offering was announced.

A group of investors led by Three Arch Partners agreed to buy shares at $1.95 each.

Based in Chatsworth, Calif., manufactures products used in oncology.

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