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Accounting Policies, by Policy (Policies)
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Dec. 31, 2012
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| Use of Estimates, Policy [Policy Text Block] | Use
of estimates
The
preparation of the consolidated financial statements in
conformity with accounting principles generally
accepted in the United States of America requires
management to make estimates and assumptions that
affect the reported amounts of assets and liabilities
and the disclosures of contingent assets and
liabilities at the dates of the financial statements
and the reported amounts of revenues and expenses
during the reporting periods. Significant
estimates and assumptions include the adequacy of the
allowances for doubtful accounts and sales returns,
recoverability of inventories, useful lives of property
and equipment (including website development costs) and
intangible assets, realization of deferred tax assets,
and the calculations related to stock-based
compensation expense. Actual results could
differ from those estimates. The Company’s
success is largely dependent on its ability to
anticipate, identify and respond to unexpected changes
in fashion trends and to provide merchandise that
satisfies consumer preferences and
demand. The Company’s failure to
anticipate, identify or respond to unexpected changes
in fashion trends and consumer preferences could
adversely affect its financial condition and results of
operations. |
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| Deferred Charges, Policy [Policy Text Block] | Deferred
financing costs
Costs
incurred in connection with the Company's financing
activities are deferred and amortized over the terms of the
related agreements using the straight-line method. During
2012, we deferred approximately $127,000 and $432,000
relating to the August 2012 financing (see Note 9 –
2012 Financing), and the new revolving credit facility with
Wells Fargo Capital Finance, and Salus Capital Partners, LLC
(see Note 10 – Revolving Credit Facility Financing
Agreement), respectively. Amortization of these costs, which
is recognized in other interest expense and other income,
net, in the accompanying consolidated statements of
operations, totaled approximately $82,000, $18,100, and
$11,700 for the years ended December 31, 2012, 2011 and 2010,
respectively. Deferred financing costs, net of accumulated
amortization, included in other assets, net, amounted to
approximately $468,000 and $35,000 as of December 31, 2012
and 2011, respectively. |
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| Consolidation, Policy [Policy Text Block] | Principles
of consolidation
The
consolidated financial statements include the financial
position, results of operations and cash flows of the
Company and its wholly-owned subsidiary,
EVT. All material intercompany transactions
between the Company and EVT have been eliminated in
consolidation.
On
October 25, 2012 (the “Sale Date”), the
Company, A + D Labs and TwoRoger Associates, Ltd.
(“Modo”) entered into a Unit Purchase Agreement
(“Purchase Agreement”) pursuant to which the
Company sold its entire 52% controlling membership interest
in Eyefly to A + D Labs for a total cash consideration of
$100,000 ($50,000 payable on the Sale Date with the
remaining $50,000 paid in ten equal monthly
installments). The Company, in connection with
the Purchase Agreement, also agreed to write off 75% of the
intercompany receivable due from Eyefly, or $185,000 (as
bad debt expense included within General and administrative
expenses in the Consolidated Statements of Operations for
the year ended December 31, 2012) with the remaining 25% of
the balance owed to the Company, or $62,000, payable at a
future date on which Eyefly has cash flows available to pay
such debt. The Company established an allowance
for doubtful accounts for the entire remaining balance of
$62,000 (with a corresponding charge to General and
administrative expenses in the Consolidated Statements of
Operations for the year ended December 31,
2012). This allowance for doubtful accounts was
necessary as the intercompany receivable was unsecured and
the amount that the Company may ultimately recover is not
presently determinable.
Prior
to the Sale Date, Eyefly was a majority-owned subsidiary of
the Company and was deconsolidated on such Sale Date as the
Company no longer had a controlling membership interest in
Eyefly. Upon deconsolidation, the Company did not retain
any remaining membership interest in Eyefly.
The
Company recognized a gain of $100,000 on the
deconsolidation and sale of Eyefly for the year ended
December 31, 2012, which is included within Other interest
expense and other income, net in the Consolidated
Statements of Operations. |
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| Concentration Risk, Credit Risk, Policy [Policy Text Block] | Concentration
For
the years ended December 31, 2012 and 2011, the Company
acquired approximately 49% and 52%, respectively, of its
inventory from its three largest suppliers. |
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| Related Party Transactions [Policy Text Block] | Related-party
transactions
As
of December 31, 2012, the Company, in connection with the
sale of its controlling membership interest in Eyefly,
had a related-party amount due from A + D Labs of
$40,000, which is presented as part of Accounts
receivable, net within the Consolidated Balance
Sheets.
On
August 13, 2012, the Company entered into a Note and
Warrant Purchase Agreement with certain related-party
stockholders as further described below in Note 9 –
2012 Financing.
As
of December 31, 2011, Eyefly had related-party amounts
of $105,000 due to A + D Labs, which is presented as
part of Accounts payable within the Consolidated
Balance Sheets. |
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| Revenue Recognition, Policy [Policy Text Block] | Revenue
recognition
The
Company recognizes revenue when the earnings process is
completed and revenue is measurable. Gross sales consist
primarily of revenue from product sales and shipping and
handling charges and are net of promotional discounts and
sales-based taxes assessed by governmental authorities that
are imposed on sales transactions. Net sales
represent gross sales, less provisions for returns and
credit card chargebacks.
Gross
sales are recognized when all the following criteria are
met:
Deferred
revenue (which consists primarily of goods shipped to
customers, but not yet received, and customer credits)
totaled approximately $4,381,000 and $4,235,000 as of
December 31, 2012 and 2011, respectively, which are
presented as Current liabilities in the Consolidated
Balance Sheets.
Shipping
and handling fees billed to customers are presented and
included as part of gross sales, and freight costs incurred
in connection with shipping customer orders are presented
and included as part of Cost of sales in the Consolidated
Statements of Operations. |
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| Revenue Recognition, Incentives [Policy Text Block] | Sales
incentives
The
Company frequently offers sales incentives to customers to
receive a reduction in the sales price of
merchandise. Sales incentives include, but are
not limited to discounts, coupons, daily deal programs and
e-mail promotions through online marketing
programs. For sales incentives issued to
customers in conjunction with the sale of merchandise, the
Company recognizes the reduction in gross sales at the time
of sale. |
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| Provisions For Sales Returns And Doubtful Accounts [Policy Text Block] | Provisions
for sales returns and doubtful accounts
The
Company generally permits returns for up to 40 days from
the date of sale. The Company performs credit
card authorizations and checks the verifications of its
customers prior to shipment of the
merchandise. Accordingly, the Company
establishes a reserve for estimated future sales returns
and allowance for doubtful accounts at the time of shipment
based primarily on historical data. Accounts
receivable (which represents billed credit card
transactions in process to be collected and a trade
receivable (discussed further below) is, presented in the
Consolidated Balance Sheets net of the allowance for
doubtful accounts.
During
the second quarter of 2011, the Company completed a
bulk-sale of merchandise to a third-party for
approximately $1,200,000. As a result of the
third-party’s deteriorating financial condition
during the fourth quarter of 2011, the Company wrote off
$475,000 as bad debt expense (included within General and
administrative expenses for the year ended December 31,
2011), which the Company was unable to collect in its
entirety. As a result, the Company established
an allowance for doubtful accounts for the entire
remaining balance of $725,000 (with a corresponding
charge to General and administrative expenses in the
Consolidated Statement of Operations for the year ended
December 31, 2011).
As
of December 31, 2012 and 2011, the allowance for
doubtful accounts, which represents estimated credit card
chargebacks, was $122,000 and $767,000 (which also
included losses related to the trade receivable in 2011),
respectively. The allowance for sales returns
was $2,081,000 and $3,124,000, at December 31, 2012 and
2011, respectively. Both are classified as
Current liabilities in the Consolidated Balance
Sheets. |
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| Shipping and Handling Cost, Policy [Policy Text Block] | Fulfillment
expenses
The
Company utilizes a third-party service provider to
perform all of its order fulfillment functions including
warehousing, administrative support, returns processing
and receiving labor. For the years ended
December 31, 2012, 2011 and 2010, fulfillment
expenses totaled $4,407,000, $3,955,000 and $3,765,000,
respectively. |
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| Advertising Costs, Policy [Policy Text Block] | Marketing
expenses
In
addition to staff-related costs, marketing expenses consist
primarily of online advertising, print and media
advertising, costs associated with sweepstakes, direct mail
campaigns as well as the related external production costs.
The costs associated with online, offline and print
advertising are expensed as incurred, with the exception of
production costs related to print and television
advertising which are expensed upon completion of the
initial advertising.
For
the years ended December 31, 2012, 2011 and 2010, total
marketing expenditures (excluding staff-related costs) were
approximately $7,605,000, $9,295,000 and $11,298,000,
respectively. |
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| Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block] | Stock-based
compensation expenses
The
Company’s Board of Directors has adopted three
stock-based employee compensation plans, one in April 2005,
one in July 2000 (which expired in December 2012) and
one in May 1997 (collectively the
“Plans”), which are described more fully in
Note 12 – Stockholders’ Equity. The
Plans, which provide for the granting of restricted stock
awards, deferred stock unit awards, stock option awards,
and other equity and cash awards, were adopted for the
purpose of encouraging key employees, consultants and
directors who are not employees to acquire a proprietary
interest in the growth and performance of the Company, and
are similar in nature. Vesting terms for restricted stock
generally range from three months to one year, while
deferred stock unit awards vest every three months over a
period of one to three years. Stock option
awards are granted in terms not to exceed ten years and
become exercisable as specified when the option is granted
and vesting terms range from immediately to a ratable
vesting period of four years. As of December 31,
2012, the Plans have an aggregate balance of 185,967 shares
available for future issuance. Total stock-based
compensation expense recorded in the Consolidated
Statements of Operations for the years ended December 31,
2012, 2011 and 2010 were $1,907,000, $1,062,000 and
$634,000, respectively. |
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| Income Tax, Policy [Policy Text Block] | Income
taxes
Income
taxes represent income taxes paid or payable (or received
or receivable) for the current year and includes any
changes in deferred taxes during the
year. Deferred tax assets and liabilities are
recognized for future tax consequences attributable to
differences between the financial statement carrying
amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets,
including tax loss and credit carryforwards, and
liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those
temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in
income in the period that includes the enactment
date. Deferred income tax expense represents the
change during the period in deferred tax assets and
deferred tax liabilities. The components of the
deferred tax assets and liabilities are individually
classified as current and non-current based on their
characteristics. Deferred tax assets are reduced
by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized.
As
of December 31, 2012 and 2011, the only tax authorities to
which the Company is subject to are the U.S. federal tax
authorities and various state tax authorities in the United
States. Open tax years that are subject to examination by
the U.S. federal and state tax authorities, which extend
back to 1998, relate to years in which unused net operating
losses were generated. The Company previously
adopted authoritative guidance relating to uncertainty in
income taxes, in which it prescribes a comprehensive model
for the manner in which a company should recognize,
measure, present and disclose in its financial statements
all material uncertain tax positions that they have taken
or expect to take on a tax return. Tax positions
must meet a “more-likely-than-not” recognition
threshold at the effective date to be recognized upon the
adoption of the authoritative guidance and in subsequent
periods. Upon the adoption of the authoritative
guidance, and through December 31, 2012, the Company had no
unrecognized tax benefits. In the event that the
Company concludes that it is subject to interest and/or
penalties arising from uncertain tax positions, the Company
will present interest and penalties as a component of
income taxes. No amounts of interest or penalties were
recognized in the Company’s Consolidated Balance
Sheets as of December 31, 2012 and 2011 or Consolidated
Statements of Operations for the years ended December 31,
2012, 2011 and 2010. |
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| Earnings Per Share, Policy [Policy Text Block] | Basic
and diluted net loss per common share attributable to
Bluefly, Inc. stockholders
Basic
net loss per common share attributable to Bluefly, Inc.
stockholders excludes dilution and is computed by dividing
net loss attributable to Bluefly, Inc. stockholders by the
weighted average number of common shares outstanding for
the period.
Diluted
net loss per common share attributable to Bluefly, Inc.
stockholders is computed by dividing net loss
attributable to Bluefly, Inc. stockholders by the
weighted average number of common shares outstanding for
the period, adjusted to reflect potentially dilutive
securities using the “treasury stock” method
for stock option awards, warrants, restricted stock
awards, deferred stock unit awards, and the
“if-converted” method for the Rho Notes (as
defined in Note 9 – 2012 Financing). Due to the
Company’s net losses for the periods presented, (i)
stock option awards and warrants to purchase shares of
Common Stock (ii) restricted stock awards that have not
yet vested and (iii) Rho Notes convertible into shares of
Common Stock were not included in the computation of
diluted loss per common share attributable to Bluefly,
Inc. stockholders, as the effects would be anti-dilutive.
Accordingly, basic and diluted weighted average shares
outstanding are equal for the following periods
presented:
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| Cash and Cash Equivalents, Policy [Policy Text Block] | Cash
and cash equivalents
The
Company considers all highly liquid investments with an
original maturity of three months or less to be cash and
cash equivalents. The Company’s cash and cash
equivalents are placed and maintained with financial
institutions that it believes are of high credit
quality. However, the Company’s cash and
cash equivalents are potentially exposed to concentration
of credit risk in the event of default by financial
institutions to the extent that cash balances with
financial institutions are in excess of insured
limits. |
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| Cash and Cash Equivalents, Restricted Cash and Cash Equivalents, Policy [Policy Text Block] | Restricted
cash
As
of December 31, 2012, the Company had $4,635,000 in
restricted cash, which has been funded by and deducted
against the availability of, the Company’s
revolving Credit Facility (discussed further in Note 10
– Revolving Credit Facility Financing Agreement),
that was held as cash collateral against the
Company’s outstanding letters of credit issued and
outstanding by its previous credit facility with Wells
Fargo Retail Finance, LLC (“Wells
Fargo”). |
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| Fair Value Measurement, Policy [Policy Text Block] | Fair
value of financial instruments
Authoritative
guidance relating to fair value establishes a framework for
measuring fair value and expands disclosure about fair
value measurements except as it applies to non-financial
assets and non-financial liabilities. The
Company’s financial instruments consist of cash and
cash equivalents, restricted cash, accounts receivable,
other assets, accounts payable and accrued
expenses. The carrying amounts of these
financial instruments approximate fair value due to their
short-term maturities. The following is the fair value
hierarchy for disclosure of fair value measurements:
Level
1 - Quoted prices in active markets for identical assets or
liabilities
Level
2 - Quoted prices for similar assets and liabilities in
active markets or inputs that are observable
Level
3 - Inputs that are unobservable (for example cash flow
modeling inputs based on assumptions)
In
connection with the Embedded Derivative in the Rho Notes
(discussed below in Note 9 – 2012 Financing), the
Company evaluates the fair value measurement of the
Embedded Derivative on a recurring basis to determine the
appropriate fair value level to classify the Embedded
Derivative at each reporting period. This
determination was based on Level 2 inputs in estimating
and measuring the fair value of the Embedded Derivative
using the Black-Scholes Option Pricing model (as
described further in Note 9 – 2012
Financing). This estimated measurement
requires significant estimates and judgments by the
Company. The following table sets forth the
Company’s liabilities that were measured at fair
value as of December 31, 2012, by level within the fair
value hierarchy:
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| Inventory, Policy [Policy Text Block] | Inventories,
net
Inventories,
which consist of finished goods, are stated at the lower of
cost or market value. Cost is determined by the
first-in, first-out (“FIFO”)
method. The Company reviews its inventory levels
in order to identify slow-moving and unsellable merchandise
and establishes a reserve for such merchandise. Inventory
reserves are established based on historical data and
management’s best estimate. Inventory may be marked
down below cost if management determines that the inventory
stock will not sell at or above its
cost. Inventory is presented net of reserves in
the Consolidated Balance Sheets.
As
of December 31, 2012 and 2011, inventories, net consist of
the following:
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| Property, Plant and Equipment, Policy [Policy Text Block] | Property
and equipment, net
Property
and equipment are stated at cost net of accumulated
depreciation and amortization expenses. Leasehold
improvements are amortized over the shorter of their
estimated useful lives or the remaining term of the
lease. Lease amortization is included in depreciation
expense. Equipment and software are depreciated on a
straight-line basis over two to five
years. Costs related to maintenance and
repairs are expensed as incurred. |
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| Research, Development, and Computer Software, Policy [Policy Text Block] | Website
development costs
Website
development costs, which consist primarily of external
direct costs, relate to the Company’s
Websites. All costs incurred by the Company
related to the development phase, including costs incurred
for enhancements that are expected to result in additional
new functionality, are capitalized. Such costs
are amortized on a straight-line basis over 36
months. All costs related to the planning and
post-implementation phase, including training and
maintenance, are expensed as incurred. Capitalized costs
related to website development are included in Property and
equipment, net in the Company’s Consolidated Balance
Sheets.
For
the years ended December 31, 2012 and 2011, the Company
capitalized website development costs of $2,840,000 and
$3,575,000, respectively. For the years ended
December 31, 2012, 2011 and 2010, the Company recognized
amortization expenses of $2,322,000, $1,720,000 and
$1,889,000, respectively, which is included in Selling
and fulfillment expenses in the Company’s
Consolidated Statements of Operations. |
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| Intangible Assets, Finite-Lived, Policy [Policy Text Block] | Intangible
assets
Intangible
assets are recorded at cost, net of accumulated
amortization and are amortized on a straight-line basis
over their estimated useful lives. No
significant residual value is estimated for intangible
assets.
The
Company evaluates the recoverability of intangible assets
at least annually for possible impairment or whenever
events or circumstances indicate that the carrying value
of such assets may not be recoverable. Such circumstances
could include, but not limited to, a significant (1)
decrease in market value of an asset or (2) adverse
change in the extent or manner the asset is used. The
Company measures the carrying amount of the asset against
the estimated undiscounted future cash flows. Should the
sum of the expected future cash flows be less than the
carrying value, an impairment loss would be recognized.
The impairment loss would be calculated as the amount by
which the carrying value of the asset exceeds its fair
value. Due to the issues encountered by the Company in
connection with its potential inability to operate as a
going concern and a material adverse change in the use of
its intangible assets, the assets were impaired by the
difference between fair value and carrying amount (see
Note 6 - Acquisition). |
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| Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block] | Long-lived
assets
The
Company’s policy is to evaluate long-lived
assets for possible impairment whenever events or
changes in circumstances indicate that the carrying
amount of such assets may not be recoverable.
This evaluation is based on a number of factors,
including expectations for future operating income
and undiscounted cash flows that will result from
the use of such assets. The Company has not
identified any such impairment of its long-lived
assets at December 31, 2012 and
2011. |
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| Deferred Rent Liability [Policy Text Block] | Deferred
rent liability
The
Company recognizes and records rent expense related to its
lease agreement, which includes scheduled rent increases,
on a straight-line basis beginning on the commencement date
over the life of the lease. The Company also
recognizes and records rent concessions, in the form of
reduced rent payments, on a straight-line basis over the
life of the lease agreement. Differences between
straight-line rent expense and actual rent payments are
recorded as Deferred rent liability and presented as a
long-term liability in the Consolidated Balance
Sheets. |
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| Derivatives, Policy [Policy Text Block] | Derivative
financial instrument
The
Company carries an embedded derivative financial
instrument on its 2012 Consolidated Balance Sheet as
discussed below in Note 9 – 2012
Financing. The Company does not use the
embedded derivative financial instrument to manage
financial exposure or enter into hedging
activities.
The
Company records its embedded derivative financial
instrument on its 2012 Consolidated Balance Sheet at fair
value. The fair value is based on a valuation
model that requires inputs including contractual terms,
market prices, yield curves and measures of
volatility. The Company’s embedded
derivative financial instrument is classified as Level 2
within the fair value hierarchy on its 2012 Consolidated
Balance Sheet. Any changes in fair value of
the embedded derivative financial instrument are recorded
in the Consolidated Statement of Operations and included
as Interest expense to related-party stockholders for the
year ended December 31, 2012. |
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| Treasury Stock [Policy Text Block] | Treasury
stock
Treasury
stock represents Common Stock withheld by the Company to
satisfy income tax withholding obligations of certain
officers and employees of the Company in connection with
the distribution of Common Stock in respect of deferred
stock units held by such officers and employees. |
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| New Accounting Pronouncements, Policy [Policy Text Block] | Recently
issued, but not yet effective, accounting
pronouncements
The
Company is not aware of any recently issued, but not yet
effective, accounting pronouncements that would have a
significant impact on the Company’s
consolidated financial position or results of
operations. |
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