##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C.
20549
 Form 10-K/A Amendment No. 2  (Mark One)x
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934For the fiscal year ended March 28, 2004
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934For the transition period from          to            .
 Commission file number: 0-50387
 RedEnvelope, Inc.
 (Exact name of Registrant as Specified in Its Charter)
 Delaware
    
    
    33-0844285(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification No.)
 201 Spear Street, 3rd Floor, San Francisco, California 94105  (Address of Principal Executive Offices and Zip Code)  (415) 371-9100  (Registrants Telephone Number, Including Area
Code)
 Securities registered pursuant to Section 12(b) of the Act:
NoneSecurities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01 per share  Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 o Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (¶229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrants knowledge, in definitive
proxy or information statements incorporated by reference in Part III of the
Form 10-K or any amendment to this Form 10-K. o Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2 of the Act). Yes
o  No x The aggregate market value of the voting stock held by non-affiliates of
the Registrant as of September 26, 2003, was approximately $63.5 million based
upon the last sale price reported for such date on the Nasdaq National Market.
The Registrants common stock commenced trading on September 25, 2003 and the
Registrants initial public offering closed on September 30, 2003. For purposes
of this disclosure, we have assumed the conversion of all shares of the
Registrants preferred stock, which occurred in connection with the closing of
the initial public offering. The number of outstanding shares of the registrants common stock, $0.01
par value per share, was 8,708,746 as of May 21, 2004. DOCUMENTS INCORPORATED BY REFERENCE None.




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Explanatory Note: We are filing this Amendment No. 2 on Form 10-K/A to our
Annual Report on Form 10-K for the fiscal year ended March 28, 2004 (the
Report) for the purpose of including information that was
to be incorporated by reference from the our definitive
proxy statement pursuant to Regulation 14A of the Securities and
Exchange Act of 1934. Because we will not file our
definitive proxy statement within 120 days of our fiscal year ended
March 28, 2004, we are amending and restating in its
entirety Part III and supplementing Part IV of the Report. No other items in the Report are amended hereby.



TABLE OF CONTENTS  PART IIIItem 10. Directors and Executive Officers of the RegistrantItem 11. Executive CompensationItem 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related TransactionsItem 14. Principal Accountant Fees and ServicesPART IVItem 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-KSIGNATURESEXHIBIT INDEXEXHIBIT 31.1EXHIBIT 31.2    Table of Contents  
 PART III 
 Item 10.Directors and Executive Officers of the Registrant Information regarding our Executive Officers required hereunder is set
forth in Item 1 of Part 1 Business  Executive Officers of the Registrant.
The information required hereunder regarding our Directors is set forth below. DIRECTORS The term of each current member of the Board of Directors expires on the
date of the 2004 annual meeting of stockholders. The following table and
related biographies set forth information regarding our directors: Name
    
    Age
    
    
    
    Position(s)Michael Moritz(1)(3)
    
    
    49
    
    
    
    
    Director and Chairman of the BoardMichael E. Dunn(2)
    
    
    40
    
    
    
    
    DirectorKaren Edwards(2)
    
    
    42
    
    
    
    
    DirectorScott Galloway
    
    
    39
    
    
    
    
    DirectorCharles Heilbronn(1)(3)
    
    
    49
    
    
    
    
    DirectorDaniel R. Lyle(2)(3)
    
    
    59
    
    
    
    
    DirectorAlison L. May
    
    
    54
    
    
    
    
    Chief Executive Officer, President
and Director
    (2) Member of the Audit Committee (3) Member of the Nominating Committee Michael Moritzhas served as a member of our Board of Directors since July
1999 and as Chairman of the Board since April 2003. Since 1988, Mr. Moritz has
served as a general partner at Sequoia Capital, a venture capital firm. Mr.
Moritz has served as a member of the board of directors of Saba Software, a
provider of human capital development and management solutions, since August
1998. Since July 1993, Mr. Moritz has served as a member of the board of
directors of Flextronics International Ltd., a contract electronics
manufacturer, and since May 1999, Mr. Moritz has served as a director of
Google, Inc. Mr. Moritz received an MA from Christ Church, University of
Oxford. 1




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Michael E. Dunnhas served as a member of our Board of Directors since
August 2000. Mr. Dunn served as the President of Prophet Brand Strategy, Inc.,
a brand consulting firm, since June 1998 and has served as President and Chief
Executive Officer of Prophet Brand Strategy since January 2000. From March 1994
to May 1998, Mr. Dunn served as the Chief Executive Officer of Context
Integration, a systems integrator. Mr. Dunn received a BA in Economics from
Haverford College and an MBA/MA in Business and Asian Studies from the
University of California at Berkeley. Karen Edwardshas served as a member of our Board of Directors since
October 2003. From January 1996 to October 2001, Ms. Edwards served as Vice
President, Worldwide Marketing with Yahoo! Inc. Ms. Edwards currently serves on
the boards of 2Wire, Inc. and OurPictures, Inc. Ms. Edwards received a BA in
Communications from Stanford University and an MBA from Harvard University. Scott Gallowayhas served as a member of the Board of Directors since June
2002. Mr. Galloway co-founded the Company in 1997 under the name Giftworks
Online, Inc. and he served as a director of the Company from September 1997 to
August 2000 and the Chairman of the Board of the Company from September 1997 to
February 2000. Mr. Galloway also founded Prophet Brand Strategy, a brand
consultancy, and served as Chief Executive Officer of Prophet from 1992 to 2000
and Chairman of the Board of Prophet from 2000 to 2002. From 2000 to 2002, Mr.
Galloway served as the Chief Executive Officer and Chairman of the Board at
Brand Farm, an e-commerce incubator. Mr. Galloway is a visiting assistant
professor at the New York University Stern School of Business where he has
taught brand strategy to second year MBA students since 2002. Mr. Galloway
received an MBA from the Haas School of Business at the University of
California at Berkeley and a BA in Economics from the University of California
at Los Angeles. Charles Heilbronnhas served as a member of our Board of Directors since
October 2002. Since 1987, Mr. Heilbronn has held the position of Vice President
and General Counsel at Chanel Limited, a luxury goods company marketing womens
clothing, leather goods, fragrances and cosmetics, fine jewelry and watches.
Mr. Heilbronn received a Master in Law from Universite de Paris V, Law School
and an LLM from New York University Law School. Daniel R. Lylehas served as a member of our Board of Directors since July
2003. Mr. Lyle served as a partner at PricewaterhouseCoopers LLP from 1982 to
June 2003. Mr. Lyle received a BA in Economics from California State
University, Northridge and an MBA from the University of California at Los
Angeles. Alison L. Mayhas served as the President, Chief Executive Officer and a
member of our Board of Directors since April 2002. Prior to joining
RedEnvelope, from March 2001 to April 2002, Ms. May served as the Chief
Operating Officer at Gymboree Corporation, a childrens specialty retailer. Ms.
May held the positions of President and Business Consultant at ALM Consulting
from February 2000 to March 2001. From January 1997 to February 2000, Ms. May
served as the Chief Operating Officer at Esprit de Corp., a clothing retailer.
Ms. May served as the President and Chief Financial Officer of Patagonia, Inc.,
an outdoor clothing and equipment retailer, from December 1991 to April 1996.
Ms. May holds an MBA in Finance from the University of Southern California and
a BA in Spanish, Education, and History from Purdue University. There are no family relationships among any of RedEnvelopes directors or
executive officers. Audit Committee The Audit Committee of the Board of Directors oversees RedEnvelopes
corporate accounting and financial reporting process and the audits of its
financial statements. The responsibilities of the audit committee include
appointing and providing the compensation of the independent registered public
accounting firm to conduct the annual audit of our financial statements,
reviewing the scope and results of the audits, reviewing and evaluating
internal accounting policies, and approving all professional services to be
provided to RedEnvelope by its independent registered public accounting firm. 2




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The Audit Committee consists of three Directors: Mr. Lyle, as Chairman,
Mr. Dunn and Ms. Edwards. The Board has determined that all members of the
audit committee are independent directors under the rules of the Nasdaq
National Market and each of them is able to read and understand fundamental
financial statements. The Board has determined that Daniel R. Lyle qualifies as
an audit committee financial expert as defined by the rules of the Securities
and Exchange Commission. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our executive officers and directors and persons who own more than 10% of a
registered class of our equity securities to file periodic reports of their
ownership, and changes in that ownership. Executive officers, directors and
greater than 10% stockholders are also required by SEC rules to furnish us with
copies of all Section 16(a) forms they file. Based solely on our review of the copies of such forms received by us and
written representations from certain reporting persons, we believe that, with
respect to fiscal year 2004, all filing requirements applicable to our
officers, directors and 10% stockholders were met, except for: (i) failure to
file a Form 3 and a Form 4 by Angel Investors II, L.P. who held more than 10%
of RedEnvelopes common stock prior to the closing of RedEnvelopes initial
public offering, but upon the closing of the such offering, held less than 10%
of RedEnvelopes common stock and (ii) a late filing made by Kristine Dang who
inadvertently filed a late Form 3 in May 2003 reporting her appointment as a
Section 16 officer by RedEnvelope in May 2003. Code of Ethics Our Board of Directors has adopted a Code of Ethics that is applicable to
all of RedEnvelopes employees, officers and directors. The Code of Ethics
contains standards that promote honest and ethical conduct by such individuals.
A copy of the RedEnvelope Code of Ethics is available on our website at
www.redenvelope.com. 
 Item 11.Executive Compensation Summary Compensation Table The following table shows the compensation earned during fiscal years
2004, 2003, and 2002 by our President and Chief Executive Officer and the five other most highly compensated
executive officers and former executive officers (collectively, the Named
Executive Officers). Bonus compensation is reported in the fiscal year
in which the compensation was earned. Long-TermAnnual Compensation
    
    Compensation AwardsSecurities Underlying
    
    All OtherName and Principal Position
    
    Year
    
    Salary ($)
    
    Bonus ($)
    
    Options (#)
    
    Compensation ($)Alison L. May(1)
    
    
    2004
    
    
    
    285,000
    
    
    
    0
    
    
    
    0
    
    
    
    6,131President and
    
    
    2003
    
    
    
    311,058
    
    
    
    0
    
    
    
    296,151
    
    
    
    573Chief Executive Officer
    
    
    2002
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
 3




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Long-TermAnnual Compensation
    

    Compensation AwardsSecurities Underlying
    
    All OtherName and Principal Position
    
    Year
    
    Salary ($)
    
    Bonus ($)
    
    Options (#)
    
    Compensation ($)Hilary Billings(2)
    
    
    2004
    
    
    
    285,000
    
    
    
    0
    
    
    
    149,444
    
    
    
    306Former Brand Strategist
    
    
    2003
    
    
    
    297,116
    
    
    
    0
    
    
    
    92,405
    
    
    
    4,1662002
    
    
    
    200,000
    
    
    
    80,000
    
    
    
    2,684
    
    
    
    4,042John W. Roberts(3)
    
    
    2004
    
    
    
    192,926
    
    
    
    0
    
    
    
    33,786
    
    
    
    195Senior Vice President,
    
    
    2003
    
    
    
    20,212
    
    
    
    0
    
    
    
    0
    
    
    
    9Information Technology
    
    
    2002
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Kristine N. Dang(4)
    
    
    2004
    
    
    
    189,231
    
    
    
    0
    
    
    
    21,404
    
    
    
    3,957General Merchandising
    
    
    2003
    
    
    
    172,500
    
    
    
    0
    
    
    
    6,831
    
    
    
    2,363Manager
    
    
    2002
    
    
    
    148,769
    
    
    
    5,000
    
    
    
    3,245
    
    
    
    2,413Eric C. Wong(5)
    
    
    2004
    
    
    
    168,462
    
    
    
    0
    
    
    
    25,674
    
    
    
    1,350Chief Financial Officer
    
    
    2003
    
    
    
    51,923
    
    
    
    0
    
    
    
    6,404
    
    
    
    38and Corporate Secretary
    
    
    2002
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Pamela A. Knox(6)
    
    
    2004
    
    
    
    160,400
    
    
    
    0
    
    
    
    53,372
    
    
    
    19,490Former Senior Vice
    
    
    2003
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0President, Marketing
    
    
    2002
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
  (1)
    
    All Other Compensation with respect to Ms. May represents $869 for life insurance premiums paid by RedEnvelope for the benefit of the
insured and $5,262 for Company contributions to 401 (k) plans of RedEnvelope.(2)
    
    All Other Compensation with respect to Ms. Billings represents $306 for life insurance premiums paid by RedEnvelope for the benefit of
the insured.(3)
    
    All Other Compensation with respect to Mr. Roberts represents $195 for life insurance premiums paid by RedEnvelope for the benefit of
the insured.(4)
    
    All Other Compensation with respect to Ms. Dang represents $172 for life insurance premiums paid by RedEnvelope for the benefit of the
insured and $3,785 for Company contributions to 401 (k) plans of RedEnvelope.(5)
    
    All Other Compensation with respect to Mr. Wong represents $138 for life insurance premiums paid by RedEnvelope for the benefit of the
insured and $1,212 for Company contributions to 401 (k) plans of RedEnvelope.(6)
    
    All Other Compensation with respect to Ms. Knox represents $19,231 for severance related payments and $259 for life insurance premiums
paid by RedEnvelope for the benefit of the insured. 4




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Option Grants in Fiscal Year 2004 The following table sets forth certain information with respect to stock
option grants during the fiscal year ended March 28, 2004 to the Named
Executive Officers. Individual Grants
    
    
    
    
    
    Potential RealizablePercent of Total
    
    
    
    
    
    
    
    
    
    Value at AssumedNumber of
    
    Options
    
    
    
    
    
    
    
    
    
    Annual Rate of StockSecurities
    
    Granted to
    
    
    
    
    
    
    
    
    
    Price Appreciation forUnderlying
    
    Employees in
    
    Exercise or
    
    
    
    
    
    Option Term ($)(2)Options
    
    Fiscal Year
    
    Base Price
    
    ExpirationName
    
    Granted (#)
    
    (%)(1)
    
    ($/Share)
    
    Date
    
    5%
    
    10%Alison L. May
    
    
    0
    
    
    
    0
    
    
    
    0.00
    
    
    
    N/A
    
    
    
    0
    
    
    
    0Hilary Billings
    
    
    149,444
    (3)
    
    
    25
    
    
    
    2.22
    
    
    
    4/11/2013
    
    
    
    209,106
    
    
    
    529,916John W. Roberts
    
    
    15,798
    (4)
    
    
    3
    
    
    
    2.22
    
    
    
    4/11/2013
    
    
    
    22,105
    
    
    
    56,0182,988
    (5)
    
    
    1
    
    
    
    5.86
    
    
    
    7/14/2013
    
    
    
    11,002
    
    
    
    27,88215,000
    (3)
    
    
    3
    
    
    
    12.19
    
    
    
    10/10/2013
    
    
    
    114,993
    
    
    
    291,416Kristine N. Dang
    
    
    6,404
    (3)
    
    
    1
    
    
    
    2.22
    
    
    
    4/11/2013
    
    
    
    8,961
    
    
    
    22,70815,000
    (3)
    
    
    3
    
    
    
    12.19
    
    
    
    10/10/2013
    
    
    
    114,933
    
    
    
    291,416Eric C. Wong
    
    
    10,674
    (6)
    
    
    2
    
    
    
    2.22
    
    
    
    4/11/2013
    
    
    
    14,935
    
    
    
    37,84915,000
    (3)
    
    
    3
    
    
    
    12.19
    
    
    
    10/10/2013
    
    
    
    114,933
    
    
    
    291,416Pamela A. Knox
    
    
    53,372
    (7)
    
    
    9
    
    
    
    2.22
    
    
    
    4/19/2004
    
    
    
    74,680
    
    
    
    189,253
   (1)
    
    Based on an aggregate of 601,374 options granted to employees of RedEnvelope under our 1999 Stock Option Plan during fiscal year ended March 28, 2004.  (2)
    
    In accordance with the rules of the SEC, the potential realizable value over the term of the option (the period from the grant date to the expiration date)
is based on SEC-mandated assumed rates of stock appreciation from the option exercise price of 5% and 10%, compounded annually. These amounts are based on
certain assumed rates of appreciation and do not represent our estimates of our future stock price. Actual gains, if any, on stock option exercises will be
dependent on the future performance of our common stock.  (3)
    
    The option vests as to 1/48 of the shares monthly.  (4)
    
    The option vests as to 25% of the shares one year after the vesting commencement date and as to 1/48 monthly thereafter.  (5)
    
    The option vests as to 8/48 of the shares on the one year anniversary of the vesting commencement date and as to 1/48 monthly thereafter. 5




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(6)
    
    The option vests as to 10/48 of the shares on the 10 month anniversary of the vesting commencement date and as to 1/48 monthly thereafter.  (7)
    
    The option vests as to 20% of the shares upon Ms. Knox initial date of employment, 25% of the shares on the one year anniversary of the vesting
commencement date and as to 1/48 of the shares monthly thereafter. Aggregate Option Exercises in Fiscal Year 2004 and Year-End Option Values The following table sets forth information regarding option exercises by
the Named Executive Officers in the fiscal year ended March 28, 2004, and
unexercised stock options held by the Named Executive Officers as of March 28,
2004. Number of Securities
    
    Value of UnexercisedUnderlying Unexercised
    
    In-the-Money OptionsShares
    
    
    
    
    
    Options at March 28, 2004(1)
    
    at March 28, 2004(2)Acquired on

    ValueName
    
    Exercise (#)
    
    Realized ($)
    
    Exercisable (#)
    
    Unexercisable (#)
    
    Exercisable ($)
    
    Unexercisable ($)Alison L. May
    
    
    0
    
    
    
    0
    
    
    
    296,151
    
    
    
    0
    
    
    
    2,224,272
    
    
    
    0Hilary Billings
    
    
    0
    
    
    
    0
    
    
    
    180,338
    
    
    
    0
    
    
    
    1,108,076
    
    
    
    0John W. Roberts
    
    
    0
    
    
    
    0
    
    
    
    20,347
    
    
    
    13,439
    
    
    
    119,248
    
    
    
    0Kristine N. Dang
    
    
    0
    
    
    
    0
    
    
    
    21,286
    
    
    
    13,439
    
    
    
    117,038
    
    
    
    0Eric C. Wong
    
    
    0
    
    
    
    0
    
    
    
    18,639
    
    
    
    13,439
    
    
    
    122,016
    
    
    
    0Pamela A. Knox
    
    
    10,674
    
    
    
    62,111
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
   (1)
    
    All options granted prior to our initial public offering are early exercisable, and when and if exercised, will be subject to a repurchase right held
by RedEnvelope, Inc., which right lapses in accordance with the vesting schedules for the option grants.  (2)
    
    Value is based on the $9.15 per share closing price of our common stock on the Nasdaq Stock Market on Friday, March 26, 2004, the last trading day of
fiscal year 2004, less the exercise price. The last day of our fiscal year was Sunday, March 28, 2004. Indemnification Agreements RedEnvelope has entered into indemnification agreements with its officers
and directors containing provisions that may require RedEnvelope, among other
things, to indemnify its officers and directors against certain liabilities
that may arise by reason of their status or service as officers or directors
(other than liabilities arising from willful misconduct and other than as
limited by Delaware law) and to advance their expenses incurred as a result of
any proceeding against them as to which they could be indemnified. 6




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Employment Agreements and Change-of-Control Arrangements Alison L. Mays employment offer letter dated May 12, 2002 provides that
she will receive severance payments equal to twelve months of her then current
base salary, paid ratably over a twelve month period, and twelve months of
continued health coverage in the event her employment is constructively
terminated or terminated other than for cause and provided that she signs our
standard general release of any claims against RedEnvelope and resigns from all
positions with RedEnvelope. In addition, her option to purchase our common
stock may be exercised by delivering full recourse five-year term promissory
note and upon a change of control of RedEnvelope twenty-five percent (25%) of
the then unvested shares held by Ms. May shall immediately vest. Under the
Sarbanes-Oxley Act of 2002, we may not be able to permit Ms. May to exercise
her option by delivering a promissory note pursuant to her offer letter while
she is a director or executive officer of RedEnvelope. Hilary Billings letter agreement dated April 10, 2002 provided that in
the event of a change in control of RedEnvelope, twenty-five percent (25%) of
Ms. Billings then unvested options or shares would become immediately vested.
If Ms. Billings employment terminated other than for cause within the twelve
months following a change of control of RedEnvelope, then an additional
twenty-five percent (25%) of her remaining unvested options or shares would
become immediately vested. In addition, in the event that Ms. Billings
employment was constructively terminated or terminated other than for cause,
she would receive severance payments equal to twelve months of her then current
base salary, paid ratably over a twelve month period and twelve months of
continued health coverage, provided that she signed our standard general
release of all claims and resigned from all positions with RedEnvelope.
Finally, Ms. Billings options provide that she may exercise them by delivering
to us a full-recourse, five-year term promissory note, and she has three years
from the date of the termination of her employment with RedEnvelope to exercise
her options. Ms. Billings employment with RedEnvelope terminated on March 28, 2004. In
connection therewith, Ms. Billings executed our general release of all claims
which provides that Ms. Billings severance benefits provided to her pursuant to
her letter agreement shall be $300,000 paid in a lump sum on the effective date
of the release. On April 9, 2004, RedEnvelope entered into a Consulting Agreement with Ms.
Billings whereby we agreed to pay Ms. Billings a non-refundable retainer of
$1,500 per week and $250 per hour for time spent by Ms. Billings providing
consulting services to RedEnvelope in excess of four hours per week. John W. Roberts employment offer letter dated February 18, 2003 provides
that he will receive severance payments totaling $44,250, paid ratably over a 3
month period, in the event his employment is terminated without cause and
provided that he signs our standard general release of any claims against
RedEnvelope. Options to purchase a total of 17,078, 18,786 and
19,725 shares of common stock held by Eric C. Wong, Mr. Roberts and Kristine Dang, respectively, provide for acceleration
of 25% of the then unvested shares in the event of a change of control of the Company. Options to purchase a total of 15,000, 15,000
and 22,000 shares of common stock held by Mr. Wong, Mr. Roberts
and Ms. Dang, respectively, provide for acceleration of 25% of the
then unvested shares in the event of a change of control of the
Company in the event that Mr. Wong, Mr. Roberts or Ms. Dang are
terminated without cause or constructively terminated within 12 months following the change of control. Pamela Knox, our former Senior Vice President of Marketing, entered into
an employment offer letter dated May 20, 2003 that provided that she would
receive severance payments totaling $125,000, paid ratably over a six month
period, and six months of continued health coverage in the event her employment
was terminated without cause and provided that she signed our standard general
release of any claims against RedEnvelope. Ms. Knoxs employment with
RedEnvelope terminated on January 19, 2004. On March 3, 2004, Ms. Knox executed
a Separation Agreement and General Release. Director Compensation Each non-employee director receives an annual retainer fee of $10,000 per
member, an additional $1,000 per member for every board meeting attended, an
additional $500 per committee member for every committee meeting attended, and
annual fees of $2,500 for the chairman of the audit committee and $1,500 for
the chairman of the compensation committee. RedEnvelope reimburses its
non-employee directors for their out-of-pocket expenses incurred in connection
with attending board and committee meetings. Mr. Moritz has declined payment of
any fees otherwise payable to him for his services as Chairman of the Board, or
as a member of the Board or any Committee thereof. RedEnvelope has also granted, and expects to continue to grant, directors
options to purchase shares of RedEnvelopes common stock. Employee directors
are eligible to participate in our 1999 Stock Plan and are eligible to
participate in our 2003 Employee Stock Purchase Plan. Non-employee directors
are eligible to participate in our 1999 Stock Plan and our 2003 Directors
Stock Option Plan. 7




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Under the 2003 Directors Stock Option Plan, each non-employee director
who first becomes a non-employee director receives an automatic initial grant
of an option to purchase 40,000 shares of our common stock upon appointment or
election. Initial grants to non-employee directors will vest and become
exercisable as to 25% of the shares subject to the option on each of the first
four anniversaries of the date of grant. The 2003 Directors Stock Option Plan
also provides for annual grants, on the date of each annual meeting of our
stockholders, to each non-employee director who has served on our Board of
Directors for at least six months and who will continue to serve on our Board
of Directors thereafter. The annual grant to non-employee directors (other than
our non-employee Chairman of the Board) will be an option to purchase 10,000
shares of common stock and the annual grant to any non-employee Chairman of the
Board will be an option to purchase 20,000 shares. All annual option grants
will vest and become exercisable as to 100% of shares subject to the option on
the first anniversary of the date of grant. The exercise price of all stock
options granted under the 2003 Directors Stock Option Plan shall be equal to
the fair market value of a share of our common stock on the date of grant of
the option. Specifically, by virtue of his being appointed as Chairman of the Board,
Mr. Moritz was to be granted an option to purchase 8,536 shares of common
stock. At Mr. Moritz request, his option was instead granted to funds
affiliated with Sequoia Capital. As a result, on April 11 2003, funds
affiliated with Sequoia Capital were granted options to purchase an aggregate
of 8,536 shares of common stock at an exercise price of $2.22 per share. These
options were fully vested upon grant. It is currently anticipated that any
future grants otherwise issuable to Mr. Moritz in his capacity as a board
member or Chairman of the Board will be issued instead to funds affiliated with
Sequoia Capital. On October 3, 2003, each of Karen Edwards, who was appointed
as a director of RedEnvelope on that date, and Daniel R. Lyle were granted
options to purchase 40,000 shares of common stock at an exercise price of
$14.01 per share. These options vest and become exercisable at a rate of 25% of
the shares subject to the option on each annual anniversary of October 3, 2003,
subject to the continued service as a director of RedEnvelope by Ms. Edwards
and Mr. Lyle, respectively. In addition, on January 29, 2004, RedEnvelope
granted an option to purchase 40,000 shares of common stock to Michael E. Dunn
at an exercise price of $10.17 per share. The option vests and becomes
exercisable at a rate of 25% of the shares subject to the option on each annual
anniversary of January 29, 2004, subject to the continued service by Mr. Dunn
as a director of RedEnvelope. Compensation Committee Interlocks and Insider Participation No interlocking relationship exists, or in the past fiscal year has
existed, between any member of our compensation committee and any member of any
other companys board of directors or compensation committee. 8




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##### Table of Contents



Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The following tables set forth certain information known to RedEnvelope
with respect to beneficial ownership of our common stock as of the close of
business on July 9, 2004 (or earlier date for information based on filings with
the Securities and Exchange Commission) by:  (i)     each person known by RedEnvelope to be the beneficial owner of more than 5%
of our common stock,(ii)     each of our directors and director-nominees,(iii)     the Named
Executive Officers, and(iv)     all current directors and executive officers as a group. Beneficial ownership is determined in accordance with the rules and
regulations of the Securities and Exchange Commission. Except as otherwise
indicated, each person or entity has sole voting and investment power with
respect to all shares shown as beneficially owned, subject to community
property laws where applicable. The number of shares outstanding used in
calculating the percentages for a person in the table below includes the shares
underlying options held by such person that are exercisable within 60 days of
July 9, 2004. Percentage of beneficial ownership is based on 8,730,540 shares
outstanding as of July 9, 2004. Percentage ofNumber of
    
    Total SharesOutstanding Shares
    
    BeneficiallyName and Address of Beneficial Owner(1)
    
    Beneficially Owned
    
    Owned5% Stockholders:Sequoia Capital(2)
    
    
    1,021,736
    
    
    
    11.7
    %3000 Sand Hill Road, Suite 4-180Menlo Park, CA 94025Moussenvelope, L.L.C.(3)
    
    
    787,067
    
    
    
    9.0
    %9 West 57th StreetSuite 4605New York, NY 10019Galloway Group(4)
    
    
    774,205
    
    
    
    8.9
    %42 W. 15th Street, #2New York, NY 10011Executive Officers and Directors:
 9




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##### Table of Contents



Percentage ofNumber of
    
    Total SharesOutstanding Shares
    
    BeneficiallyName and Address of Beneficial Owner(1)
    
    Beneficially Owned
    
    OwnedAlison L. May(5)
    
    
    299,151
    
    
    
    3.4
    %Hilary Billings(6)
    
    
    53,686
    
    
    
    
    *Kristine N. Dang(7)
    
    
    37,250
    
    
    
    
    *John W. Roberts(8)
    
    
    21,910
    
    
    
    
    *Eric C. Wong(9)
    
    
    20,202
    
    
    
    
    *Pamela A. Knox
    
    
    0
    
    
    
    
    *Michael Moritz(2)
    
    
    1,021,736
    
    
    
    11.7
    %Michael E. Dunn(10)
    
    
    14,794
    
    
    
    
    *Karen Edwards
    
    
    0
    
    
    
    
    *Scott Galloway(11)
    
    
    232,945
    
    
    
    2.7
    %Charles Heilbronn(3)
    
    
    787,067
    
    
    
    9.0
    %Daniel R. Lyle(12)
    
    
    2,500
    
    
    
    
    *All current directors and executive officers as a group
(12 persons)(13)
    
    
    2,454,047
    
    
    
    28.1
    %
   *
    
    Less than 1%.(1)
    
    Unless otherwise indicated, the address of each of the named individuals is c/o RedEnvelope, Inc., 201 Spear Street,
3rd Floor, San Francisco, CA 94105.(2)
    
    This information is derived from this stockholders Schedule 13G filed with the SEC on December 31, 2003. 385,037
shares of which are directly held by Sequoia Capital IX (SC IX), 59,264 shares are directly held by Sequoia Capital
Entrepreneurs Fund (SCEF), 71,067 shares are directly held by Sequoia Capital IX Principals Fund (SC IX PF), SC IX
Management, LLC (SC IX LLC) is the General Partner of SC IX and SCEF, and the Managing Member SC IX PF. 452,825 of
such shares are directly held by Sequoia Capital Franchise Fund, L.P. (SCFF) and 53,543 shares are directly held by
Sequoia Capital Franchise Partners, L.P. (SCFP). SCFF Management, LLC (SCFF LLC) is the General Partner of SCFF
and SCFP. Mr. Moritz is a Managing Member of SC IX LLC and SCFF LLC. Mr. Moritz disclaims beneficial ownership of all
such shares except to the extent of his individual pecuniary interest therein.(3)
    
    This information is derived from this stockholders Schedule 13G and Form 4 filed with the SEC on December 31, 2003
and May 25, 2004, respectively. The shares of common stock are held directly by Moussenvelope, L.L.C.,
(Moussenvelope). Moussescapade, L.P., a Cayman Islands limited partnership (Moussescapade), is the sole member of
Moussenvelope. Moussescribe, a Cayman Islands company (Moussescribe and, together with Moussenvelope and
Moussescapade, the Mousse Entities), is the General Partner of Moussescapade. Mr. Charles Heilbronn is sole owner
and president of Moussescribe. Mr. Heilbronn is also a member of the Board. Mr. Heilbronn and the other filers
disclaim any beneficial ownership of the shares of Common Stock held by Moussenvelope except to the extent of their
pecuniary interest.(4)
    
    This information is derived from the Schedule 13D filed by Scott Galloway, R. Ian Chaplin, Martin McClanan and Michael
L. Meyer (the Galloway Group) with the SEC on June 23, 2004, as amended on July 12, 2004.(5)
    
    Includes 3,000 and 296,151 shares issuable upon exercise of options exercisable within 60 days of July 9, 2004, of
which 172,754 are vested at that time.(6)
    
    Includes 53,686 shares issuable upon exercise of options exercisable within 60 days of July 9, 2004. 10




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##### Table of Contents



(7)
    
    Includes 13,672 and 23,578 shares issuable upon exercise of options exercisable within 60 days of July 9, 2004, of
which 15,703 are vested at that time.(8)
    
    Includes 21,910 shares issuable upon exercise of options exercisable within 60 days of July 9, 2004, of which 9,528
are vested at that time.(9)
    
    Includes 20,202 shares issuable upon exercise of options exercisable within 60 days of July 9, 2004, of which 9,482
are vested at that time.(10)
    
    Includes 13,514 and 1,280 shares issuable upon exercise of options exercisable within 60 days of July 9, 2004, of
which 586 are vested at that time.(11)
    
    This information is derived from the Form 13G filed by the Galloway Group with the SEC on June 23, 2004, as amended on
July 12, 2004. This information does not include the shares beneficially owned by the other members of the Galloway
Group, as reported on the Form 13G, as amended.(12)
    
    This information is derived from this stockholders Form 4 filed with the SEC on May 17, 2004.(13)
    
    Please see footnotes (2)-(3), (5) and (7)-(12). Also includes 16,492 shares issuable upon exercise of options
exercisable within 60 days of July 9, 2004, of which 10,015 are vested at that time. Equity Compensation Plan Information The following table summarizes our equity compensation plan information as
of March 28, 2004 with respect to outstanding awards and shares remaining
available for issuance under the Companys existing equity compensation plans.
Information is included in the table as to common stock that may be issued
pursuant to the Companys equity compensation plans. Number ofsecurities to beissued upon
    
    Weighted averageexercise of
    
    exercise price of
    
    Number ofoutstanding
    
    outstanding
    
    securitiesoptions, warrants
    
    options, warrants
    
    remaining availablePlan category
    
    and rights
    
    and rights
    
    for future issuanceEquity compensation
plans approved by
security holders
(1)
    
    
    1,188,244
    
    
    $
    6.09
    
    
    
    1,462,899
    (2)Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    1,188,244
    
    
    $
    6.09
    
    
    
    1,462,899
    (2)
  (1)
    
    These plans include our 1999 Stock Plan, 2003 Directors Stock Option
Plan and 2003 Employee Stock Purchase Plan.(2)
    
    The 1999 Stock Plan provides for an annual increase on the
first day of each of the Companys fiscal years beginning in each of
2005 through 2009 equal to the lesser of (a) 426,985 shares, (b) 4%
of the shares outstanding on the last day of the immediately
preceding fiscal year, or 11




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##### Table of Contents



(c) such lesser number of shares as the Board shall determine; provided however that the maximum number of shares that may be added in any year pursuant to this sentence shall
not result in the 1999 Plans having available for issuance an
aggregate number of shares that exceeds 4% of the fully diluted shares of outstanding common stock as of the last day of the
immediately preceding fiscal year. The 2003 Employee Stock Purchase
Plan provides for annual increases in the number of shares available
for issuance under the 2003 Employee Stock Purchase Plan on the
first day of each of the Companys fiscal years 2005, 2006, 2007, 2008
and 2009, equal to the lesser of 1% of the outstanding shares of
our common stock on the first day of the applicable fiscal year,
106,746 shares or another amount as the board may determine. 
 Item 13.Certain Relationships and Related Transactions Edward Schmults employment offer letter dated April 22, 2004 provides
that he will receive severance payments totaling $125,000, paid ratably over a
6 month period, in the event his employment is terminated without cause and
provided that he signs our standard general release of any claims against
RedEnvelope. Christopher Nordquists employment offer letter dated October 7, 2003
provides that he will receive severance payments totaling $124,995, paid
ratably over a 6 month period, in the event his employment is terminated
without cause and provided that he signs our standard general release of any
claims against RedEnvelope. 
 Item 14.Principal Accountant Fees and Services The aggregate fees billed by Deloitte & Touche LLP for the indicated
services performed during the fiscal years 2004 and 2003 were as follows: Fiscal 2004
    
    Fiscal 2003Audit Fees(1)
    
    $
    150,000
    
    
    $
    147,000Audit-Related Fees(2)
    
    $
    7,500
    
    
    $
    300,000Tax Fees(3)
    
    $
    28,860
    
    
    $
    65,090All Other Fees
   (1)
    
    Audit Fees consist of fees billed for
professional services rendered for the audit
of RedEnvelopes annual financial
statements, review of the interim
consolidated financial statements included
in quarterly reports and services that are
normally provided by RedEnvelopes
independent registered public accounting
firm in connection with statutory and
regulatory filings or engagements.(2)
    
    Audit-Related Fees consist of fees billed
for assurance and related services that are
reasonably related to the performance of the
audit or review of RedEnvelopes financial
statements and are not reported under Audit
Fees. In fiscal year 2004, these fees
included fees for Sarbanes-Oxley readiness
services. In fiscal year 2003, these fees
included fees for assurance and related
services in connection with RedEnvelopes
initial public offering.(3)
    
    Tax Fees consist of fees billed for
professional services rendered for tax
compliance, tax advice and tax planning. 12




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The Audit Committee has considered, and believes that, the non-audit
services provided by Deloitte & Touche LLP as described above are compatible
with maintaining Deloitte & Touche LLPs independence as RedEnvelopes
independent registered public accounting firm. The Audit Committee is responsible for pre-approving all audit services
and permitted non-audit services not prohibited by law to be performed by
RedEnvelopes independent registered public accounting firm and associated
fees. The Audit Committee has the authority to delegate to one or more members
of the committee the authority to grant such pre-approvals, provided that such
decisions are presented to the full Audit Committee at regularly scheduled
meetings. 
 PART IV 
 Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K List the following documents filed as a part of the report on Form 10-K/A: 3. Exhibits Number
    
    Description31.1
    
    Alison Mays Certification pursuant to 13a-14(a) as
adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    Eric Wongs Certification pursuant to 13a-14(a) as
adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
 13




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##### Table of Contents



SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Amendment No. 2 to
the Annual Report on Form 10-K to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of San Francisco, State of California on
July 26, 2004. REDENVELOPE, INC.By:
    /s/ ERIC C. WONGEric C. WongChief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this
Amendment No. 2 to the Annual Report on Form 10-K has been signed by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated: Signature
    
    Title
    
    Date*
Michael Moritz
    
    Chairman of the Board
    
    July 26, 2004/s/ ALISON L. MAY
Alison L. May
    
    Director, President and
Chief Executive Officer
(Principal Executive Officer)
    
    July 26, 2004/s/ ERIC C. WONG
Eric C. Wong
    
    Chief Financial Officer
(Principal Financial and
Accounting Officer)
    
    July 26, 2004*
Michael Dunn
    
    Director
    
    July 26, 2004*
Karen Edwards
    
    Director
    
    July 26, 2004Scott Galloway
    
    Director*
Charles Heilbronn
    
    Director
    
    July 26, 2004*
Daniel R. Lyle
    
    Director
    
    July 26, 2004
 *By:
    /s/ ERIC C. WONG  Eric C. Wong  Attorney-in-fact
 14




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##### Table of Contents



EXHIBIT INDEX Number
    
    Description31.1
    
    Alison Mays Certification pursuant to 13a-14(a) as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Eric Wongs Certification
pursuant to 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.