MILAN — Fila, lacking prospects for short-term profitability or even assurances of funding from its principal owner, Holding Partecipazioni Industriali SpA, is turning to the equity markets to generate sorely needed funds.

The company, warning that it doesn’t expect a profit until 2005, is offering up to 25.7 million new shares priced at $1.73 each, for a potential capital increase of $44.6 million. Dollar figures are converted from the euro at current exchange rates.

Fila, which has lost money every year since 1998, said in a prospectus filing with the Securities and Exchange Commission: "We have a history of operating and net losses that we expect to continue for some period of time. These historical and future losses limit our ability to pay dividends on our ordinary shares, make it more difficult to obtain credit and otherwise operate normally, impair our ability to make capital expenditures that could be necessary for our business, and adversely affect the market price of our [American depositary shares]."

Holders of American Depository Shares have the right to buy three new shares for each ADS held.

Fila said it doesn’t expect to reach profitability at an operating level before 2004 and at a net level before 2005 at the earliest.

The sportswear company said it’s wholly reliant on funding from its majority shareholder Holding Partecipazioni Industriali, which has been trying unsuccessfully to sell Fila. Recently HdP, which, through a capital increase, upped its Fila stake to 91.1 percent from 71.9 percent, said it may look to restructure Fila internally.

"Our majority shareholder intends to sell its interest in us, which creates uncertainty and could make it difficult for us to obtain credit or continue operating," Fila said.

The company warned that it won’t be able to continue operations unless it regains profitability or receives ongoing financial support from HdP or the entity that buys HdP’s stake.

Fila also stated that the New York Stock Exchange may still decide to opt to delist Fila’s depository shares.

As reported, the stock exchange notified Fila in October that its shares risked being delisted for falling below the average closing price of $1 over a 30-day trading period, and having a market capitalization and shareholders’ equity of less than $50 million.Fila said its shares and capitalization levels are back in line with requirements but they must stay at those levels for it to stay a public company. Furthermore, Fila’s listing is also contingent on the company presenting a viable business plan to the Listing and Compliance Committee of the New York Stock Exchange.

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