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     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 [  ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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 this Form 10-K or any amendment to this form 10-K [  ].

     As of April 24, 2002, the number of shares of the registrant’s Common Stock outstanding was 2,207,753. The aggregate market value of the Common Stock held by non affiliates of the registrant as of April 24, 2002 was approximately $3.1 million, based on the closing price of the Common Stock ($2.35) as reported by the NASDAQ National Market on such date. For purposes of the foregoing computation, all executive officers, directors and 5% beneficial owners of the registrant are deemed to be affiliates. Such determination should not be deemed to be an admission that such executive officers, directors or 5% beneficial owners are, in fact, affiliates of the registrant.

DOCUMENTS INCORPORATED BY REFERENCE

     Certain information called for by Part III is incorporated to the Proxy Statement for the Annual Meeting of Shareholders of the company, which will be filed no later than 120 days after the close of the fiscal year end.

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FORWARD-LOOKING STATEMENTS

     Certain statements within this Form 10-K constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All forward-looking statements are based on current expectations regarding important risk factors. Accordingly, actual results may differ materially from those expressed in the forward-looking statements, and the making of such statements should not be regarded as a representation by the Company or any other person that the results expressed in the statements will be achieved. See “Risk Factors That May Affect Future Results” in Item 7.

PART I.

ITEM 1. BUSINESS

BUSINESS STRATEGY

     E Com Ventures, Inc., a Florida Corporation (“ECOMV” or the “Company”), is a holding company that operates two wholly-owned subsidiaries, Perfumania, Inc. (“Perfumania”), a Florida corporation, which is a specialty retailer and wholesaler of fragrances and related products and perfumania.com, inc., an Internet retailer of fragrances and other specialty items.

     Perfumania is a leading specialty retailer and wholesale distributor of a wide range of brand name and designer fragrances. As of February 2, 2002, Perfumania operated a chain of 247 retail stores specializing in the sale of fragrances at discounted prices up to 75% below the manufacturer’s suggested retail prices. Perfumania’s wholesale division distributes approximately 500 stock keeping units (SKUs) of fragrances and related products to approximately 9 customers, including national and regional chains and other wholesale distributors throughout North America and overseas. Our E-commerce site, www.perfumania.com offers our more popular products for sale and serves as an extension of the Perfumania shopping experience. For a description of perfumania.com’s September 1999 initial public offering, the sale of a majority of our interest in perfumania.com and our subsequent repurchase of that interest, see Note 11 of Notes to Consolidated Financial Statements included in Item 8.

     Perfumania and perfumania.com, inc., are the sole operating subsidiaries of the Company. Perfumania operates its wholesale business as an unincorporated division. Its retail business is managed and owned by Magnifique Parfumes and Cosmetics, Inc. (“Magnifique”), a wholly-owned subsidiary of Perfumania. For ease of reference in this Form 10-K, our retail and wholesale business are referred to as segments; our Internet sales are included with those of our retail business. See Item 6 for Selected Financial Data by segment.

RETAIL SEGMENT

     MARKETING AND MERCHANDISING. Each of Perfumania’s retail stores generally offers approximately 175 different brands of fragrances for women and men at prices up to 75% below the manufacturer’s suggested retail prices. Stores stock brand name and designer brands such as Estee Lauder®, Fendi®, Yves Saint Laurent®, Fred Hayman®, Calvin Klein®, Giorgio Armani®, Gucci®, Ralph Lauren/Polo®, Perry Ellis®, Liz Claiborne®, Giorgio®, Hugo Boss®, Halston®, Christian Dior®, Chanel® and Cartier®. Perfumania also carries a private label line of bath & body treatment products under the name Jerome Privee®, and a private label line of cosmetics, treatment and aromatherapy under the name Nature’s Elements®.

     The cornerstone of Perfumania’s marketing philosophy is customer awareness that its stores offer an extensive assortment of brand name and designer fragrances at discount prices. Perfumania posts highly visible price tags for each item in its stores, listing both the manufacturers’ suggested retail prices and Perfumania’s discounted prices to enable customers to make price comparisons. In addition, we utilize sales promotions such as “gift with purchase” and “purchase with purchase” offers. From time to time, we test market in our stores additional specialty gift items.

     Perfumania’s stores are “full-service” stores. Accordingly, store personnel are trained to establish personal rapport with customers, to identify customer preferences with respect to both product and price range, and to successfully conclude a sale.

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     Management believes that attentive personal service and knowledgeable sales personnel are key factors to the success of Perfumania’s retail stores. Perfumania’s store personnel are compensated on a salary plus bonus basis. Perfumania has several bonus programs that provide incentives for store personnel to sell merchandise which have higher profit margins. In addition, to provide an incentive to reduce expenses, district managers are eligible to receive a bonus if store profitability and operational goals are met. Management believes that a key component of Perfumania’s ability to increase profitability will be its ability to hire, train and retain store personnel and district managers. Perfumania conducts comprehensive training programs designed to increase customer satisfaction.

     Perfumania primarily relies on its distinctive store design and window displays to attract the attention of prospective customers. In addition, Perfumania distributes advertising flyers and brochures by mail and in its stores and malls in which its stores are located. The amount of advertising varies with the seasonality of the business.

     RETAIL STORES. Perfumania’s standard store design includes signs and merchandise displays which are designed to enhance customer recognition of Perfumania’s stores. Perfumania’s stores average approximately 1,400 square feet, however, stores located in manufacturer’s outlet malls tend to be larger than Perfumania’s other stores. Each store is managed by one manager and one assistant manager. The average number of employees in a Perfumania store is five, including part-time help. District managers visit stores on a regular basis in an effort to ensure knowledgeable and attentive customer service and compliance with operational policies and procedures.

     INFORMATION SYSTEMS. Perfumania has a point-of-sale and management information system which integrates data from every significant phase of our operations and provides information for planning, purchasing, pricing, distribution, financial and human resources decisions. Inventory is received in each retail location using an automated inventory tracking system. Sales and inventory data are updated in our system each night by downloading information from our point-of-sale system, resulting in a perpetual daily inventory. Daily compilation of sales, gross margin and inventory data enables management to analyze profitability and sell-through by item and product line as well as to monitor the success of sales promotions. The system also provides price labels and pick orders as well as automatic reordering, minimum and maximum stocking levels and optimum order quantities based on actual sales. The information system also has automated time and attendance modules to capture payroll information through the stores’ point-of-sale systems and E-Mail systems allowing daily communication among the stores, district managers and the corporate office and automated scheduling for store personnel.

     STORE LOCATION AND EXPANSION. Perfumania’s stores are located in 35 states, the District of Columbia and Puerto Rico, including 49 in Florida, 29 in New York, 19 in California, 14 in Texas and 14 in Puerto Rico. Perfumania’s current business strategy focuses on maximizing sales by raising the average dollar sale per transaction, reducing expenses at existing stores, selectively closing under-performing stores and on a limited basis, opening new stores in proven geographic markets. When opening new stores, Perfumania seeks locations primarily in regional and manufacturers’ outlet malls and, selectively, on a stand-alone basis in suburban shopping centers in metropolitan areas. To achieve economies of scale with respect to advertising and management costs, Perfumania evaluates opening additional stores in markets where it already has a presence or to expand into additional markets that it believes have a population density to support a cluster of stores.

     Perfumania’s current average cost for opening a store is approximately $130,000, including furniture and fixtures, build-out costs and other items. In addition, initial inventory in a new store ranges from approximately $150,000 during the first fiscal quarter to approximately $200,000 during the Christmas holiday season. To support inventory in its stores, Perfumania carries at least four months supply of inventory in its warehouse.

     In fiscal year 2001, 2000 and 1999, Perfumania opened 5 stores, 9 stores (including 6 acquired stores) and 8 stores, respectively. Perfumania continuously monitors store performance and from time to time has closed under-performing stores, which typically have been older stores in undesirable locations. During fiscal years 2001, 2000 and 1999, Perfumania closed 15, 28 and 21 stores, respectively. For fiscal 2002, Perfumania will continue to focus on improving the profitability of its existing stores. Perfumania expects to open a maximum of 10 stores and close up to 10 stores during fiscal 2002.

WHOLESALE SEGMENT

     Perfumania distributes fragrances on a wholesale basis to national and regional retail chains and other wholesale distributors throughout North America and overseas. During fiscal years 2001 and 2000, the wholesale division sold to approximately 9 and 13

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customers, respectively. One Perfumania customer, unaffiliated to the Company, accounted for 92.0% and 62.9% of net wholesale sales during fiscal year 2001 and 2000, respectively. There were no foreign wholesale sales during fiscal year 2001 compared to $1.1 million during fiscal year 2000. The decrease in wholesale sales was due to our continuing strategic initiative to redirect our managerial, administrative and inventory resources to our retail operations. We do not believe the wholesale business will increase significantly during fiscal year 2002. See Note 14 to the Company’s Consolidated Financial Statements included in Item 8 hereof.

PERFUMANIA.COM

     Perfumania.com provides a number of advantages for retail and wholesale fragrance sales. Our Internet site enables us to display a larger number of products than traditional store-based or catalog sellers. In addition, the ability to frequently adjust featured selections and edit content and pricing provides significant merchandising flexibility. Our Internet site benefits from the ability to reach a large group of customers from a central location. Additionally, we can also easily obtain demographic and behavioral data of customers, increasing opportunities for direct marketing and personalized services. Because brand loyalty is a primary factor influencing a fragrance purchase, the ability to physically sense the fragrance product is not critical to the purchasing decision. Perfumania.com’s online store provides its customers with value, selection, pricing and convenience.

     Our online store offers visitors several special features arranged in simple, easy-to-use formats to enhance product search, discovery and selection. By clicking on the displayed products and product categories, users can move directly to the site that contains details about the particular products. Users can quickly browse promotions, such as perfumania.com’s perfume of the month and other featured products. In addition, customers can browse the online store by linking to specially designed pages dedicated to products of well known national and specialty brands. Customers can also link to pages by product category, such as women’s and men’s brand name perfumes and colognes, children’s fragrances, gift set specials and bath and body products.

     Customers are offered a choice of over 2,000 designer and private label fragrances, fragrance related products, accessories and bath and body products for men and women at discounted prices. High levels of customer service and support are critical to retain and expand our customer base. Perfumania.com monitors orders from the time they are placed through delivery by providing numerous points of electronic, telephonic and personal communication to customers. All orders and shipments are confirmed by e-mail. Customer service representatives are available during regular business hours by telephone.

     A variety of relationships have been established with several Internet sites to build traffic and attract customers. Although perfumania.com obtains most of its inventory from Perfumania, it may obtain inventory from suppliers depending on which offers the most favorable selection, pricing, quality and terms. Products are generally shipped within 24 hours. For a description of perfumania.com’s September 1999 initial public offering, the sale of a majority of our interest in perfumania.com and our subsequent repurchase of that interest, see Note 11 of Notes to Consolidated Financial Statements included in Item 8.

     In September 2001, we entered into a licensing agreement with an affiliate to license our retail fragrance Internet Web site. Under the terms of the agreement, we earn a royalty of 5% of defined product sales for sales up to $8 million per annum, decreasing to 3% on sales exceeding $11 million per annum. Royalty income under this agreement for the year ended February 2, 2002 was approximately $88,000. Additionally, the affiliate rents approximately 20,000 square feet of warehouse facilities from us for approximately $15,000 per month. See Investment in Nimbus Group, Inc. in this Item 1 and Note 6 of Notes to Consolidated Financial Statements included in Item 8.

SOURCES OF SUPPLY

     During fiscal years 2001 and 2000, Perfumania purchased fragrances from approximately 140 and 170 different suppliers, respectively, including national and international manufacturers, distributors, wholesalers, importers and retailers. Perfumania generally makes its purchases based on the most favorable available combination of prices, credit terms, quantities and merchandise selection and, accordingly, the extent and nature of Perfumania’s purchases from its various suppliers change constantly. As is customary in the fragrance industry, Perfumania has no long-term or exclusive contracts with suppliers.

     Approximately 17% and 20%, respectively of Perfumania’s total merchandise purchased in fiscal year 2001 and 2000 was from our affiliate, Parlux Fragrances, Inc. (“Parlux”), a manufacturer and distributor of prestige fragrances and related beauty products. The

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Chairman of the Board of Directors and Chief Executive Officer of Parlux, Ilia Lekach, is also our Chairman of the Board and Chief Executive Officer.

     Merchandise is purchased both directly from manufacturers and secondary sources such as distributors, wholesalers, importers and retailers. Merchandise purchased from secondary sources includes trademarked and copyrighted products manufactured in foreign countries or the United States that may have been sold to foreign distributors. Substantially all of Perfumania’s merchandise is covered by trademarks or copyrights owned by others. From time to time, United States trademark and copyright owners and their licensees and trade associations have initiated litigation or administrative agency proceedings seeking to halt the importation into the United States of such foreign manufactured or previously exported trademarked products or restrict the sale of such goods in the United States. Federal legislation for such purposes has been proposed but not yet adopted.

     In 1988, the United States Supreme Court in K-Mart v. Cartier (“K-Mart”), upheld U.S. Customs Service regulations permitting the importation, without the consent of the U.S. trademark owner, of products manufactured overseas having legitimate foreign trademarks identical to U.S. trademarks, when the foreign and U.S. trademarks are owned by the same entity or entities under “common ownership or control.” K-Mart also held that where the foreign trademarked goods are produced by an unaffiliated entity authorized, but not controlled, by the U.S. trademark holder, the U.S. Customs Service cannot permit the importation of the goods without the consent of the U.S. trademark owner. Certain federal courts have narrowly interpreted the K-Mart case as applying to a particular tariff statute, and the courts remain divided on the extent to which copyright or other laws or regulations may restrict the importation or sale of trademarked or copyrighted merchandise without the consent of the trademark or copyright owner, even where the entities owning and applying the trademark or copyright involved are under common ownership or control.

     In the trademark context, a 1993 District of Columbia Circuit Court of Appeals decision, in Lever Bros. v. United States (“Lever Bros.”), held that the “common ownership or control” exception does not apply to foreign goods with an identical trademark but with material differences from the product produced by the U.S. trademark holder. Under Lever Bros., such goods are barred from importation without the permission of the United States trademark holder. After Lever Bros., federal courts have consistently recognized that the importation and U.S. distribution of unauthorized goods bearing the same trademark as, but differing materially from, goods authorized for sale in the U.S. violates the Lanham Act even if produced by an affiliate of the U.S. trademark holder or authorized distributor. Material differences may include not only physical differences, but differences in quality control, warranty protection and service, labeling and packaging.

     In the copyright context, the U.S. District Court for the Central District of California, in a 1992 unreported decision in Parfums Givenchy, Inc. v. Drug Emporium, Inc. (“Parfums”), which purports to follow a decision of the Ninth Circuit Court of Appeals, held that the sale of products manufactured abroad and imported into the United States, which would be covered by a U.S. copyright, without the consent of the U.S. copyright holder, is a copyright violation. This decision was upheld by the 9th Circuit Court of Appeals and in 1995, the U.S. Supreme Court denied certiorari, without giving any reason. In 1998, however, the United States Supreme Court in Quality King Distributors v. L’anza Research International (“L’anza”), was faced with a situation in which a U.S. manufacturer had manufactured and sold certain goods with copyrighted labels affixed to a foreign purchaser. These goods somehow found their way from the foreign purchaser back into the United States without L’anza’s permission, and were sold by Quality King to unauthorized retailers at discounted prices. The Court unanimously held that there was no copyright violation by Quality King because the “first sale” doctrine applied to imported copies.

     The “first sale” doctrine was also successfully used to defeat a claim for trademark infringement in at least one federal court decision. In 1996, the U.S. District Court for the Central District of California, in Summit Technology v. High-Line Medical Instruments (“Summit”), purported to follow other decisions from the 9th Circuit Court of Appeals, in holding that the “first sale” doctrine precluded a trademark infringement claim against a U.S. company which was alleged to have acquired legally exported trademarked products used in foreign countries and then re-imported them for distribution in the United States. However, the greater weight of authority has held that the first sale doctrine does not apply in the context of trademark infringement based upon the importation or sale of gray market goods. For example, in 2001, in Davidoff & Cie, S.A. v. Pld Intern. Corp., the Eleventh Circuit Court of Appeals held that the first sale doctrine does not bar a trademark infringement claim when the alleged infringer sells trademarked goods that are materially different than those sold by the trademark owner. Similarly, in 1997, the Fifth Circuit Court of Appeals in Martin’s Herend Imports, Inc. v. Diamond & Gem Trading USA, Co., held that the first sale rule does not apply when genuine, but unauthorized, imports differ materially from authentic goods authorized for sale in the domestic market. Additionally, in 1998, the Third Circuit Court of Appeals in Iberia Foods Corp. v. Romeo held the first sale doctrine inapplicable where the U.S. trademark owner had no right to control the foreign sales alleged to qualify as first sales.

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     Moreover, in March 1999, certain amendments to United States Customs Service’s regulations became effective, so as to provide a mechanism by which United States trademark owners, upon application to United States Customs, may attempt to restrict importation of certain goods bearing genuine trademarks identical to or substantially indistinguishable from those appearing on goods authorized by the United States trademark owner for importation or sale in the United States, and that thereby create a likelihood of consumer confusion, in circumstances where the imported goods and those bearing the authorized United States trademark are physically and materially different. Consistent with the holding in Lever Bros., these restrictions apply even if the United States and foreign trademark owners are the same, are parent and subsidiary companies, or are otherwise subject to the common ownership or control. However, these restrictions do not operate to bar importation if the otherwise restricted goods bear a prescribed label, informing the consumer that the goods were not authorized by the United States trademark owner and were physically and materially different from the goods that were so authorized. It is still too early to tell how these regulations will impact, if at all, the importation of products from secondary sources.

     As is often the case in the fragrance and cosmetics business, some of the merchandise purchased by suppliers such as Perfumania may have been manufactured by entities, particularly foreign licensees and others, who are not the owners of the trademarks or copyrights for the merchandise. If Perfumania were called upon or challenged by the owner of a particular trademark or copyright to demonstrate that specific merchandise was produced and sold with the proper authority and it was unable to do so, Perfumania could, among other things, be restricted from reselling the particular merchandise or be subjected to other liabilities, which could have an adverse effect on Perfumania’s business and results of operations. Perfumania may not always be able to know or to demonstrate that the manufacturer of specific merchandise had proper authority from the trademark or copyright owner to produce the merchandise or permit it to be resold in the United States.

     Perfumania’s secondary market sources generally will not disclose the identity of their suppliers, which they consider to be proprietary trade information. As a result, Perfumania cannot determine specifically what portion of its merchandise purchased from secondary market sources could be affected by the potential actions discussed above or actions on other grounds. There can be no assurance that future judicial, legislative or administrative agency action, including possible import, export, tariff or other trade restrictions, will not limit or eliminate some of the secondary sources of supply used by the Company or any of Perfumania’s business activities. In addition, there can be no assurance that Perfumania’s business activities will not become the subject of legal or administrative actions brought by manufacturers, distributors or others.

DISTRIBUTION

     Perfumania’s retail and wholesale operations are served by its warehouse in Miami, Florida. The lease for the facility expires in July 2003, however, Perfumania has a five-year extension option. The warehouse is approximately 139,000 square feet, of which 20,000 square feet is utilized as office space. Perfumania also utilizes space occasionally in a third party bonded warehouse.

     Perfumania utilizes independent national trucking companies to deliver merchandise to its stores. Deliveries generally are made weekly, with more frequent deliveries during the Christmas holiday season. Such deliveries permit the stores to minimize inventory storage space and increase the space available for display and sale of merchandise. Perfumania generally ships merchandise to wholesale customers by truck or ship. To expedite delivery of merchandise to its customers, Perfumania sometimes instructs its suppliers to ship merchandise directly to wholesale division customers.

COMPETITION

     Retail and wholesale perfume businesses are highly competitive. Perfumania’s retail competitors include department stores, regional and national retail chains, independent drug stores, duty-free shops and other specialty retail stores. Perfumania is the largest specialty retailer of discounted fragrances in the United States in terms of number of stores. Some of Perfumania’s competitors sell fragrances at discount prices and some are part of large national or regional chains that have substantially greater resources and name recognition than Perfumania. Perfumania’s stores compete on the basis of selling price, customer service, merchandise variety, store location and ambiance. Perfumania believes that its European-style perfumeries concept, full-service sales staff, discount prices, large and varied selection of brand name and designer fragrances and attractive shopping environment are important to its competitive position.

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     Perfumania’s wholesale division competes directly with other perfume wholesalers and perfume manufacturers, some of which have substantially greater resources or merchandise variety than Perfumania. The wholesale division competes principally on the basis of merchandise selection, price, availability and delivery.

EMPLOYEES

     At February 2, 2002, the Company had 1,582 employees, of whom 1,407 were employed in Perfumania’s retail stores, 63 were employed in Perfumania’s warehouse and distribution operations and 112 were employed in executive, administrative and other positions. Temporary and part-time employees are usually added during peak sales periods (principally between Thanksgiving and Christmas). None of the Company’s employees are covered by a collective bargaining agreement and the Company considers its relationship with its employees to be good.

TRADE NAME AND SERVICE MARK

     Perfumania’s stores use the trade name and service mark Perfumania®, Perfumania also operates 1 store under the trade name “Nature Elements,” 3 stores under the trade name “Class Perfumes” in malls where the Company also operates a Perfumania® store, one store under the trade name “Touch at Perfumania,” one store under the trade name “Perfumania Too,” and 8 stand-alone stores under the trade name “Perfumania Plus”. Perfumania has common law rights to its trade names and service mark in those general areas in which its existing stores are located and has registered the service mark Perfumania® with the U.S. Patent and Trademark Office. The registration expires in 2009 and may be renewed for 10-year terms thereafter.

     INVESTMENT IN NIMBUS GROUP, INC.

     During fiscal year 2000, we purchased 314,000 shares of Take to Auction.Com, Inc. (“TTA”), an Internet auction site, for approximately $2.5 million. In June 2000, we acquired approximately 139,000 shares of TTA’s common stock upon conversion of a $1.0 million convertible promissory note receivable. See “Item 7” Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.”

     As of February 3, 2001, the market price for TTA’s common stock was below our average cost per share of $5.38. In consideration of accounting guidance that considers a six to nine month decline in stock price to be other than temporary, we valued the shares at $1.01 per share and recorded a non-cash charge of approximately $3.1 million to realized loss on investments on the consolidated statement of operations for fiscal year 2001.

     In January 2001, we received 250,000 shares of TTA common stock as partial payment on a loan receivable from Ilia Lekach. These shares were valued at $252,500 ($1.01 per share).

     In September 2001, TTA effected a corporate reorganization (“Re-organization”) as a result of which TTA became a wholly owned subsidiary of Nimbus Group, Inc. (“Nimbus”). As a result of the Reorganization; our shares of TTA common stock were exchanged for an equal number of shares of Nimbus common stock.

     In January 2002, we received 300,000 shares of Nimbus common stock as partial payment on a loan receivable from Ilia Lekach. These shares were valued at $357,000 ($1.19 per share).

     As of February 2, 2002 we owned approximately 1,003,000 shares of Nimbus common stock representing approximately 13% of its total outstanding common stock. The investment in Nimbus is shown on our balance sheet as investments available for sale in the amount of approximately $1,304,000 representing the market value of $1.30 per share at that date.

     Ilia Lekach, our Chairman of the Board and Chief Executive Officer was Chairman of the Board of TTA from October 1999 until the Reorganization and has been Chairman of Nimbus since the Reorganization and Interim Chief Executive Officer since

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January 2002. Horacio Groisman, M.D., one of our Directors, served as Vice Chairman of TTA from October 1999 until the Reorganization and was Vice Chairman of Nimbus from the Reorganization until his resignation in October 2001.

ITEM 2. PROPERTIES

     Our executive offices and warehouse are leased through July 2003 pursuant to a lease which currently provides for monthly rent of approximately $78,000 and specified annual increases. We have an option to renew the lease for a five-year term.

     All of Perfumania’s retail stores are located in leased premises. Most of the store leases provide for the payment of a fixed amount of base rent plus a percentage of sales, ranging from 3% to 15%, over certain minimum sales levels. Store leases typically require Perfumania to pay all utility charges, insurance premiums, increases in property taxes and certain other costs. Certain of Perfumania’s leases permit the termination of the lease if specified minimum sales levels are not met. See Note 13 to the Company’s Consolidated Financial Statements included in Item 8 hereof, for additional information with respect to the Company’s store leases.

ITEM 3. LEGAL PROCEEDINGS

     The Company is involved in legal proceedings in the ordinary course of business. Management cannot presently predict the outcome of these matters, although management believes that the Company would have meritorious defenses and that the ultimate resolution of these matters should not have a materially adverse effect on the Company’s financial position or result of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     On December 7, 2001, we held our annual meeting of shareholders. At the annual meeting, the shareholders elected Ilia Lekach, A. Mark Young, Jeffrey Geller, Donovan Chin, Carole Ann Taylor, Horacio Groisman, M.D., Zalman Lekach, Ana Maria Fernandez Haar and James Fellus to the Board of Directors. In addition, the shareholders ratified the appointment of Deloitte & Touche LLP as our independent certified public auditors.

     The following table reflects the results of the meeting (all share amounts have been adjusted to give effect to a one-for-four reverse stock-split effective March 20, 2002):

     ELECTION OF DIRECTORS:

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     RATIFICATION OF AUDITORS:

PART II.

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

     Our Common Stock is traded on the NASDAQ Stock Market under the symbol ECMV. The following table sets forth the high and low closing sales prices for our Common Stock for the periods indicated, as reported by the NASDAQ Stock Market. All prices have been adjusted to give effect to the one-for-four reverse stock-split effective March 20, 2002.

     As of April 24, 2002, there were 64 holders of record, which excluded Common Stock held in street name. The closing sales price for the Common Stock on April 24, 2002 was $2.35 per share.

REVERSE STOCK-SPLIT

     The Company’s Board of Directors authorized a one-for-four reverse stock-split of the Company’s outstanding shares of common stock for shareholders of record on March 20, 2002. Accordingly, all share and per share data shown in this Form 10-K have been retroactively adjusted to reflect this reverse stock split.

DIVIDEND POLICY

     We have not declared or paid any dividends on our Common Stock and do not currently intend to declare or pay cash dividends in the foreseeable future. Payment of dividends, if any, will be at the discretion of the Board of Directors after taking into account various factors, including our financial condition, results of operations, current and anticipated cash needs and plans for expansion. Perfumania is prohibited from paying cash dividends under its line of credit agreement with GMAC Commercial Finance LLC.

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ITEM 6. SELECTED FINANCIAL DATA

     The selected financial data presented below for the last five fiscal years and as of the end of each such fiscal years are derived from our consolidated financial statements and should be read in conjunction with such financial statements and related notes.

     Our fiscal year ends on the Saturday closest to January 31. All references herein to fiscal years are to the calendar year in which the fiscal year begins; for example, fiscal year 2001 refers to the fiscal year that began on February 4, 2001 and ended on February 2, 2002.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

     Perfumania’s retail division accounts for most of our net sales and gross profit. Perfumania’s overall profitability depends principally on our ability to attract customers and successfully conclude retail sales. Other factors affecting our profitability include

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general economic conditions, competition, availability of volume discounts, number of stores in operation, timing of store openings and closings and the effect of special promotions offered by Perfumania.

     The following table sets forth items from our Consolidated Statements of Operations expressed as a percentage of total net sales for the periods indicated:

PERCENTAGE OF NET SALES

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RESULTS OF OPERATIONS

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

     Some of the statements in this quarterly report, including those that contain the words “anticipate,” “believe,” “plan,” “estimate,” “expect,” “should,” “intend” and other similar expressions, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Those forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company or its industry to be materially different from any future results, performance or achievements expressed or implied by those forward-looking statements.

WE MAY HAVE PROBLEMS RAISING MONEY NEEDED IN THE FUTURE

     Our growth strategy includes selectively opening and operating new Perfumania retail locations and increasing the average retail sales per store. We may need to obtain funding to achieve our growth strategy. Additional financing may not be available on acceptable terms, if at all. In order to obtain additional financing, we may be required to issue securities with greater rights than those currently possessed by holders of our common stock. We may also be required to take other actions which may lessen the value of our common stock, including borrowing money on terms that are not favorable to us.

PERFUMANIA’S BUSINESS IS SUBJECT TO SEASONAL FLUCTUATIONS, WHICH COULD LEAD TO
FLUCTUATIONS IN OUR STOCK PRICE

     Perfumania has historically experienced and expects to continue experiencing higher sales in the third and fourth fiscal quarters than in the first and second fiscal quarters. Purchases of fragrances as gift items increase during the Christmas holiday season which results in significantly higher fourth fiscal quarter retail sales. If our quarterly operating results are below expectations of stock market analysts, our stock price might decline. Our quarterly results may also vary as a result of the timing of new store openings and store closings, net sales contributed by new stores and fluctuations in comparable sales of existing stores. Sales levels of new and existing stores are affected by a variety of factors, including the retail sales environment, the level of competition, the effect of marketing and promotional programs, acceptance of new product introductions, adverse weather conditions and general economic conditions.

PERFUMANIA’S BUSINESS HAS BEEN AFFECTED BY AN ECONOMIC DOWNTURN

     Since the third quarter of 2000, the U.S. economy has shown signs of a downturn, and the events of September 11 have further exacerbated the situation. The retail industry, in general, is displaying signs of a slowdown, both in and outside our industry segment, with many companies reporting earnings shortfalls compared to market expectations over the last several months. This general economic slowdown negatively impacted our results during the fiscal year 2001, and may continue to adversely impact our business and the results of our operations.

PERFUMANIA MAY EXPERIENCE SHORTAGES OF THE MERCHANDISE IT NEEDS BECAUSE IT DOES NOT HAVE LONG-TERM AGREEMENTS WITH SUPPLIERS

     Perfumania’s success depends to a large degree on our ability to provide an extensive assortment of brand name and designer fragrances. Perfumania has no long-term purchase contracts or other contractual assurance of continued supply, pricing or access to new products. While we believe that Perfumania has good relationships with its suppliers, if Perfumania is unable to obtain merchandise from one or more key suppliers on a timely basis, or if there is a material change in Perfumania’s ability to obtain necessary merchandise, our results of operations could be adversely affected.

PERFUMANIA NEEDS TO SUCCESSFULLY MANAGE ITS GROWTH

     Perfumania’s growth is somewhat dependent upon opening and operating new retail stores on a profitable basis, which in turn is subject to, among other things, securing suitable sites on satisfactory terms, hiring, training and retaining qualified management and other personnel, having adequate capital resources and successfully integrating new stores into existing operations. It is possible that Perfumania’s new stores might not achieve sales and profitability comparable to existing stores, and it is possible that the opening of new locations might adversely affect sales at existing locations.

PERFUMANIA COULD BE SUBJECT TO LITIGATION BECAUSE OF THE MERCHANDISING ASPECT OF ITS BUSINESS

     Some of the merchandise Perfumania purchases from suppliers is manufactured by entities who are not the owners of the trademarks or copyrights for the merchandise. This practice is common in the fragrance and cosmetics business. The owner of a particular trademark or copyright may challenge Perfumania to demonstrate that the specific merchandise was produced and sold with the proper authority and if Perfumania is unable to demonstrate this, it could, among other things, be restricted from reselling the particular merchandise. This type of restriction could adversely affect Perfumania’s business and results of operations.

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OUR COMMON STOCK MAY BE DELISTED

     Our Common Stock is currently listed on the NASDAQ national market. Due to the recent decline in trading prices of our Common Stock and our market capitalization, NASDAQ has notified us that we do not meet its minimum listing requirements and as a result, our Common Stock may be delisted. These listing requirements include a series of financial tests relating to net tangible assets, public float, number of market makers and shareholders, maintaining a minimum bid price for listed securities of $1.00 and a minimum market value of publicly traded shares of $5,000,000. If we fail to meet NASDAQ’s maintenance criteria our Common Stock may be delisted by NASDAQ. In such event, trading, if any, in our Common Stock may then continue to be conducted in the non-NASDAQ over-the-counter market (commonly referred to as the electronic bulletin board and the “pink sheets”). As a result, investors may find it more difficult to dispose of their holdings or obtain accurate quotations as to the market value of our Common Stock. In addition, we would be subject to a Securities and Exchange Commission Rule that may adversely affect the ability of broker-dealers to sell our Common Stock, which would adversely affect the ability of our shareholders to sell their shares in the secondary market. Delisting could make trading our shares more difficult for investors, potentially leading to further declines in share price. It would also make it more difficult and more expensive for us to raise additional capital.

FUTURE GROWTH MAY PLACE STRAINS ON OUR MANAGERIAL, OPERATIONAL AND FINANCIAL
RESOURCES

     Future growth may place a significant strain on our managerial, operational and financial resources. Further, as the number of our users, advertisers and other business partners grow, we will be required to manage multiple relationships with various customers, strategic partners and other third parties. Future growth or increase in the number of our strategic relationships might strain our managerial, operational and financial resources, inhibiting our ability to achieve the rapid execution necessary to successfully implement our business plan. In addition, our future success will also depend on our ability to expand our sales and marketing organization and our support organization commensurate with the growth of our business and the Internet.

WE ARE SUBJECT TO INTENSE COMPETITION

     Some of Perfumania’s competitors sell fragrances at discount prices, and some are part of large international, national or regional chains that have substantially greater resources and name recognition than Perfumania. Perfumania’s stores compete on the basis of selling price, customer service, merchandise variety and store location. Many of our current and potential competitors have greater financial, technical, operational, and marketing resources. We may not be able to compete successfully against these competitors in developing our products or services.

EXPANDING OUR BUSINESS THROUGH ACQUISITIONS AND INVESTMENTS IN OTHER BUSINESSES
AND TECHNOLOGIES PRESENTS SPECIAL RISKS

     We may expand through the acquisition of and investment in other businesses. Acquisitions involve a number of special problems, including:

	• difficulty integrating acquired technologies, operations, and personnel with our existing business;
	• diversion of management’s attention in connection with both negotiating the acquisitions and integrating the assets;
	• the need for additional financing;
	• strain on managerial and operational resources as management tries to oversee larger operations; and
	• exposure to unforeseen liabilities of acquired companies.

     We may not be able to successfully address these problems. Moreover, our future operating results will depend to a significant degree on our ability to successfully manage growth and integrate acquisitions. In addition, many of our investments might be in early-stage companies with limited operating histories and limited or no revenues. We may not be able to successfully develop these early-stage companies.

COMPARISON OF FISCAL YEARS 2001 AND 2000

     Net sales decreased 6.4% from $206.6 million in fiscal year 2000 to $193.4 million in fiscal year 2001. The decrease in net sales during fiscal year 2001 was due to a slight decrease in retail sales (from $185.4 million to $184.1 million) and a 56.6% decrease in wholesale sales (from $21.2 million to $9.2 million). The decrease in retail sales was due to a reduction in the average number of stores operated, from 264 during fiscal year 2000 to 250 in fiscal year 2001 as well as weakness in the United States economy.

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     Comparable retail store sales increased 2.5% in fiscal year 2001 compared with fiscal year 2000. We believe that the increase in Perfumania’s comparable store sales was due to an improved merchandise assortment at our retail stores. The decrease in wholesale sales was due to our continuing strategic initiative to redirect our managerial, administrative and inventory resources to our retail operations.

     Gross profit decreased 4.0% from $83.4 million in fiscal year 2000 (40.4% of total net sales) to $80.2 million in fiscal year 2001 (41.4% of total net sales) as a result of lower sales and gross profit in both the retail and wholesale divisions.

     Gross profit for the retail division decreased 1.1% from $79.2 million in fiscal year 2000 to $78.3 million in fiscal year 2001, principally as a result of lower retail sales volume. As a percentage of net retail sales, gross profit for the retail division decreased from 42.7% in fiscal year 2000 to 42.5% in fiscal year 2001.

     Gross profit for the wholesale division decreased from $4.2 million in fiscal year 2000 to $1.8 million in fiscal year 2001. The wholesale division’s gross margin in fiscal 2001 was 19.2% compared to 19.9% in fiscal year 2000. The decrease in gross profit was due to lower wholesale sales. Wholesale sales historically yield a lower gross margin when compared to retail sales.

     Selling, general and administrative expenses decreased 8.7% from $79.9 million in fiscal year 2000 to $73.0 million in fiscal year 2001. The decrease was attributable to lower store operating expenses resulting from a reduction in the average number of stores operated from 264 during fiscal year 2000 to 250 in fiscal year 2001 as well as better expense control. Also, approximately $1.1 million of severance costs were incurred in fiscal year 2000 for various senior management whose employment with the Company was terminated in that year. We also incurred additional payroll and other administrative costs associated with our reorganization into a holding company in fiscal year 2000. As a percentage of net sales, selling, general and administrative expenses decreased from 38.7% in fiscal year 2000 to 37.7% in fiscal year 2001. The majority of our selling, general and administrative expenses relate to the retail division.

     A provision for impairment of assets and store closings of $0.7 million was recorded in fiscal year 2001 compared with a recovery of $0.5 million in fiscal year 2000. The recovery in fiscal year 2000 was attributable to the $1.0 million reversal of a write-off on a convertible note receivable offset by $0.5 million of impairment charges for assets related to retail stores which were closed during fiscal year 2000. The asset impairment charges in fiscal 2001 relate to retail store locations with negative cash flows that were either closed or are targeted for closure.

     EBITDA, defined as loss from operations less depreciation and amortization, increased 63.3% or $2.5 million to $6.5 million in fiscal year 2001 from $4.0 million in fiscal year 2000. The increase was primarily attributable to decreases in selling, general and administrative expenses described above.

     Depreciation and amortization increased $1.0 million, or 17.3%, in fiscal year 2001 compared to fiscal year 2000 due primarily to amortization of goodwill related to the acquisition of perfumania.com in May 2000 (see Note 11 of Notes to Consolidated Financial Statements) and increases in capital spending for systems improvements over the past two years.

     Interest expense (net) decreased from $8.2 million in fiscal year 2000 to $3.1 million in fiscal year 2001. The decrease was primarily due to the issuance of $9.0 million of convertible notes in March 2000 and the resulting non-cash interest charges of approximately $2.6 million in fiscal year 2000, a reduction in the outstanding balance of convertible notes payable and a lower average outstanding balance and interest rate on our bank line of credit. See “Liquidity and Capital Resources.”

     Gain on the sale of an affiliate’s common stock totaled $10.0 million in fiscal year 2000; the gain was attributable to the sale of 600,000 shares of Envision Development Corporation (“EDC”) and the exchange of 400,000 shares of EDC common stock for the acquisition of perfumania.com.

     Realized loss on investments totaled $4.8 million in fiscal year 2000. The losses were primarily attributable to realized losses of approximately $1.1 million on the sale of securities and a decline in the market prices on securities available for sale which resulted in the Company recording a non-cash charge of $3.7 million.

     As a result of the foregoing, we had a net loss of $3.2 million in fiscal year 2001 compared to a net loss of $6.1 million in fiscal year 2000.

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COMPARISON OF FISCAL YEARS 2000 AND 1999

     Net sales increased 7.1% from $193.0 million in fiscal year 1999 to $206.6 million in fiscal year 2000. The increase in net sales during fiscal year 2000 was due to an 18.9% increase in retail sales (from $156.0 million to $185.4 million), offset by a 42.7% decrease in wholesale sales (from $37.0 million to $21.2 million). The increase in retail sales was primarily due to a 16.9% increase in Perfumania’s comparable stores sales compared to the prior year, as the average number of stores operated during fiscal year 2000 compared to fiscal year 1999 decreased from 283 in fiscal 1999 to 264 in fiscal 2000. We believe that the increase in Perfumania’s comparable store sales was due to an improved merchandise assortment at our retail stores. The decrease in wholesale sales was due to our continuing strategic initiative to redirect our managerial, administrative and inventory resources to our retail operations.

     Gross profit increased 10.3% from $75.6 million in fiscal year 1999 (39.2% of total net sales) to $83.4 million in fiscal year 2000 (40.4% of total net sales) as a result of higher sales and gross profit in the retail division offset by lower gross profit in the wholesale division, as well as higher inventory provisions in fiscal 1999.

     Gross profit for the retail division increased 15.5% from $68.6 million in fiscal year 1999 to $79.2 million in fiscal year 2000, principally as a result of higher retail sales volume. As a percentage of net retail sales, gross profit for the retail division decreased from 44.0% in fiscal year 1999 to 42.7% in fiscal year 2000. The decrease was due to lower merchandise gross margins offset by decreases in inventory provisions and inventory shrinkage compared to the prior year.

     Gross profit for the wholesale division decreased from $7.0 million in fiscal year 1999 to $4.2 million in fiscal year 2000. The wholesale division’s gross margin in fiscal 2000 was 19.9% compared to 19.0% in fiscal year 1999. The decrease in gross profit was due to lower wholesale sales. Wholesale sales historically yield a lower gross margin when compared to retail sales.

     Selling, general and administrative expenses increased 12.0% from $71.4 million in fiscal year 1999 to $79.9 million in fiscal year 2000. The increase was attributable to 1) higher store payroll associated with competitive wage pressures, 2) increased incentive compensation due to higher retail sales, 3) approximately $1.1 million of severance costs incurred for various senior management whose employment with the Company was terminated in fiscal year 2000 and partially offset by the reversal of $0.7 million of accrued expenses for litigation in July 1999 due to a settlement amount which was less than the expense previously accrued. We also incurred additional payroll and other administrative costs associated with our reorganization into a holding company in fiscal year 2000. As a percentage of net sales, selling, general and administrative expenses increased from 36.9% in fiscal year 1999 to 38.7% in fiscal year 2000 due primarily to the impact of the significant reduction in wholesale sales. The majority of our selling, general and administrative expenses relate to the retail division.

     A recovery for impairment of assets and store closings of $0.5 million was recorded in fiscal year 2000 compared with a provision of $3.4 million in fiscal year 1999. The recovery is attributable to the $1.0 million reversal of a write-off on a convertible note receivable offset by $0.5 million of impairment charges for assets related to retail stores which were closed during fiscal year 2000. In fiscal year 1999, we incurred $1.6 million of asset impairment charges related to retail store locations with negative cash flows that were either closed or targeted for closure.

     EBITDA, defined as loss from operations less depreciation and amortization, increased by $3.2 million to $4.0 million in fiscal year 2000 from $0.8 million in fiscal year 1999. The increase was attributable to higher net sales and gross profits, offset by increases in selling, general and administrative expenses described above.

     Depreciation and amortization increased $1.1 million, or 23.1%, in fiscal year 2000 compared to fiscal year 1999 due primarily to amortization of goodwill related to the acquisition of perfumania.com in May 2000 (see Note 11 of Notes to Consolidated Financial Statements) and increases in capital spending for systems improvements over the past two years.

     Interest expense (net) increased 24.1% from $6.6 million in fiscal year 1999 to $8.2 million in fiscal 2000. The increase was primarily due to the issuance of $9.0 million of convertible notes in March 2000, and the resulting non-cash interest charges of approximately $2.6 million, compared with non-cash interest charges in fiscal 1999 of approximately $1.4 million related to similar convertible notes issued in the prior year. See “Liquidity and Capital Resources.”

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     Gain on the sale of an affiliate’s common stock totaled $10.0 million in 2000 compared with $15.0 million in fiscal 1999. The fiscal year 2000 gain is attributable to the sale of 600,000 shares of Envision Development Corporation (“EDC”) and the exchange of 400,000 shares of EDC common stock for the acquisition of perfumania.com.

     Realized loss on investments totaled $4.8 million in fiscal 2000. The losses were primarily attributable to realized losses of approximately $1.1 million on the sale of securities and a decline in the market prices on securities available for sale which resulted in the Company recording a non-cash charge of $3.7 million.

     As a result of the foregoing, we had a net loss of $6.1 million in fiscal 2000 compared to a net income of $1.0 million in fiscal 1999.

LIQUIDITY AND CAPITAL RESOURCES

     Our principal capital requirements for operating purposes are to fund Perfumania’s inventory purchases, renovate existing stores and selectively open new stores. During fiscal years 2001 and 2000, we financed these requirements primarily through cash flows from operations, issuance of convertible notes, borrowings under our line of credit, capital equipment leases and other short-term borrowings.

     On May 12, 2000, Perfumania entered into a three-year senior secured credit facility with GMAC Commercial Finance LLC (“GMAC”) that provides for borrowings of up to $40 million for working capital requirements and other general corporate purposes. Proceeds from this facility were used to refinance our previous credit facility. Advances under the line of credit are based on a formula of eligible inventories and bears interest at a floating rate ranging from (a) prime less 0.75% to prime plus 1% or (b) LIBOR plus 1.75% — 3.50% depending on a financial ratio test. As of February 2, 2002, the credit facility bore interest at 4.3%. Advances are secured by a first lien on all assets of Perfumania and the assignment of a life insurance policy on the Chief Executive Officer of the Company. The line contains limitations on additional borrowings, capital expenditures and other items. It also contains various restrictive covenants including maintenance of minimum net worth, and certain key ratios, as defined by the lender.

     As of February 2, 2002, Perfumania was in compliance with all financial covenants and had approximately $5.6 million available under the line of credit.

     In October 2000, we entered into a capital lease of approximately $3.9 million of new point-of-sale equipment for our retail stores. The lease is for a thirty-six month term.

     On March 9, 2000 and March 27, 2000, we issued an aggregate of $4 million of Series C Convertible Notes and $5 million of Series D Convertible Notes, respectively. The notes are convertible into our common stock, bear interest at 8% and are payable in full in March 2003. The conversion price is the lower of (A) $9.58 per share for the Series C and $7.76 for the Series D, subject to adjustment or (B) a floating conversion price determined by multiplying (1) the average closing bid price of the common stock for the three trading days immediately preceding the date of determination, by (2) 80%, subject to adjustment. The conversion price may be adjusted pursuant to antidilution provisions in the convertible notes.

     In April 1999 and July 1999, we issued an aggregate of $2 million Series A and $2 million Series B Convertible Notes, respectively. The Series A and Series B Notes are convertible into our common stock, bear interest at 8% and the remaining non-redeemed portion will be payable in full in April 2002 and July 2002, respectively. On or about April 30, 2002, the Company repaid the Series A debt. The conversion price is the lower of (A) $4.35 per share for the Series A Notes and $3.41 per share for the Series B Notes, subject to adjustment or (B) a floating conversion price determined by multiplying (1) the average closing bid price of the common stock for the three trading days immediately preceding the date of determination, by (2) 80%, subject to adjustment. The conversion price may be adjusted pursuant to antidilution provisions in the convertible notes.

     In February 2001, we entered into a Convertible Note Option Repurchase Agreement (the “Agreement”) with the holders of our outstanding Series A, B, C, and D Convertible Notes. The Agreement provided that the Company had the monthly option to repurchase the then outstanding $8.8 million convertible notes over an eleven month period, at a price equal to the unpaid principal balance plus a 20% premium. The portion of the notes redeemable in each of the eleven months varied as per a specified redemption schedule. In the event that the Company made redemption payments as per the schedule, the note holders were restricted from

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converting any part of the remaining outstanding and unpaid principal balance of such holder’s notes into the Company’s common stock. During fiscal year 2001, the Company repaid $4.1 million to the note holders.

     In February 2002, we entered into a Convertible Note Option Repurchase Agreement (the “Agreement”) with the holders of our outstanding Series C and D Convertible Notes. The Agreement provides that the Company has the monthly option to repurchase the approximate $4.9 million outstanding notes over an 11 month period beginning February 2002, at a price equal to the unpaid principal balance plus a 20% premium. The portion of the notes redeemable in each of the 11 months varies as per a specified redemption schedule. In the event that we exercise our monthly option, the note holders are restricted from converting any part of the remaining outstanding and unpaid principal balance of such holder’s notes into the Company’s common stock.

     The holders of the Series A, B, C and D Convertible Notes are restricted from converting to the extent that the holder owns more than 9.9% of our outstanding common stock.

     In accordance with accounting literature, when debt is convertible at a discount from the then current common stock market price, the discounted amount represents an incremental yield, or a “beneficial conversion feature”, which should be recognized as a return to the debt holders. Based on the market price of our common stock at the date of issuance, our Series C and Series D Notes had beneficial conversion features of approximately $1.2 million and $1.4 million, respectively, at such point in time which represented a non-cash charge that is included in interest expense on the accompanying consolidated statement of operations.

     In December 1999, we loaned $1 million to TTA pursuant to the terms of a convertible promissory note. The principal balance of the note was payable on December 20, 2001, and interest, which accrued at a rate of six percent per annum was payable semi-annually commencing June 2000. We had the right to convert, for a period of 14 days after TTA’s initial public offering, all of the principal amount of the note into shares of TTA’s common stock at a conversion price per share equal to the initial public offering price. TTA commenced its initial public offering on June 13, 2000 and we converted the $1.0 million note into 138,889 shares of TTA’s common stock.

     Due to the uncertainty of TTA’s initial public offering and collectability of the note, we wrote off the principal balance of the note and related interest receivable as of January 29, 2000. As a result of TTA’s successful initial public offering which occurred on June 13, 2000, the $1.0 million principal balance and related interest previously written off was reversed in the first quarter of fiscal 2000.

     In March 2000, we loaned TTA an additional $1.0 million pursuant to the terms of a convertible promissory note. The terms of the note were the same as the December 1999 note described above except that the principal balance was payable on March 8, 2002 and interest was payable semi-annually, commencing September 2000. The note was repaid in full in June 2000. As an incentive to provide the loans, TTA granted us warrants to purchase 200,000 shares of its common stock at its initial public offering price. The warrants were exercisable in whole or in part until June 13, 2001 but were not exercised.

     On June 30, 2001, Perfumania signed a $3.0 million subordinated note agreement with Parlux. The note was in consideration for the reduction of $3.0 million in trade payables due to Parlux. The note was due on March 31, 2002 with various periodic principal payments, bears interest at prime plus 1% and was subordinate to all bank related indebtedness. As of February 2, 2002, the outstanding principal balance due on the note was $100,000. The balance of the note was repaid in full in April 2002. On June 1, 2000, Perfumania signed a similar $5,000,000 subordinated note agreement with Parlux. The note included the refinancing of a $2,000,000 balance due to Parlux remaining under a previous $8,000,000 subordinated secured note dated October 4, 1999, and a reduction of $3,000,000 in trade payables due to Parlux. The note was due on December 29, 2000 with various periodic principal payments, bore interest at prime plus 1% and was subordinate to all bank related indebtedness. The note was repaid in full in December 2000.

     On October 12, 2000, we borrowed $500,000 from TTA. The loan was unsecured, matured on December 31, 2000 and bore interest at the rate charged by the Company’s major lender. The loan was repaid in December 2000.

     Trade receivables primarily relate to Perfumania’s wholesale business. Trade receivables, net due from customers as of February 2, 2002 were $0.6 million; there were no trade receivables more than 90 days past due. Allowance for doubtful accounts was approximately $0.1 million as of February 2, 2002 and was considered adequate by management based on its write-off experience during the last three years and an analysis of the aging of its trade receivables at February 2, 2002.

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     In fiscal year 2001, net cash provided by operating activities was approximately $14.3 million compared with $2.6 million in fiscal year 2000. The increase in net cash provided by operating activities was principally a result of the decrease in the loss for the period and the net change in our inventories and accounts payable. Inventories and accounts payable increased by $5.9 million and $11.9 million, respectively in fiscal year 2001, due to improved availability of merchandise and better credit terms from our suppliers.

     Net cash used in investing activities in fiscal year 2001 was approximately $1.6 million, principally due to capital expenditures related to opening new stores and renovating existing stores. We intend to focus on continuing to improve the profitability of our existing stores and anticipate that we will open no more than 10 stores in fiscal 2002. Currently, our average capital expenditure for opening a store is approximately $130,000, including furniture and fixtures, equipment, build-out costs and other items. In addition, initial inventory (not including inventory replenishment) in a new store ranges from approximately $150,000 during the first fiscal quarter to approximately $200,000 during the Christmas holiday season.

     In fiscal year 2001, net cash used in financing activities was $13.3 million, due primarily to net repayments under our bank line of credit and capital lease obligations, as well as repayments of the subordinated debt and convertible notes discussed above. In fiscal year 2000, net cash provided by financing activities was $5.0 million.

     In December 1999, our Board of Directors approved the repurchase by the Company of up to 375,000 shares of our common stock, reflecting its belief that our common stock represented a significant value at its then current trading price. In January 2001, the Board approved an increase in the stock repurchase program by an additional 250,000 shares and in February 2002, the Board approved an increase in the stock repurchase program by an additional 250,000 shares. Pursuant to these authorizations, we have repurchased approximately 767,000 shares of common stock for approximately $7,039,000 during fiscal 1999, 2000 and 2001, including approximately 358,000 shares for $1.4 million in fiscal year 2001.

     The Company has fallen below the continued listing requirements of The NASDAQ National Market in that the Company’s common stock has failed to maintain a minimum market value of publicly held shares of $5,000,000. The Company has until June 24, 2002 to regain compliance. There can be no assurance that the listing of the Company’s common stock will be continued.

     Management believes that Perfumania’s borrowing capacity under the bank line of credit, projected cash flows from operations and other short-term borrowings will be sufficient to support the Company’s working capital needs and capital expenditures, including new store openings, remodeling of existing stores and debt service for at least the next twelve months.

SEASONALITY AND QUARTERLY RESULTS

     Our operations historically have been seasonal, with generally higher sales in the third and fourth fiscal quarters than in the first and second fiscal quarters. Significantly higher fourth quarter retail sales result from increased purchases of fragrances as gift items during the Christmas holiday season. Our quarterly results may vary due to the timing of new store openings, net sales contributed by new stores and fluctuations in comparable sales of existing stores. Wholesale sales vary by fiscal quarter as a result of the selection of merchandise available for sale and the need to stock our retail stores for the Christmas holiday season. Results of any interim period are not necessarily indicative of the results that may be expected during a full fiscal year.

RECENT ACCOUNTING STANDARDS

     During fiscal year 2001,the Company adopted Statement of Financial Accounting Standards No. 133 (“SFAS 133”), Accounting for Derivative Instruments and Hedging Activities. The adoption of SFAS 133 did not have a significant impact on the Company’s financial position or results of operations.

     In July 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 141 (“SFAS 141”), Accounting for Business Combinations, and Statement of Financial Accounting Standards No. 142 (“SFAS 142”), Goodwill and Other Intangible Assets. These Statements modify accounting for business combinations after June 30, 2001 and will affect the Company’s treatment of goodwill and other intangible assets at the start of fiscal year 2002. The Statements require that goodwill existing at the date of adoption be reviewed for possible impairment and that impairment tests be periodically repeated, with

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impaired assets written-down to fair value. Additionally, existing goodwill and intangible assets must be assessed and classified consistent with the Statements’ criteria. Amortization of goodwill and other intangible assets with indefinite useful lives will cease. Intangible assets with estimated useful lives will continue to be amortized over those periods. Goodwill amortization, which totaled $0.6 million in fiscal year 2001, will no longer be recorded.

     In July 2001, the FASB issued Statement of Financial Accounting Standards No. 143 (“SFAS 143”), Accounting For Asset Retirement Obligations. This Statement requires capitalizing any retirement costs as part of the total cost of the related long-lived asset and subsequently allocating the total expense to future periods using a systematic and rational method. Adoption of this Statement is required for fiscal years beginning after June 15, 2002. We do not expect a significant impact to the Company’s financial position and results of operations from the adoption of this Statement.

     In October 2001, the FASB issued Statement of Financial Accounting Standards No. 144 (“SFAS 144”), Accounting For The Impairment Or Disposal Of Long-Lived Assets. This Statement supersedes Statement No. 121 but retains many of its fundamental provisions. Additionally, this Statement expands the scope of discontinued operations to include more disposal transactions. The provisions of this Statement are effective for financial statements issued for fiscal years beginning after December 15, 2001. We do not expect a significant impact to the Company’s financial position and results of operations from the adoption of this Statement.

CHANGES IN FOREIGN EXCHANGE RATES CREATE RISK

     Although large fluctuations in foreign exchange rates could have a material effect on the prices we pay for products purchased from outside the United States, such fluctuations have not been material to our results of operations to date. Transactions with foreign suppliers are in United States dollars. We believe inflation has not had a material impact on our results of operations and we are generally able to pass through cost increases by increasing sales prices.

CRITICAL ACCOUNTING POLICIES

     Our critical accounting policies, including the assumptions and judgments underlying them, are disclosed in the Notes to the Consolidated Financial Statements. These policies have been consistently applied in all material respects and address such matters as principles of consolidation, allowance for doubtful accounts, investments, impairment of long-lived assets, accrued self-insurance, revenue recognition and stock based compensation. While the estimates and judgments associated with the application of these policies may be affected by different assumptions or conditions, we believe the estimates and judgments associated with the reported amounts are appropriate in the circumstances.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

     We conduct business in the United States where the functional currency of the country is the United States dollar. As a result, we are not at risk to any foreign exchange translation exposure on a prospective basis.

     Our exposure to market risk for changes in interest rates relates primarily to our bank line of credit. The bank line of credit bears interest at a variable rate, as discussed above under “Liquidity and Capital Resources”. We mitigate interest rate risk by continuously monitoring the interest rates. As a result of borrowings associated with our operating and investing activities, we are exposed to interest rate risk. As of February 2, 2002 and February 3, 2001, our primary source of funds for working capital and other needs is a line of credit totaling $40.0 million.

     Of the $39.2 million and $48.1 million of short-term and long-term borrowings on the Company’s balance sheet as of February 2, 2002 and February 3, 2001, respectively, approximately 20.4% and 30.3%, respectively, represented fixed rate instruments. The line of credit bears interest at a floating rate ranging from (a) prime less .075% to prime plus 1.0%, or (b) LIBOR plus 1.75% to 3.5% depending on a financial ratio test. As of February 2, 2002, the credit facility bore interest at 4.3%. A hypothetical 10% adverse move in interest rates would increase fiscal year 2001 and 2000 interest expense by approximately $0.3 million and $0.5 million, respectively.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The financial information and the supplementary data required in response to this Item are as follows:

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INDEPENDENT AUDITORS’ REPORT

To the Board of Directors of
E Com Ventures, Inc.:

We have audited the accompanying consolidated balance sheets of E Com Ventures, Inc. and subsidiaries (the “Company”) as of February 2, 2002 and February 3, 2001, and the related consolidated statements of operations, changes in shareholders’ equity and cash flows for the fiscal years ended February 2, 2002 and February 3, 2001. Our audits also included the financial statement schedule listed in the Index at Item 14(a)(2). These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of E Com Ventures, Inc. and subsidiaries as of February 2, 2002 and February 3, 2001, and the results of their operations and their cash flows for the fiscal years ended February 2, 2002 and February 3, 2001, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects, the information set forth therein.

/s/ DELOITTE & TOUCHE LLP
Certified Public Accountants

Miami, Florida
April 22, 2002

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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and
Shareholders of E Com Ventures, Inc.
(formerly Perfumania, Inc.)

In our opinion, the consolidated statements of operations, changes in stockholders’ equity and cash flows for the year ended January 29, 2000 present fairly, in all material respects, the results of operations and cash flows of E Com Ventures, Inc. and its subsidiary, (formerly Perfumania, Inc.), for the year ended January 29, 2000, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Miami, Florida
May 12, 2000

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E COM VENTURES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

See accompanying notes to consolidated financial statements.

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E COM VENTURES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

See accompanying notes to consolidated financial statements.

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E COM VENTURES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE FISCAL YEARS ENDED FEBRUARY 2, 2002, FEBRUARY 3, 2001 AND JANUARY 29, 2000