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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED NOVEMBER 2, 2002
COMMISSION FILE NUMBER 0-19714

E COM VENTURES, INC.

STATE OF FLORIDA I.R.S. NO. 65-0977964

11701 N.W. 101ST ROAD
MIAMI, FLORIDA 33178

TELEPHONE NUMBER: (305) 889-1600

     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 TWELVE (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 NINETY (90) DAYS.

Yes   x   No   o

COMMON STOCK $.01 PAR VALUE
OUTSTANDING SHARES AT
DECEMBER 9, 2002, 2,506,834

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E COM VENTURES, INC. AND SUBSIDIARIES

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

E COM VENTURES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

See accompanying notes to consolidated condensed financial statements.

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E COM VENTURES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

See accompanying notes to consolidated condensed financial statements.

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E COM VENTURES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

See accompanying notes to consolidated condensed financial statements.

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E COM VENTURES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 1 — OPERATIONS AND BASIS OF PRESENTATION

     E Com Ventures, Inc., a Florida Corporation (the “Company” or “ECOMV”), is a holding company that owns and operates 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 fragrance and other specialty items. It also has an investment in Nimbus Group, Inc., (“Nimbus”), a company listed on the American Stock Exchange (Symbol NMC).

     Perfumania’s retail stores are located in regional malls, manufacturer’s outlet malls, airports and on a stand-alone basis in suburban strip shopping centers. The number of retail stores in operation as of November 2, 2002 and November 3, 2001, were 242 and 248, respectively.

     The consolidated condensed financial statements include the accounts of ECOMV and its subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.

     The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted as permitted by those rules and regulations. The Company believes that the disclosures made are adequate to make the information presented not misleading. The financial information presented herein, which is not necessarily indicative of results to be expected for the current fiscal year, reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the interim unaudited consolidated condensed financial statements. It is suggested that these consolidated condensed financial statements be read in conjunction with the financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended February 2, 2002 filed with the SEC on May 3, 2002. As the wholesale operations represent less than 10% of sales, net income and assets for all of the periods ended November 2, 2002 and November 3, 2001, the Company has ceased reporting such information for retail and wholesale operations.

RECLASSIFICATION

     Certain fiscal 2001 amounts have been reclassified to conform with the fiscal 2002 presentation.

NOTE 2 — GOODWILL AND OTHER INTANGIBLE ASSETS

     On February 3, 2002, the Company adopted Statement of Financial Accounting Standards No. 142 (“SFAS No. 142”), “Goodwill and Other Intangible Assets,” which eliminated the amortization of goodwill and other intangible assets with indefinite useful lives. During the second quarter of fiscal year 2002, the Company completed its testing for impairment of goodwill and other intangible assets which did not result in any impairment. Goodwill and intangible assets will be tested for impairment at least annually and more frequently if an event occurs which indicates the goodwill or intangible assets may be impaired.

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     Amortization of intangible assets totaled approximately $0.2 million for the first thirty-nine weeks of fiscal year 2002, and amortization of goodwill and intangible assets totaled approximately $0.6 million for the first thirty-nine weeks of fiscal year 2001. Without goodwill amortization, pro forma net loss would have decreased approximately $0.4 million for the first thirty-nine weeks of fiscal year 2001. Reported loss per share would have decreased by $0.16. It is anticipated that amortization of “other intangible assets” will continue at approximately $0.2 million per year for each of the next three years.

NOTE 3 — BANK LINE OF CREDIT

     Perfumania’s three year senior secured credit facility with GMAC Commercial Finance LLC provides for borrowings of up to $40 million, of which approximately $2.3 million was available at November 2, 2002, and supports normal working capital requirements and other general corporate purposes. 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% to 3.50% depending on a financial ratio test. As of November 2, 2002, the credit facility bore interest at 3.8%. Borrowings are secured by a first lien on all assets of Perfumania and the assignment of a life insurance policy on the Chairman and Chief Executive Officer of the Company. The credit facility contains limitations on additional borrowings, capital expenditures and other items, and contains various covenants including maintenance of minimum net worth, and certain key ratios, as defined by the lender. As of November 2, 2002, Perfumania was in compliance with all financial covenants.

     The Company has a working capital deficit of approximately $7.1 million and has experienced a loss from operations and a net loss for the nine-months ended November 2, 2002 as has been the case in prior years. Although the Company is confident that its lender will renew the existing credit facility when it expires in May 2003 or obtain a comparable facility with another lender, an inability to renew or replace the facility could result in an adverse effect on the Company’s financial position and its operating results. Management believes that assuming the renewal or replacement of the credit facility, cash flows from operations, which considers the seasonal nature of the business and the dependence on successful operating results for the fourth quarter of the year, will be sufficient to support its working capital needs, capital expenditures and debt service for at least the next twelve months.

NOTE 4 — BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE

     Basic loss per common share has been computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted loss per share includes, in periods in which they have a dilutive effect, the impact of common shares issuable upon exercise of stock options and other common stock equivalents. For all periods presented in the accompanying consolidated condensed statements of operations, incremental shares attributed to outstanding stock options and convertible notes were not included because the results would be anti-dilutive.

NOTE 5 — COMPREHENSIVE INCOME (LOSS)

     Comprehensive income (loss) represents all non-owner changes in shareholders’ equity and consists of the following:

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NOTE 6 — INVESTMENTS AVAILABLE FOR SALE

     As of November 2, 2002, the Company owned approximately 1,003,000 shares of Nimbus common stock representing approximately 13% of the total outstanding common stock. The investment in Nimbus is shown on the Company’s consolidated condensed balance sheets as investments available for sale. Ilia Lekach, the Company’s Chairman of the Board and Chief Executive Officer, is Chairman of the Board and Interim Chief Executive Officer of Nimbus. As of November 2, 2002, the market price for Nimbus’ common stock was below the Company’s current carrying value. In consideration of accounting guidance that considers a six to nine month decline in stock price to be other than temporary, the Company has recorded a non-cash charge of approximately $0.7 million in realized loss on investments on the consolidated condensed statements of operations during the thirteen and thirty-nine weeks ended November 2, 2002. The carrying value of this investment as of November 2, 2002 totaled approximately $0.4 million.

NOTE 7 — CONVERTIBLE NOTES PAYABLE

     In February 2002, the Company entered into a Convertible Note Option Repurchase Agreement (the “Agreement”) with holders of the Company’s outstanding Series C and D Convertible Notes. The Agreement provides the Company a monthly option to repurchase the currently remaining $1.8 million outstanding Series C and D Notes over an eleven 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 eleven months varies. In the event that the Company exercises its 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. During the first thirty-nine weeks of fiscal year 2002, the Company paid approximately $2.7 million to the note holders, which represented approximately $2.3 million of principal and approximately $0.4 million of premiums.

NOTE 8 — CONTINGENCIES

     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.

NOTE 9 — RELATED PARTY TRANSACTIONS

     As November 2, 2002, the Company had a balance due of approximately $3.3 million from its Chairman and Chief Executive Officer, Ilia Lekach. This balance is in the form of notes and are recorded as a component of shareholders’ equity in the accompanying consolidated condensed balance sheets. Approximately $3.0 million of the notes are due February 1, 2003 with the remainder of approximately $0.3 million due in five years. The notes bear interest at prime plus 1% per annum. Interest has been paid up to the beginning of this fiscal year.

     Purchases of products from the Company’s affiliate, Parlux Fragrances, Inc. (“Parlux”), whose Chairman of the Board of Directors and Chief Executive Officer is Ilia Lekach, amounted to approximately $9,806,000 and $13,241,000 for the first thirty-nine weeks of fiscal years 2002 and 2001, respectively, representing approximately 11.5% and 16.7% of the Company’s total purchases, respectively. The amount due to Parlux as of November 2, 2002 was approximately $17,260,000 including a $2,950,000 subordinated note payable bearing interest at prime plus 1% per annum and $14,310,000 of accounts payable. Accounts payable to Parlux are non-interest bearing and are included in accounts payable affiliates in the accompanying consolidated condensed balance sheets.

     On September 30, 2002, Perfumania signed a $3,000,000 subordinated note agreement with Parlux. The note represents the reduction of $3,000,000 in trade payables due to Parlux. The note is due on March 31, 2003 with monthly principal and interest payments beginning October 31, 2002, and is subordinate to all bank related indebtedness. The outstanding amount of the indebtedness as of November 2, 2002 is reflected in the accompanying consolidated condensed balance sheet as subordinated note payable, affiliate.

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     During the first thirty-nine weeks of fiscal year 2002, the Company purchased approximately $8,491,000 of merchandise from a company owned by Zalman Lekach, a former director of the Company, who is a brother of Ilia Lekach and approximately $4,721,000 from a company owned by another brother of Ilia and Zalman Lekach. The amounts due to these companies as of November 2, 2002 were approximately $2,951,000 and $1,961,000, respectively, and are included in accounts payable affiliates in the accompanying consolidated condensed balance sheets. These purchases did not include products manufactured or distributed by Parlux.

     In September 2001, the Company entered into a licensing agreement with Take To Auction.com, Inc. (“TTA”), a wholly owned subsidiary of Nimbus, to license the Company’s retail fragrance Internet Web site. Under the terms of the agreement, TTA pays the Company 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. For the first thirty-nine weeks of fiscal year 2002, sales of merchandise from the Company to TTA approximated $1,997,000, royalties approximated $149,000 and the Company was paid approximately $499,000. Nimbus has disclosed in its public filings that it is negotiating the sale of TTA, its main subsidiary. Since the proposed transaction has been in progress for several months without closure, management has recorded a provision for impairment of the total receivable from affiliate of $1,941,000 in the accompanying consolidated statement of operations. If this transaction closes and proceeds are received from Nimbus, the Company will record a recovery for impairment of receivable from affiliate for the amount received.

     NOTE 10 — NON-CASH TRANSACTIONS

     Supplemental disclosures of non-cash investing and financing activities are as follows:

NOTE 11 — 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 as of March 20, 2002. Accordingly, all data shown in the accompanying consolidated condensed financial statements and notes has been retroactively adjusted to reflect this change.

NOTE 12 — RECENT ACCOUNTING STANDARDS

     In July 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 142 (“SFAS 142”), Goodwill and Other Intangible Assets. This Statement affected the Company’s treatment of goodwill and other intangible assets at the start of fiscal year 2002. The Statement requires that goodwill existing at the date of adoption be reviewed for possible impairment and that impairment tests be periodically repeated, with 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

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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 will no longer be recorded. The Company adopted SFAS 142 for the fiscal year beginning February 3, 2002, and completed its testing of impairment of goodwill and intangible assets during the second quarter of fiscal year 2002. Based on this testing, the Company concluded that goodwill and intangible assets was not impaired.

     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. The Company does not expect a significant impact on its 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 Company adopted SFAS 144 for the fiscal year beginning February 3, 2002. The adoption of SFAS 144 did not have a significant impact on the financial statements.

     In April 2002, the FASB issued Statement of Financial Accounting Standards No. 145 (“SFAS 145”), Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Correction. This Statement eliminates extraordinary accounting treatment for reporting gain or loss on debt extinguishment, and amends other existing authoritative pronouncements to make various technical corrections, clarifies meanings, or describes their applicability under changed conditions. The provisions of this Statement are effective for the Company with the beginning of fiscal year 2003; however, early application of the Statement is encouraged. Debt extinguishments reported as extraordinary items prior to scheduled or early adoption of this Statement would be reclassified in most cases following adoption. The Company does not anticipate a significant impact on its financial position and results of operations from adopting this Statement.

     In June 2002, the FASB issued Statement of Financial Accounting Standards No. 146 (“SFAS 146”), Accounting for Costs Associated with Exit or Disposal Activities. This Statement requires recording costs associated with exit or disposal activities at their fair values when a liability has been incurred. Under previous guidance, certain exit costs were accrued upon management’s commitment to an exit plan. Adoption of this Statement is required with the beginning of fiscal year 2003. The Company does not anticipate a significant impact on its financial position and results of operations from adopting this Statement.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 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 increasing Perfumania’s number of stores and 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, our stock price would likely 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 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 seriously harmed.

Perfumania needs to successfully manage its growth

     Even though Perfumania has grown significantly in the past several years, it may not be able to sustain the growth in revenues that it has achieved historically. 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 store 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 expected sales and profitability, and it is possible that the opening of new locations might adversely effect 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 might be 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

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demonstrate this, it could, among other things, be restricted from reselling the particular merchandise. This type of restriction could seriously harm Perfumania’s business and results of operations.

Future growth may place strains on our managerial, operational and financial resources

     If we grow as expected, a significant strain on our managerial, operational and financial resources may occur. 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 could 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 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. 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 funding;
	•		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 may 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.

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RESULTS OF OPERATIONS

COMPARISON OF THE THIRTEEN-WEEKS ENDED NOVEMBER 2, 2002 WITH THE THIRTEEN-WEEKS ENDED NOVEMBER 3, 2001.

     Net sales increased 3.0% from $41.9 million in the thirteen-weeks ended November 3, 2001 to $43.1 million in the thirteen-weeks ended November 2, 2002. The increase in sales was principally due to a 7.4% increase in comparable store sales. The average number of stores operated during the thirteen-weeks ended November 2, 2002 decreased to 241 from 248 in the thirteen-weeks ended November 3, 2001.

     The increase in sales were realized although there were no significant wholesale sales in the thirteen weeks ended November 2, 2002 versus approximately $1.0 million in the comparable period of the prior year. The decrease in wholesale sales was due to management’s decision to concentrate on the more profitable retail sales.

     Gross profit increased 3.4% from $17.3 million in the thirteen-weeks ended November 3, 2001 (41.4% of net sales) to $17.9 million in the thirteen-weeks ended November 2, 2002 (41.5% of net sales).

     Selling, general and administrative expenses increased 4.1% from $17.8 million in the thirteen-weeks ended November 3, 2001 to $18.5 million in the thirteen-weeks ended November 2, 2002. The increase is attributable primarily to higher employee compensation costs, including increased incentive compensation paid to store personnel due to higher retail sales.

     Provision for impairment of receivable from affiliate was $1.9 million during the thirteen-weeks ended November 2, 2002, and represents a provision for a receivable which management has deemed may not be collectible. See further discussion at Note 9 of the notes to consolidated condensed financial statements.

     Depreciation and amortization expense was $1.7 million in the thirteen-week period ended November 3, 2001 compared to $1.5 million in the thirteen-week period ended November 2, 2002.

     EBITDA, defined as loss from operations less depreciation and amortization was ($0.5) million in the thirteen-weeks ended November 3, 2001 compared with ($2.5) million in the thirteen-weeks ended November 2, 2002, due primarily to a provision for impairment of receivable from affiliate and higher selling, general and administrative expenses offset by higher gross profit as described above.

     Interest expense, net decreased by 47.6% from $0.8 million for the thirteen-weeks ended November 3, 2001 to $0.4 million for the thirteen-weeks ended November 2, 2002. The decrease results from lower interest rates and a reduction in the outstanding balance of convertible notes payable in the thirteen-weeks ended November 2, 2002 compared to the thirteen-weeks ended November 3, 2001.

     Realized loss on investments of $0.7 million during the thirteen-weeks ended November 2, 2002 is due to a decline in the market price on securities available for sale resulting in the Company recording a non-cash charge. See further discussion at Note 6 of the notes to consolidated condensed financial statements.

     Benefit for income taxes of $0.2 million during the thirteen-weeks ended November 2, 2002 is due to prior years alternative minimum tax refund due the Company.

     As a result of the foregoing, we incurred a net loss of $5.0 million, or ($1.92) per diluted share, in the thirteen-weeks ended November 2, 2002 compared to a net loss of $2.9 million, or $(1.24) per diluted share in the thirteen-weeks ended November 3, 2001.

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COMPARISON OF THE THIRTY-NINE WEEKS ENDED NOVEMBER 2, 2002 WITH THE THIRTY-NINE WEEKS ENDED NOVEMBER 3, 2001.

     Net sales increased 3.7% from $126.6 million in the thirty-nine weeks ended November 3, 2001 to $131.4 million in the thirty-nine weeks ended November 2, 2002. The increase in sales was principally attributed to an increase in comparable store sales. Comparable store sales increased 11.7% when compared to last year.

     The increase in sales were realized although there were $2.1 million in wholesale sales in the thirty-nine weeks ended November 2, 2002 versus approximately $8.5 million in the comparable period of the prior year. The decrease in wholesale sales was due to management’s decision to concentrate on the more profitable retail sales.

     Gross profit increased 4.9% from $52.6 million in the thirty-nine weeks ended November 3, 2001 (41.6% of net sales) to $55.2 million in the thirty-nine weeks ended November 2, 2002 (42.0% of net sales) due to increases in sales.

     Selling, general and administrative expenses increased 2.9% from $52.9 million in the thirty-nine weeks ended November 3, 2001 to $54.4 million in the thirty-nine weeks ended November 2, 2002. The increase is attributable primarily to higher employee compensation costs, including increased incentive compensation paid to store personnel due to higher retail sales. The average number of stores operated during the thirty-nine weeks ended November 2, 2002 compared to the thirty-nine weeks ended November 3, 2001 decreased from 251 to 242.

     Provision for impairment of receivable from affiliate was $1.9 million during the thirty-nine weeks ended November 2, 2002, and represents a provision for a receivable which management has deemed may not be collectible. See further discussion at Note 9 of the notes to consolidated condensed financial statements.

     Depreciation and amortization expense decreased 14.7% from $5.2 million in the thirty-nine weeks ended November 3, 2001 to $4.4 million in the thirty-nine weeks ended November 2, 2002. The decrease represents the adoption of SFAS 142 on February 3, 2002 which eliminated the amortization of goodwill and other intangible assets with indefinite useful lives.

     EBITDA, defined as earnings (loss) from operations less depreciation and amortization, improved by $0.8 million from ($0.3) million in the first thirty-nine weeks of 2001 to ($1.1) million in the first thirty-nine weeks of 2002, due to a provision for impairment of receivable from affiliate and higher selling, general and administrative expenses offset by increased gross profit as described above.

     Interest expense, net decreased by 42.4% from $2.6 million for the thirty-nine weeks ended November 3, 2001 to $1.5 million for the thirty-nine weeks ended November 2, 2002. The decrease was principally due to lower interest rates and a reduction in the outstanding balance of convertible notes payable in the thirty-nine weeks ended November 2, 2002 compared to the thirty-nine weeks ended November 3, 2001.

     Realized loss on investments of $0.7 million during the thirty-nine weeks ended November 2, 2002 is due to a decline in the market price on securities available for sale resulting in the Company recording a non-cash charge. See further discussion at Note 6 of the notes to consolidated condensed financial statements.

     Benefit for income taxes of $0.2 million during the thirty-nine weeks ended November 2, 2002 is due to prior years alternative minimum tax refund due the Company.

     During the thirty-nine weeks ended November 2, 2002 the Company had a net loss of $7.6 million or ($3.04) per diluted share, compared to a net loss of $8.1 million or ($3.29) per diluted share during the thirty-nine weeks ended November 3, 2001.

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LIQUIDITY AND CAPITAL RESOURCES

     Our principal capital requirements are to fund Perfumania’s inventory purchases, renovate existing stores, and selectively open new stores. For the first thirty-nine weeks of fiscal 2002, these capital requirements generally were satisfied through borrowings under our credit facility and cash flows from operations.

     At November 2, 2002, we had negative working capital of approximately ($7.1) million compared to working capital of approximately $2.8 million at February 2, 2002. The decrease was primarily due to a decline in investments available for sale, reclassification of the convertible note payables which mature in March 2003 and losses for the thirty-nine weeks of fiscal 2002.

     Net cash provided by operating activities during the current period was approximately $0.5 million compared with approximately $5.2 million for the same period in the prior year. Net cash provided by operating activities compared to the comparative period of the prior year was negatively affected by increased advances to suppliers and higher inventories, partially offset by increased accounts payable. The increase in inventories was the result of management’s decision to provide a greater amount of merchandise in the stores in anticipation of holiday sales. It is expected that these inventories will be reduced by fiscal year-end.

     Net cash used in investing activities was approximately $1.1 million, compared with approximately $1.2 million for the same period in the prior year. Investing activities represent purchases of fixtures and equipment for store openings and the renovation of existing stores and information system improvements.

     Net cash provided by financing activities during the current period was approximately $1.0 million compared with net cash used of approximately $4.3 million for the same time period in the prior year. The change was due primarily to increased borrowings on our bank line of credit offset by repayments of convertible notes payables of approximately $2.8 million and advances to shareholders and officers of approximately $0.4 million.

     Perfumania’s three year senior secured credit facility with GMAC Commercial Finance LLC provides for borrowings of up to $40 million, of which $2.3 million was available as of November 2, 2002, and supports normal working capital requirements and other general corporate purposes. 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% to 3.50% depending on a financial ratio test. As of November 2, 2002, the credit facility bore interest at 3.8%. Borrowings are secured by a first lien on all assets of Perfumania and the assignment of a life insurance policy on the Chairman and Chief Executive Officer of the Company. The credit facility contains limitations on additional borrowings, capital expenditures and other items, and contains various covenants including maintenance of minimum net worth, and certain key ratios, as defined by the lender. As of November 2, 2002, Perfumania was in compliance with all financial covenants of the line.

     Although the Company is confident that its lender will renew the existing credit facility when it expires in May 2003 or obtain a comparable facility with another lender, an inability to renew or replace the facility could result in an adverse effect on the Company’s financial position and its operating results. Management believes that assuming the renewal or replacement of the credit facility, cash flows from operations, which considers the seasonal nature of the business and the dependence on successful operating results for the fourth quarter of the year, will be sufficient to support its working capital needs, capital expenditures and debt service for at least the next twelve months.

     During the thirty-nine weeks ended November 2, 2002, Perfumania closed 7 stores. As of November 2, 2002, Perfumania operated 242 stores. Management intends to focus on improving the profitability of its existing stores and expects to open 2 new stores during the fourth quarter of fiscal 2002.

RECENT ACCOUNTING STANDARDS

     In July 2001, the FASB issued SFAS 142, Goodwill and Other Intangible Assets. This Statement affected the Company’s treatment of goodwill and other intangible assets at the start of fiscal year 2002. The Statement requires that goodwill existing at the date of adoption be reviewed for possible impairment and that impairment tests be periodically repeated, with 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 will no longer be recorded. The Company adopted SFAS 142 for the fiscal year beginning February 3, 2002, and completed its testing of impairment of

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goodwill and intangible assets during the second quarter of fiscal year 2002. Based on this testing, the Company concluded that goodwill and intangible assets was not impaired.

     In July 2001, the FASB issued 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. The Company does not expect a significant impact on it’s financial position and results of operations from the adoption of this Statement.

     In October 2001, the FASB issued 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 Company adopted SFAS 144 for the fiscal year beginning February 3, 2002. The adoption of SFAS 144 did not have a significant impact on the financial statements.

     In April 2002, the FASB issued SFAS 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Correction. This Statement eliminates extraordinary accounting treatment for reporting gain or loss on debt extinguishment, and amends other existing authoritative pronouncements to make various technical corrections, clarifies meanings, or describes their applicability under changed conditions. The provisions of this Statement are effective for the Company with the beginning of fiscal year 2003; however, early application of the Statement is encouraged. Debt extinguishments reported as extraordinary items prior to scheduled or early adoption of this Statement would be reclassified in most cases following adoption. The Company does not anticipate a significant impact on its financial position and results of operations from adopting this Statement.

     In June 2002, the FASB issued SFAS 146, Accounting for Costs Associated with Exit or Disposal Activities. This Statement requires recording costs associated with exit or disposal activities at their fair values when a liability has been incurred. Under previous guidance, certain exit costs were accrued upon management’s commitment to an exit plan. Adoption of this Statement is required with the beginning of fiscal year 2003. The Company does not anticipate a significant impact on its financial position and results of operations from adopting this Statement.

CRITICAL ACCOUNTING POLICIES

     Our condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. As such, some accounting policies have a significant impact on amounts reported in these financial statements. A summary of those significant accounting policies can be found in our 2001 Annual Report on Form 10-K, filed on May 3, 2002 in the notes to the Consolidated Financial Statements, Note 1. 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.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

     During the quarter ended November 2, 2002, there have been no material changes in the information about our market risks as of February 2, 2002 as set forth in Item 7A of the 2001 Form 10-K.

ITEM 4. CONTROLS AND PROCEDURE

     Our Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation within 90 days of the filing date of this report, that our disclosure controls and procedures are effective for gathering, analyzing and disclosing the information we are required to disclose in our reports filed under the Securities Exchange Act of 1934. There have been no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of the previously mentioned evaluation.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     Not applicable.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

     Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     Not applicable.

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

     Not applicable.

ITEM 5. OTHER INFORMATION

     Not applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits

	Index to Exhibits

     (b)  Reports on Form 8-K.

	On September 27, 2002 and October 17, 2002, the Company filed 8-K’s announcing changes in its Board of Directors.

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E COM VENTURES, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused the report to be signed on its behalf by the undersigned, thereunto duly authorized.

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CERTIFICATIONS

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Ilia Lekach, certify that:

     (1)  I have reviewed this quarterly report on Form 10-Q of E Com Ventures, Inc.;

     (2)  Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and

     (3)  Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report.

     (4)  The registrant’s other certifying officer and I (herein the “Certifying Officers”) are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

	(a) designed such internal controls to ensure that material information relating to the registrant, including its consolidated subsidiaries (collectively the “Company”) is made known to the Certifying Officers by others within the Company, particularly during the period in which this quarterly report is being prepared;

	(b) evaluated the effectiveness of the registrant’s internal controls as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

	(c) presented in this quarterly report the conclusions of the Certifying Officers about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

     (5)  The registrant’s Certifying Officers have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors:

	(a) all significant deficiencies (if any) in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

	(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

     (6)  The registrant’s Certifying Officers have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

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CERTIFICATIONS

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, A. Mark Young, certify that:

     (1)  I have reviewed this quarterly report on Form 10-Q of E Com Ventures, Inc.;

     (2)  Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and

     (3)  Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report.

     (4)  The registrant’s other certifying officer and I (herein the “Certifying Officers”) are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

	(a) designed such internal controls to ensure that material information relating to the registrant, including its consolidated subsidiaries (collectively the “Company”) is made known to the Certifying Officers by others within the Company, particularly during the period in which this quarterly report is being prepared;

	(b) evaluated the effectiveness of the registrant’s internal controls as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

	(c) presented in this quarterly report the conclusions of the Certifying Officers about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

     (5)  The registrant’s Certifying Officers have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors:

	(a) all significant deficiencies (if any) in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

	(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

     (6)  The registrant’s Certifying Officers have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

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