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 MAY 1, 2004
COMMISSION FILE NUMBER 0-19714
E COM VENTURES, INC.
STATE OF FLORIDA I.R.S. NO. 65-0977964
251 INTERNATIONAL PARKWAY
SUNRISE, FL 33325
TELEPHONE NUMBER: (954) 335-9100
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 WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS
DEFINED IN RULE 12B-2 OF THE EXCHANGE ACT). YES |_| NO |X|
AS OF JUNE 7, 2004, THE REGISTRANT HAD 2,876,801 SHARES OF ITS COMMON STOCK,
$0.01 PAR VALUE, OUTSTANDING.
TABLE OF CONTENTS
E COM VENTURES, INC. AND SUBSIDIARIES
PART I
FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS (unaudited)...................................3
Consolidated Condensed Balance Sheets..............................3
Consolidated Condensed Statements of Operations....................4
Consolidated Condensed Statements of Cash Flows....................5
Notes to Consolidated Condensed Financial Statements...............6
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS......................9
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK.......................................................11
ITEM 4 CONTROLS AND PROCEDURES...........................................11
PART II
OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS.................................................12
ITEM 2 CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER
PURCHASES OF EQUITY SECURITIES....................................12
ITEM 3 DEFAULTS UPON SENIOR SECURITIES...................................12
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...............12
ITEM 5 OTHER INFORMATION.................................................12
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K..................................12
SIGNATURES....................................................................14
CERTIFICATIONS................................................................15
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
E COM VENTURES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
ASSETS: MAY 1, 2004 JANUARY 31, 2004
---------------- ----------------
Current assets:
Cash and cash equivalents $ 1,384,481 $ 1,961,310
Trade receivables, net 1,108,317 777,186
Advances to suppliers 43,828 114,041
Inventories 75,653,950 60,877,451
Prepaid expenses and other current assets 1,144,610 1,347,452
Notes and interest receivable from
shareholder and officers -- 327,311
---------------- ----------------
Total current assets 79,335,186 65,404,751
Property and equipment, net 23,612,180 24,414,624
Goodwill 1,904,448 1,904,448
Other assets, net 679,164 739,575
---------------- ----------------
Total assets $ 105,530,978 $ 92,463,398
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Bank line of credit $ 32,393,947 $ 30,472,027
Accounts payable, non-affiliates 21,668,613 16,459,786
Accounts payable, affiliates 24,784,581 17,440,492
Accrued expenses and other liabilities 5,185,006 9,614,287
Subordinated note payable, affiliate 5,000,000 250,000
Current portion of obligations under capital leases 261,041 258,700
---------------- ----------------
Total current liabilities 89,293,188 74,495,292
Long-term portion of obligations under capital leases 7,680,437 7,746,262
---------------- ----------------
Total liabilities 96,973,625 82,241,554
---------------- ----------------
Commitments and contingencies (see Note 6)
Shareholders' equity:
Preferred stock, $.10 par value, 1,000,000
shares authorized, none issued -- --
Common stock, $.01 par value, 6,250,000 shares
authorized; 3,650,050 and 3,285,758 shares issued
in fiscal years 2004 and 2003, respectively 36,501 32,858
Additional paid-in capital 74,635,607 73,666,193
Treasury stock, at cost, 898,249 shares in
fiscal year 2004 and 2003 (8,576,944) (8,576,944)
Accumulated deficit (57,537,811) (54,900,263)
---------------- ----------------
Total shareholders' equity 8,557,353 10,221,844
---------------- ----------------
Total liabilities and shareholders' equity $ 105,530,978 $ 92,463,398
================ ================
See accompanying notes to consolidated condensed financial statements.
3
E COM VENTURES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
THIRTEEN WEEKS ENDED THIRTEEN WEEKS ENDED
MAY 1, 2004 MAY 3, 2003
-------------------- --------------------
Net sales $ 43,571,466 $ 36,887,829
Cost of goods sold 26,066,580 20,072,336
-------------------- --------------------
Gross profit 17,504,886 16,815,493
-------------------- --------------------
Operating expenses:
Selling, general and administrative 17,949,465 17,839,116
Depreciation and amortization 1,552,312 1,454,741
-------------------- --------------------
Total operating expenses 19,501,777 19,293,857
-------------------- --------------------
Loss from operations (1,996,891) (2,478,364)
Interest expense, net (640,657) (451,783)
-------------------- --------------------
Net loss $ (2,637,548) $ (2,930,147)
==================== ====================
Net loss per common share:
Basic $ (1.00) $ (1.19)
==================== ====================
Diluted $ (1.00) $ (1.19)
==================== ====================
Weighted average number of common shares outstanding:
Basic 2,650,153 2,459,052
==================== ====================
Diluted 2,650,153 2,459,052
==================== ====================
See accompanying notes to consolidated condensed financial statements.
4
E COM VENTURES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
THIRTEEN WEEKS ENDED THIRTEEN WEEKS ENDED
MAY 1, 2004 MAY 3, 2003
-------------------- --------------------
Cash flows from operating activities:
Net loss $ (2,637,548) $ (2,930,147)
Adjustments to reconcile net loss to net cash
used in operating activities:
Provision for impairment of assets and store closing -- 57,755
Depreciation and amortization 1,552,312 1,454,741
Change in operating assets and liabilities:
Trade receivables (331,131) (347,250)
Advances to suppliers 70,213 92,547
Inventories (14,776,499) (6,091,562)
Prepaid expenses and other assets 205,198 343,253
Accounts payable, non-affiliates 5,208,827 2,675,950
Accounts payable, affiliates 7,094,089 1,794,229
Accrued expenses and other liabilities (4,429,281) (501,147)
-------------------- --------------------
Net cash used in operating activities (8,043,820) (3,451,631)
-------------------- --------------------
Cash flows from investing activities:
Additions to property and equipment (691,813) (2,017,994)
-------------------- --------------------
Net cash used in investing activities (691,813) (2,017,994)
-------------------- --------------------
Cash flows from financing activities:
Net borrowings under bank line of credit 1,921,920 4,957,790
Principal payments under capital lease obligations (63,484) (397,525)
Proceeds from notes and interest receivable,
shareholder and officer 327,311 --
Proceeds from note and interest receivable, related party 5,000,000 (3,927)
Repayment of convertible notes payable -- (450,000)
Proceeds from exercise of stock options 973,057 69,999
-------------------- --------------------
Net cash provided by financing activities 8,158,804 4,176,337
-------------------- --------------------
Decrease in cash and cash equivalents (576,829) (1,293,288)
Cash and cash equivalents at beginning of period 1,961,310 2,964,645
-------------------- --------------------
Cash and cash equivalents at end of period $ 1,384,481 $ 1,671,357
==================== ====================
See accompanying notes to consolidated condensed financial statements.
5
E COM VENTURES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - OPERATIONS AND BASIS OF PRESENTATION
E Com Ventures, Inc., a Florida corporation ("ECOMV" ), performs all of
its operations through 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.,
("perfumania.com"), a Florida corporation, which is 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. Perfumania sells fragrances at
discounted prices up to 75% below the manufacturers' suggested retail prices.
Perfumania's wholesale division distributes fragrances and related products to
other wholesale distributors throughout North America and overseas.
Perfumania.com offers a selection of our more popular products for sale over the
Internet and serves as an alternative shopping experience to the Perfumania
shopping experience. The number of retail stores in operation at May 1, 2004,
and May 3, 2003, were 230 and 237, respectively.
The consolidated condensed financial statements include the accounts of
ECOMV and subsidiaries (collectively, the "Company"). All material intercompany
balances and transactions have been eliminated in consolidation.
Effective January 30, 2004, Ilia Lekach, the Company's then Chairman of
the Board and Chief Executive Officer, and several other parties controlled by
Mr. Lekach and his wife Deborah Lekach (collectively, "Lekach"), entered into
the Nussdorf Option Agreement, with Stephen Nussdorf and Glenn Nussdorf (the
"Nussdorfs"), pursuant to which the Nussdorfs were granted options to acquire up
to an aggregate 720,954 shares of the Company's common stock beneficially owned
by Lekach, for a purchase price of $12.70 per share, with the acquisition price
to be paid in specified installments.
As of May 10, 2004, Mr. Lekach had exercised his options from the Company
to acquire 443,750 shares and the Nussdorfs had acquired all 720,954 shares
pursuant to the Nussdorf Option Agreement. In accordance with the Nussdorf
Option Agreement, the Nussdorfs own an aggregate of 1,128,144 shares of the
Company's common stock or approximately 39% of the total number of shares of the
Company's common stock outstanding.
As of May 1, 2004, the Company has a seasonal working capital deficiency
of approximately $10.0 million, cash balances of approximately $1.4 million and
additional borrowing capacity of $7.6 million under its bank line of credit.
Management believes that the cash balances, the available borrowing capacity
under it's new three-year line of credit (see Note 3), and the projected future
operating results will generate sufficient liquidity to support the Company's
needs for the next twelve months; however, there can be no assurance that
management's plans will be successful. If the Company is unable to generate
sufficient cash flows from operations in the future to service its obligations,
the Company could face liquidity and working capital constraints, which could
adversely impact future operations and growth.
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 pursuant to those rules and regulations.
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 January 31, 2004 filed with
the SEC on May 17, 2004, and as amended on May 18, 2004 and June 1, 2004.
6
RECLASSIFICATIONS
Certain fiscal year 2003 amounts have been reclassified to conform with
the fiscal year 2004 presentation.
NOTE 2 - ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"), and provides proforma
disclosure of net income(loss) and earnings(loss) per share as if the fair value
based method prescribed by Statement of Financial Accounting Standards No. 123
"Accounting for Stock-Based Compensation," ("SFAS 123") as amended, had been
applied in measuring compensation expense for options granted to employees and
directors. In accordance with APB 25, compensation cost for stock options is
measured as the excess, if any, of the quoted market price of the Company's
stock at the date of the grant over the amount an employee or director must pay
to acquire the stock. Had compensation cost for options granted been determined
in accordance with the fair value provisions of SFAS No. 123, the Company's net
loss and net loss per share would have been increased to the proforma amounts
presented below.
THIRTEEN WEEKS ENDED THIRTEEN WEEKS ENDED
MAY 1, 2004 MAY 3, 2003
-------------------- --------------------
Net loss as reported $ (2,637,548) $ (2,930,147)
Add: Total fair value of stock
based employee compensation
expense not included in reported
net loss, net (12,172) (103,381)
-------------------- --------------------
Proforma net loss $ (2,649,720) $ (3,033,528)
==================== ====================
Proforma net loss per share:
Basic $ (1.00) $ (1.23)
==================== ====================
Diluted $ (1.00) (1.23)
==================== ====================
NOTE 3 - BANK LINE OF CREDIT AND NOTES PAYABLE
As of May 1, 2004, Perfumania's senior secured credit facility with GMAC
Commercial Finance LLC ("GMAC") provided for borrowings of up to $40 million. On
May 12, 2004, the Company entered into a new three-year amended and restated
senior secured revolving credit facility with GMAC Commercial Finance LLC and
Congress Financial Corporation which provides for borrowings of up to $60
million and supports normal working capital requirements and other general
corporate needs. Advances under the new line of credit are based on a formula of
eligible inventories and will bear interest depending on the Company's financial
ratios from (1) prime to prime plus 1.25% or (b) LIBOR plus 2.50% to 3.75%.
Borrowings are secured by a first lien on all assets of Perfumania. The credit
facility contains limitations on additional borrowings, capital expenditures and
other items, and contains various covenants including a fixed charge coverage
ratio and minimum EBITDA amounts as defined. Approximately $7.6 million was
available under the existing and amended credit facilities as of May1, 2004.
On March 9, 2004, the Nussdorfs made a $5,000,000 subordinated secured
demand loan to Perfumania. The demand loan bears interest at the prime rate plus
1%, requires quarterly interest payments and is secured by a security interest
in Perfumania's assets pursuant to a Security Agreement, by and among Perfumania
and the Nussdorfs. There are no prepayment penalties and the loan is subordinate
to all bank related indebtedness.
NOTE 4 - BASIC AND DILUTED 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. 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.
7
NOTE 5 - COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) represents all non-owner changes in
shareholders' equity and consists of the following:
THIRTEEN WEEKS ENDED THIRTEEN WEEKS ENDED
MAY 1, 2004 MAY 3, 2003
-------------------- --------------------
Net loss $ (2,637,548) $ (2,930,147)
Net unrealized gain on
investments available for sale -- 20,057
-------------------- --------------------
Total comprehensive loss $ (2,637,548) $ (2,910,090)
==================== ====================
NOTE 6 - CONTINGENCIES
The Company is involved in legal proceedings in the ordinary course of
business. Management believes that the Company has meritorious defenses and that
the ultimate resolution of these matters should not have a material adverse
effect on the Company's financial position or result of operations; however,
management cannot presently predict the outcome of these matters.
NOTE 7 - RELATED PARTY TRANSACTIONS
Parlux Fragrances, Inc. ("Parlux") owns 378,102 shares, or approximately
13%, of the Company's outstanding common stock. The Nussdorfs own approximately
39% of the Company's outstanding common stock and they are officers and
principals of Quality King. During the first thirteen weeks of fiscal 2004, the
Company sold approximately $5.4 million of wholesale merchandise to Quality
King. Purchases of product from these related parties was approximately $21
million for the first thirteen weeks of fiscal 2004, representing approximately
52% of the Company's total inventory purchases. The amount due to related
parties at May 1, 2004 is approximately $24.8 million, is non-interest bearing
and is included in accounts payable, affiliates in the accompanying consolidated
condensed balance sheets.
Notes receivable from Ilia Lekach, the Company's former Chairman of the
Board of Directors and Chief Executive Officer, was $327,311 as of January 31,
2004. The notes were unsecured, matured in five years and bore interest at prime
plus 1% per annum. Principal and interest were payable in full at maturity. The
loan and all accrued interest was fully repaid in March 2004.
NOTE 8 - NON CASH TRANSACTIONS
Supplemental disclosures of non-cash investing and financing activities
are as follows:
FOR THE THIRTEEN WEEKS ENDED
-------------------------------------------
MAY 1, 2004 MAY 3, 2003
-------------------- --------------------
Unrealized gain on investments -- $ 20,057
available for sale
Cash paid during the period for:
Interest $ 624,094 $ 403,717
8
NOTE 9 - SEGMENT INFORMATION
The Company operates in two industry segments, specialty retail sales and
wholesale distribution of fragrances and related products. Financial information
for these segments is summarized in the following table.
THIRTEEN WEEKS THIRTEEN WEEKS
ENDED ENDED
MAY 1, 2004 MAY 3, 2003
-------------------- --------------------
Net sales to external
customers:
Retail $ 38,198,657 $ 36,138,988
Wholesale 5,372,809 748,841
-------------------- --------------------
$ 43,571,466 $ 36,887,829
==================== ====================
Gross profit:
Retail $ 17,150,401 $ 16,678,308
Wholesale 354,485 137,185
-------------------- --------------------
$ 17,504,886 $ 16,815,493
==================== ====================
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THE THIRTEEN WEEKS ENDED MAY 1, 2004 WITH THE THIRTEEN WEEKS ENDED
MAY 3, 2003.
Net sales increased 18.1% from $36.9 million in the first thirteen weeks
of 2003 to $43.6 million in the first thirteen weeks of 2004. The increase in
sales was primarily due to a $4.6 million increase in wholesale sales combined
with a $2.1 million increase in retail store sales. Wholesale sales were $5.4
million for the first thirteen weeks of fiscal 2004 compared to $0.7 million for
the first thirteen weeks of fiscal 2003. All wholesale sales during the first
quarter of fiscal 2004 were made to Quality King. Retail sales were $38.2
million for the first thirteen weeks of fiscal 2004 compared to $36.1 million
for the first thirteen weeks of fiscal 2003. The increase in retail sales is
attributable to an increase in Perfumania's comparable store sales of 7.2% in
the first thirteen weeks of fiscal 2004, as the average number of stores
operated was 230 versus 238 in the prior year's comparable period. Comparable
store sales measure sales from stores that have been open for one year or more.
The increase in comparable store sales was due to a 2.5% increase in the number
of customer transactions and a 3.1% increase in the average dollar value per
transaction.
Gross profit increased 4.1% from $16.8 million in the first thirteen weeks
of 2003 (45.6% of total net sales) to $17.5 million in the first thirteen weeks
of 2004 (40.2% of total net sales). The increase in gross profit was due to the
increase in sales. As a percentage of net sales, gross profit in the first
thirteen weeks of 2004 decreased versus the first thirteen weeks of 2003 due to
larger number of wholesale transactions in fiscal 2004 compared to fiscal 2003.
The Company, through its supplier relationships, is able to obtain certain
merchandise at better prices and quantities than Quality King. Wholesale sales
yield lower margins than retail sales.
Selling, general and administrative expenses increased 0.6% from $17.9
million in the first thirteen weeks of 2003 to $18.0 million in the first
thirteen weeks of 2004. The increase was attributable to higher store related
costs compared with 2003. Depreciation and amortization was approximately $1.6
million in the first thirteen weeks of 2004 compared to $1.5 million for the
first thirteen weeks of 2003.
Interest expense, net was approximately $641,000 for the first thirteen
weeks of 2004 compared with $452,000 in 2003. The increase in interest expense
was primarily due to interest incurred on the capital lease for our corporate
office and distribution center to which we relocated in the second quarter of
fiscal 2003.
As a result of the foregoing, our net loss decreased to $2.6 million in
the first thirteen weeks of 2004 compared to a net loss of $2.9 million in the
first thirteen weeks of 2003. Net loss per share for the first thirteen weeks of
2004 and 2003 was $1.00 and $1.19, respectively.
9
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 thirteen weeks of fiscal 2004, these capital requirements generally were
satisfied through borrowings under our credit facility.
At May 1, 2004, we had a working capital deficiency of approximately $10.0
million compared to a working capital of approximately $9.1 million at January
31, 2004. The increase was primarily due to the net loss during the current
period, increased purchases of property and equipment offset by lower long-term
debt.
Net cash used in operating activities during the current period was
approximately $8.0 million compared with approximately $3.4 million for the same
period in the prior year. The increase in cash used in operating activities was
primarily due to a $14.8 million increase in inventories primarily due to
seasonality demands, decrease in accrued expenses of $4.4 million resulting from
payments made in connection with the change in management control, offset by
$12.3 million increase in accounts payable as a result of the increased
inventory purchases.
Net cash used in investing activities was approximately $0.7 million in
the first thirteen weeks of fiscal year 2004 compared to $2.0 million in the
first thirteen weeks of 2003. Investing activities primarily represent spending
for the renovation of existing stores and new store openings.
Net cash provided by financing activities during the current period was
approximately $8.2 million compared with approximately $4.2 million for the same
period in the prior year. The increase was primarily due to $5 million in
proceeds from a subordinated note payable to an affiliate.
As of May 1, 2004, we have a seasonal working capital deficiency of $10.0
million and cash balances of approximately $1.4 million. On May 12, 2004, we
entered into a new three-year amended and restated senior secured revolving
credit facility with GMAC Commercial Finance LLC and Congress Financial
Corporation that provides for borrowings of up to $60 million. Approximately
$7.6 million was available under the existing and amended facilities as of May
1, 2004. We believe that the cash balances, the available borrowing capacity,
and the projected future operating results will generate sufficient liquidity to
support our working capital needs and capital expenditures for the next twelve
months; however, there can be no assurance that our plans will be successful. If
we are unable to generate sufficient cash flows from operations in the future to
service our obligations and/or refinance our existing debt, we could face
liquidity and working capital constraints, which could adversely impact future
operations and growth.
During the thirteen weeks ended May 1, 2004, Perfumania closed 4 stores
and opened 2 new stores. At May 1, 2004, Perfumania operated 230 stores compared
to 237 stores as of May 3, 2003. Management's focus is on improving the
profitability of existing stores and selectively opening new stores. Management
plans to open 13 and close 5 stores for the remainder of fiscal year 2004.
CRITICAL ACCOUNTING POLICIES
Our consolidated condensed financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim information. Presentation of these statements requires
management to make judgments and estimates. As such, some accounting policies
have a significant impact on amounts reported in these financial statements. The
judgments and estimates made can significantly affect results. Materially
different amounts would be reported under different conditions or by using
different assumptions. A summary of those significant accounting policies can be
found in our 2003 Annual Report on Form 10-K, in the notes to the Consolidated
Financial Statements, Note 2.
FORWARD LOOKING STATEMENTS
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. These forward-looking statements involve known and unknown risks,
10
uncertainties and other factors that may cause our actual results, performance
or achievements of those of our industry to be materially different from any
future results, performance or achievements expressed or implied by those
forward-looking statements. Among the factors that could cause actual results,
performance or achievement to differ materially from those described or implied
in the forward-looking statements are our ability to service our obligations,
our ability to comply with the covenants in our credit facility, general
economic conditions including a decrease in discretionary spending by consumers,
competition, potential technology changes, changes in or the lack of anticipated
changes in the regulatory environment in various countries, the ability to
secure partnership or joint-venture relationships with other entities, the
ability to raise additional capital to finance expansion, the risks inherent in
new product and service introductions and the entry into new geographic markets
and other factors included in our filings with the Securities and Exchange
Commission (the "SEC"), including the Risk Factors included in our 2003 Annual
Report on From 10-K filed with the SEC. Those Risk Factors contained in our 2003
Annual Report on Form 10-K are incorporated herein by this reference to them.
Copies of our SEC filings are available from the SEC or may be obtained upon
request from us. We do not undertake any obligation to update the information
contained herein, which speaks only as of this date.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
During the quarter ended May 1, 2004, there have been no material changes
in the information about our market risks as of January 31, 2004 as set forth in
Item 7A of the 2003 Form 10-K.
ITEM 4. CONTROLS AND PROCEDURES
Our Chief Executive Officer and Chief Financial Officer have concluded,
based on their evaluation as of May 1, 2004, 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 changes in our internal control over financial
reporting during the quarter ended May 1, 2004 that have materially affected or
are reasonably likely to materially affect our internal control over financial
reporting.
11
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF
EQUITY SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At a special meeting of shareholders of the Company held on April,
29, 2004, the shareholders (i) approved an amendment to our 2000
Stock Option Plan (the "Employee Plan"), to increase the aggregate
number of shares of common stock that may be issued under the
Employee Plan by an aggregate 204,252 shares from 661,946 shares to
866,198 shares and (ii) approved an amendment to the Employee Plan
to increase the aggregate number of options that may be issued to
any one person under the Employee Plan from 125,000 to 500,000.
The table below shows the result of the shareholders' voting:
VOTES IN VOTES VOTES WITHHELD/
FAVOR AGAINST ABSTENTIONS
---------- ---------- ---------------
Increase the aggregate
number of shares of common
stock that may be issued
under the Employee Plan by
an aggregate 204,252
shares from 661,946 shares
to 866,198 shares 1,429,323 62,608 1,216,828
Increase the aggregate
number of options that may
be issued to any one person
under the Employee Plan
from 125,000 to 500,000 1,429,298 62,633 1,216,828
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Index to Exhibits
Exhibit No.
31.1 Certification by Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification by Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
12
32.1 Certification by Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification by Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K.
We filed a current report on Form 8-K with the SEC dated
February 10, 2004 to report, under Item 1 that we had a change
in control.
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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.
E COM VENTURES, INC.
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(Registrant)
Date: June 11, 2004 By: /S/ MICHAEL W. KATZ
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Michael W. Katz
Chief Executive Officer and President
By: /S/ A. MARK YOUNG
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A. Mark Young Chief Financial Officer
(Principal Financial and Accounting
Officer)
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