UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                               ------------------

                                    FORM 10-K


    FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(D) OF THE
                            SECURITIES EXCHANGE ACT


|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
    OF 1934

     FOR THE FISCAL YEAR ENDED JANUARY 31, 2004

                                       OR

|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
    ACT OF 1934

     FOR THE TRANSITION PERIOD FROM                      TO
                                    --------------------    --------------------

                         COMMISSION FILE NUMBER: 0-10714

                               ------------------

                              E COM VENTURES, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


                 FLORIDA                                       65-0977964
     (STATE OR OTHER JURISDICTION OF                        (I.R.S. EMPLOYER
      INCORPORATION OR ORGANIZATION)                      IDENTIFICATION NO.)

        251 INTERNATIONAL PARKWAY

             SUNRISE, FLORIDA                                    33325
 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                      (ZIP CODE)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (954) 335-9100

                               ------------------

           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

                                      NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                           COMMON STOCK $.01 PAR VALUE

                               ------------------

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. |_|

          Indicate by check mark whether the Registrant is an accelerated  filer
(as defined in Exchange Act Rule 12b-2). Yes |_| No|X|

          The aggregate market value of the voting stock held by  non-affiliates
of the  Registrant  was  approximately  $8.9  million as of August 2, 2003.  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.

     The number of shares outstanding of the Registrant's common stock as of
     April 27, 2004: 2,740,830 shares

                       DOCUMENTS INCORPORATED BY REFERENCE

          Portions of the  Registrant's  definitive proxy statement for its 2004
annual  meeting of  shareholders,  which proxy  statement will be filed no later
than 120 days after the close of the Registrant's  fiscal year ended January 31,
2004, are hereby  incorporated by reference in Part III of this Annual Report on
Form 10-K

==================

<PAGE>

                                TABLE OF CONTENTS

ITEM                                                                        PAGE

                                     PART I

 1.   Business                                                                3
 2.   Properties                                                             10
 3.   Legal Proceedings                                                      10
 4.   Submission of Matters to a Vote of Security Holders                    10

                                     PART II

 5.   Market for Registrant's Common Equity and Related Stockholder Matters  11
 6.   Selected Financial Data                                                12
 7.   Management's Discussion and Analysis of Financial Condition
      and Results of Operations                                              13
 7A.  Quantitative and Qualitative Disclosures About Market Risk             23
 8.   Financial Statements and Supplementary Data                            24
 9.   Changes in and Disagreements with Accountants on
      Accounting and Financial Disclosure                                    43
 9A.  Controls and Procedures                                                43

                                    PART III

 10.  Directors and Executive Officers of the Registrant                     44
 11.  Executive Compensation                                                 44
 12.  Security Ownership of Certain Beneficial Owners and Management and
      Related Stockholder Matters                                            44
 13.  Certain Relationships and Related Transactions                         44
 14.  Principal Accountant Fees and Services                                 44

                                     PART IV

 15.  Exhibits, Financial Statement Schedules and Reports on Form 8-K        44


                                       2
<PAGE>

                                     PART I.

ITEM 1.        BUSINESS

BUSINESS STRATEGY

           E  Com  Ventures,   Inc.,  a  Florida  corporation  ("ECOMV"  or  the
"Company"),   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.  As of January 31, 2004,
Perfumania  operated a chain of 232 retail  stores  specializing  in the sale of
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.

           Perfumania operates its wholesale business directly.  It operates its
retail business through Magnifique Parfumes and Cosmetics,  Inc. ("Magnifique"),
a  wholly-owned  subsidiary  of  Perfumania,  although the stores are  generally
operated  under the name  Perfumania  as  described  below under "Trade Name and
Service  Mark."  Perfumania's  retail  stores  are  located in  regional  malls,
manufacturers'  outlet malls,  airports and on a  stand-alone  basis in suburban
strip shopping centers.  The number of retail stores in operation at January 31,
2004,   February  1,  2003,  and  February  2,  2002  were  232,  238  and  247,
respectively.

           Sales of  perfumania.com  are  included  within  those of our  retail
business in this Form 10-K.  For ease of reference in this Form 10-K, our retail
and  wholesale  business are referred to as  divisions.  See Item 6 for Selected
Financial Data by division.

RECENT DEVELOPMENTS AND CHANGE OF CONTROL

          Effective  January 30,  2004,  Ilia Lekach,  our then  Chairman of the
Board and Chief  Executive  Officer,  IZJD Corp. and Pacific  Investment  Group,
Inc.,  each of which are  wholly-owned  by Mr.  Lekach and Deborah  Lekach,  Mr.
Lekach's  wife  (collectively,  "Lekach"),  entered  into  the  Nussdorf  Option
Agreement (The "Nussdorf  Option  Agreement"),  with Stephen  Nussdorf and Glenn
Nussdorf (the "Nussdorfs"), pursuant to which the Nussdorfs were granted options
by Lekach to acquire up to an aggregate  720,954 shares of the Company's  common
stock owned or beneficially  owned by Lekach, for a purchase price of $12.70 per
share exercisable in the installments  indicated on or after the dates set forth
in the table below:

                  Date                               Number of Shares
                  ---------------------              ----------------------
                  January 30, 2004                   433,070
                  March 15, 2004                     162,884
                  April 23, 2004                     125,000

           The  purchase  price for the shares to be acquired  by the  Nussdorfs
under the  Nussdorf  Option  Agreement  is  payable in cash;  provided  that the
Nussdorfs  may elect to pay a portion of the purchase  price for the shares that
are subject to the option  installment  that first becomes  exercisable in April
2004, by offsetting  the principal and accrued  interest then owed by Mr. Lekach
under a $1,000,000 demand note, dated December 8, 2003,  payable to the order of
Stephen Nussdorf.

           In  addition,  pursuant  to and in  accordance  with the terms of the
Nussdorf Option Agreement,  the Nussdorfs have been granted an irrevocable proxy
for the term set forth in the  Agreement to vote any shares owned by Lekach that
are the subject of the Nussdorf Option Agreement.

          The  Nussdorfs  gave  notice  of  the  exercise  of the  first  option
installment pursuant to the Nussdorf Option Agreement to acquire 433,070 shares:
298,530  shares by Stephen  Nussdorf and 134,540  shares by Glenn  Nussdorf (the
"Initial  Exercise").  The aggregate purchase price for the Initial Exercise was
paid in cash.

          On March 10, 2004,  the  Nussdorfs  gave notice of the exercise of the
second option  installment  pursuant to the Nussdorf Option Agreement to acquire
162,884 shares:  81,442 shares each by Stephen  Nussdorf and Glenn Nussdorf (the
"Second Exercise").  The shares included in the Second Exercise were acquired on
March 19, 2004. The aggregate purchase price for the Second Exercise was paid in


                                     - 3 -
<PAGE>

cash. In connection with the Second Exercise,  Mr. Lekach exercised  options for
162,884  shares of the  Company's  common stock in March 2004,  of which 125,000
shares were issued upon the exercise of options  granted to Mr. Lekach under the
Company's 2000 Stock Option Plan.

           Of the 720,954 shares subject to the Nussdorf  Option  Agreement,  an
aggregate  443,750  shares were  issuable upon exercise of certain stock options
owned of record by Ilia Lekach.  As of April 26, 2004,  Mr. Lekach has exercised
options to acquire  318,750 of those  shares  and the  Nussdorfs  have  acquired
595,954 shares pursuant to the Nussdorf Option Agreement.  The remaining 125,000
shares subject to the Nussdorf  Option  Agreement are those shares issuable upon
exercise of 125,000 options  required to be issued to Mr. Lekach pursuant to the
terms of his  employment  agreement as a  consequence  of the change of control.
These  125,000  options may only be issued upon  approval of an amendment to the
Company's 2000 Stock Option Plan. Such an amendment was voted on and approved at
a special meeting of the Company's shareholders on April 29, 2004.

          Assuming the Nussdorfs  exercise their option to acquire the remaining
125,000 shares subject to the Nussdorf Option Agreement, the Nussdorfs would own
an aggregate  1,128,144  shares of the Company's  Common Stock or  approximately
39.7% of the total number of shares of the Company's common stock outstanding as
of April 26, 2004.

           On March 11, 2004,  following the  acquisition  of the 433,070 shares
pursuant to the Initial Exercise, the Nussdorfs made a $5,000,000 secured demand
loan to  Perfumania.  The  demand  loan bears  interest  at prime plus 1% and is
secured by a security  interest in  Perfumania's  assets  pursuant to a Security
Agreement, by and among Perfumania and the Nussdorfs.

           On February 6, 2004,  Miles  Raper,  Donovan  Chin and Daniel  Bengio
resigned as members of the Company's Board of Directors,  and Stephen  Nussdorf,
Paul  Garfinkle  and  Michael  W. Katz were  elected to the  Company's  Board of
Directors. Effective February 10, 2004, Mr. Lekach's employment with the Company
was  terminated  and Mr. Lekach ceased serving as an employee and officer of the
Company.  In addition,  on February 10, 2004,  Stephen L. Nussdorf was appointed
the  Company's  Chairman  of the Board and  Michael  W. Katz was  appointed  the
Company's Chief Executive Officer and President.

RETAIL DIVISION

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(R), Fendi(R), Yves Saint Laurent(R), Fred Hayman(R),
Calvin  Klein(R),  Giorgio  Armani(R),  Gucci(R),  Ralph  Lauren/Polo(R),  Perry
Ellis(R),  Liz Claiborne(R),  Giorgio(R),  Hugo Boss(R),  Halston(R),  Christian
Dior(R), Chanel(R) and Cartier(R).  Perfumania also carries a private label line
of bath & body treatment products under the name Jerome Privee(R), and a private
label line of  cosmetics,  treatment  and  aromatherapy  under the name Nature's
Elements(R).

           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.  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 and increase
sales,  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 in the  malls in  which  its  stores  are  located.  The  amount  of
advertising varies with the seasonality of the business.



                                     - 4 -
<PAGE>

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   manufacturers'   outlet  malls  tend  to  be  larger  than
Perfumania's  other stores. A store is typically  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 an integrated  information  system  including  retail
outlet  and  corporate  systems.  Perfumania.com  has  a  completely  integrated
e-commerce  system.  These  systems  encompass  every  significant  phase of our
operations  and  provide   information   for  planning,   purchasing,   pricing,
distribution, finance and human resource decisions. E-mail and other information
are  communicated  between the corporate  office and store locations  through an
enterprise-wide   Intranet.  Daily  compilation  of  sales,  gross  margin,  and
inventory levels enables management to analyze profitability and sell-through by
item  and  product  line as well as  monitor  the  success  of sale  promotions.
Inventory is tracked through its entire life cycle.  During 2003, a new point of
sale  system  was  implemented  in all  stores.  This  system  enables  improved
communication,  pricing and promotion programs,  time and attendance  reporting,
and enhanced inventory control.

STORE LOCATION AND EXPANSION

           Perfumania's  stores  are  located  in 36  states,  the  District  of
Columbia and Puerto Rico,  including 45 locations in Florida,  19 in California,
16 in Texas and Puerto Rico, and 15 in New York.  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 expanding 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  $160,000,  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 Holiday season.

           In fiscal years 2003, 2002 and 2001,  Perfumania  opened 11 stores, 4
stores  and 5  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
2003,  2002  and  2001,   Perfumania   closed  17  stores,  13  and  15  stores,
respectively.  For  fiscal  year  2004,  Perfumania  will  continue  to focus on
improving the  profitability  of its existing  stores and management  expects to
open approximately 15 stores and close approximately 10 stores.

WHOLESALE DIVISION

           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 2003,  2002 and 2001,  the wholesale
division sold to approximately 5, 5 and 9 customers,  respectively. Quality King
Distributors,  Inc. ("Quality King"), an affiliate of ourcurrent Chief Executive
Officer and President,  Michael Katz, our principal shareholder, the Nussdorf's,
accounted for 81%, 47% and 0% of net  wholesale  sales during fiscal years 2003,
2002  and  2001,  respectively.   See  further  discussion  at  Note  5  to  our
Consolidated Financial Statements included in Item 8, hereof. A single customer,
unaffiliated with the Company, considerably reduced its purchases in the current
year and  accounted  for 3%, 49% and 92% of wholesale  sales during fiscal years
2003, 2002 and 2001, respectively.

PERFUMANIA.COM

           Perfumania.com  provides a number of advantages for retail  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 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



                                     - 5 -
<PAGE>

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.

SOURCES OF SUPPLY

           During fiscal years 2003 and 2002,  Perfumania  purchased  fragrances
from approximately 100 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 23% and 10% of Perfumania's total merchandise purchased
in fiscal  years  2003 and 2002,  respectively,  was from an  affiliate,  Parlux
Fragrances,   Inc.  ("Parlux"),  a  manufacturer  and  distributor  of  prestige
fragrances and related beauty products.  Ilia Lekach, our former Chairman of the
Board and Chief Executive Officer and one of our former principal  shareholders,
is the  Chairman  of the  Board  and  Chief  Executive  Officer  of  Parlux  and
beneficially  owns  approximately 20% of Parlux's  outstanding  common stock. No
other supplier  accounted for more than 10% of our merchandise  purchases during
2003 or 2002.

           Approximately 5% and 1% of Perfumania's  total merchandise  purchased
in fiscal  years  2003 and 2002,  respectively,  was from  Quality  King.  These
purchases do not include products manufactured or distributed by Parlux.

           Approximately 7% and 9% of Perfumania's  total merchandise  purchased
in fiscal years 2003 and 2002,  respectively,  was from Grupo  Tulin,  a company
owned by a former Director and brother of Ilia Lekach.  Approximately 4% and 5%,
respectively,  of Perfumania's total merchandise  purchased in fiscal years 2003
and 2002 was acquired  from S&R  Fragrances,  Inc.,  a company  owned by another
brother of Ilia Lekach.  Purchases from these  affiliates are at lower prices or
on better  terms than would  otherwise be available  from other  sources.  These
purchases do not include products manufactured or distributed by Parlux.

           A substantial  portion of Perfumania's  merchandise is purchased from
secondary  sources such as distributors,  wholesalers,  importers and retailers.
Merchandise   purchased  from  secondary   sources   includes   trademarked  and
copyrighted  products  that were  manufactured  in the  United  States,  sold to
foreign  distributors and then  re-imported  into the United States,  as well as
trademarked  and  copyrighted  products  manufactured  and  intended for sale in
foreign  countries.  From time to time, U.S.  trademark and copyright owners and
their   licensees  and  trade   associations   have   initiated   litigation  or
administrative agency proceedings,  based on U.S. Customs Service regulations or
trademark or copyright  laws,  seeking to halt the  importation  into the United
States of such "gray market" merchandise or to restrict its resale in the United
States, and some of these actions have been successful. However, the U.S. courts
remain  divided on the extent to which  trademark,  copyright or other  existing
laws or  regulations  can be used to restrict the  importation  or sale of "gray
market"  merchandise.  In  addition,  from time to time federal  legislation  to
restrict the importation or sale of "gray market" merchandise has been proposed,
but no such legislation has been adopted.

           As is often the case in the fragrance and cosmetics business, some of
the merchandise  purchased by 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.  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 may not
always be able 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.  Accordingly,  there
is a risk that 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.

           Perfumania's business activities could become the subject of legal or
administrative actions brought by manufacturers,  distributors or others, any of
which actions could have a material  adverse effect on our business or financial
condition.  In addition,  future judicial,  legislative or administrative agency
action,  including possible import,  export, tariff or other trade restrictions,
could limit or eliminate some of Perfumania's secondary sources of supply or any
of its business activities.

DISTRIBUTION

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


                                     - 6 -
<PAGE>

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, promotions, customer service, merchandise variety, store location
and ambiance. Perfumania believes that its perfumery 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.

           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  and
availability.

EMPLOYEES

           At  January  31,  2004,  we had 1,338  employees,  of whom 1,195 were
employed  in  Perfumania's  retail  stores,  44 were  employed  in  Perfumania's
warehouse  and  distribution  operations  and 99  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 our  employees  are  covered  by a  collective  bargaining
agreement and we consider our relationship with our employees to be good.

TRADE NAME AND SERVICE MARK

           Perfumania's   stores   use  the   trade   name  and   service   mark
Perfumania(R);  Perfumania  also  operates  1 store  under the trade  name "Also
Perfumania,"  2 stores  under the trade name "Class  Perfumes" in malls where we
also  operate a  Perfumania(R)  store,  one store under the trade name "Touch at
Perfumania," one store under the trade name "Perfumania  Too," and 7 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(R)  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.

           Our former  Chairman of the Board and Chief Executive  Officer,  Ilia
Lekach,  was also  Chairman and interim CEO of Nimbus  Group,  Inc.  ("Nimbus"),
formerly  known  as  TakeToAuction.com  ("TTA"),  a  public  company  previously
committed to the  development  of a private jet air taxi network.  TTA initially
sold consumer products on Internet auction sites.

           From  fiscal  year  2000   through   fiscal  year  2002  we  acquired
approximately  1,003,000 shares of Nimbus common stock. The investment in Nimbus
was shown on our balance sheets as investments available for sale. During fiscal
year 2003 we disposed of our holding in Nimbus in open market  transactions at a
loss of approximately $172,000.

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

           The  following  set forth  certain  risk  factors that may affect the
Company and results of operations.  These may be additional  risks not set forth
below or in this annual  report on form 10-K,  which may also affect the Company
and its operations.

WE COULD FACE  LIQUIDITY  AND WORKING  CAPITAL  CONSTRAINTS  IF WE ARE UNABLE TO
GENERATE SUFFICIENT CASH FLOWS FROM OPERATIONS

           As shown in the accompanying financial statements, we have incurred a
net loss of $12.9  million  for the  fiscal  year ended  January  31,  2004.  In
addition,  as of January 31, 2004, we had a working  capital  deficiency of $9.1
million and an accumulated  deficit of $54.9 million. As of January 31, 2004, we
had cash  balances  totaling  approximately  $2.0 million.  Additionally,  $30.5
million was  outstanding  and $5.6 million was  available  under our $40 million
credit facility with GMAC, which expires in May 2005.  Management  believes 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  management's  plans and  expectations  will be
successful.  If we are unable to generate  sufficient cash flows from operations
in the future to service our obligations,  finance our existing debt and achieve
improved  operating  results,  we  could  face  liquidity  and  working  capital
constraints,  which could  adversely  impact future  operations  and growth and,
thereby, may raise a question as to our ability to remain a going concern.


                                     - 7 -
<PAGE>

            As of January 31, 2004,  Perfumania  was not in compliance  with its
tangible  net worth  ratio,  fixed  charge  ratio,  leverage  ratio and  capital
expenditures  limitation.  On April 30, 2004,  Perfumania obtained a waiver from
GMAC for all instances of non-compliance as of January 31, 2004.

           On May 12, 2004, Perfumania 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.

           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 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. Advances will be secured by a first
lien an all assets of Perfumania.

             If we are unable to generate  sufficient cash flows from operations
to service our  obligations  and  refinance  the credit  facility on  acceptable
terms,  we could face  liquidity and working  capital  constraints,  which could
adversely impact our future operations and growth.

FAILURE TO COMPLY WITH COVENANTS IN OUR EXISTING CREDIT FACILITY COULD RESULT IN
OUR INABILITY TO BORROW ADDITIONAL FUNDS

           Our credit facility  requires us to maintain  compliance with various
financial  covenants.  Our  ability to meet those  covenants  can be affected by
events  beyond  our  control,  and  therefore  we may be  unable  to meet  those
covenants.  As described  above,  Perfumania was not in compliance  with certain
financial  covenants  as of January  31,  2004.  If our actual  results  deviate
significantly  from  our  projections,  we may  not be in  compliance  with  the
covenants  and might not be allowed to borrow under the credit  facility.  If we
were not able to borrow  under our  credit  facility,  we would be  required  to
develop an alternative  source of liquidity,  or to sell  additional  securities
which would result in dilution to existing  stockholders.  We cannot assure that
we could obtain  replacement  credit  facilities  on favorable  terms or at all.
Without a source of financing, we could experience cash flow difficulties.

CONSUMERS  HAVE  REDUCED  DISCRETIONARY  PURCHASES  OF OUR  PRODUCTS,  WHICH HAS
INCREASED OUR NET LOSS

           Sales levels at  Perfumania's  retail stores were adversely  affected
during fiscal year 2003 by an economic downturn in the United States, the war in
Iraq and  disruption  in our  inventory  supplies due to the  relocation  of our
distribution  facility.  Due to higher unemployment and stagnant business growth
rates,  consumer  spending in general and  especially  on  discretionary  items,
declined.  Sales from our retail stores  decreased from  $199,369,000 for fiscal
year 2002 to  $198,479,000  for fiscal year 2003 and our net loss  increased  to
$(5.24)  per share for fiscal  year 2003 from  $(1.12) per share for fiscal year
2002.  We may  continue  to  experience  declines  in sales  as a result  of the
economic downturn, or in the event of terrorism or diseases affecting customers'
purchasing  patterns.   Future  economic  downturns  may  adversely  impact  our
business, the results of our operations and our liquidity.

PERFUMANIA 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.

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 fourth fiscal  quarter than in the first three
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. 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. 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.


                                     - 8 -
<PAGE>

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. If Perfumania is unable to
obtain  merchandise  from  one or  more  key  suppliers  on a  timely  basis  or
acceptable  terms, or if there is a material  change in Perfumania's  ability to
obtain  necessary  merchandise,  our results of  operations  could be  seriously
harmed.

PERFUMANIA  PURCHASES  MERCHANDISE  FROM  PARTIES  RELATED TO OUR  FORMER  CHIEF
EXECUTIVE  OFFICER  AND ONE OF OUR  PRINCIPAL  SHAREHOLDERS,  WHICH  MAY CAUSE A
CONFLICT OF INTEREST

           Approximately  30%  and  19%,  respectively,  of  Perfumania's  total
merchandise  purchased in fiscal years 2003 and 2002 were from affiliates of our
former  Chief  Executive  Officer.  In addition,  in fiscal  2003,  we purchased
approximately   $5.6  million  of   merchandise   from  Quality  King  and  sold
approximately  $11.4  million of  different  merchandise  to Quality  King.  The
Nussdorfs  are officers and  principals  of Quality  King.  While we believe the
terms of these  purchases  and sales are more  favorable to us than the terms of
third  party  arrangements,  there may be a conflict  of  interest  between  our
interest in purchasing or selling merchandise at the best price and those of our
principal  shareholders and former officer in obtaining the best price for their
respective companies.

PERFUMANIA NEEDS TO SUCCESSFULLY MANAGE ITS GROWTH

           Perfumania  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  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.  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.

OUR STOCK PRICE VOLATILITY  COULD RESULT IN SECURITIES CLASS ACTION  LITIGATION,
SUBSTANTIAL COST, AND DIVERSION OF MANAGEMENT'S ATTENTION

           The price of our common stock has been and likely will continue to be
subject to wide fluctuations in response to a number of events, such as:

               o    quarterly variations in operating results;

               o    acquisitions,  capital commitments of strategic alliances by
                    us or our competitors;

               o    legal   regulatory   matters  that  are  applicable  to  our
                    business;

               o    the  operating  and  stock  prices   performance   of  other
                    companies that investors may deem comparable to us; and

               o    news reports relating to trends in our markets.

           In addition, the stock market in general has experienced  significant
price and volume  fluctuations that often have been unrelated to the performance
of specific  companies.  The broad market  fluctuations may adversely affect the
market price of our common stock,  regardless of our operating performance.  Our
stock price  volatility  could  result in class  action  litigation  which would
require  substantial  monetary  cost to  defend,  as well  as the  diversion  of
management  attention from day-to-day  activities which could negatively  affect
operating performance.  Such litigation could also have a negative impact on the
price  of our  common  stock  due  to the  uncertainty  and  negative  publicity
associated with litigation.

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



                                     - 9 -
<PAGE>

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 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 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.  These factors, as well as demographic trends, economic conditions and
discount   pricing   strategies  by  competitors,   could  result  in  increased
competition  and could  have a  material  adverse  effect on our  profitability,
operating cash flow, and many other aspects of our business,  prospects, results
of operations and financial condition.

THE LOSS OF OR DISRUPTION  IN OUR  DISTRIBUTION  FACILITY  COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR SALES

           We  currently  have one  distribution  facility,  which is located in
Sunrise,  Florida.  The loss of, or any damage to this facility,  as well as the
inventory stored therein,  would require us to find  replacement  facilities and
assets.  In  addition,  weather  conditions,  such as natural  disasters,  could
disrupt our  distribution  operations.  If we cannot  replace  our  distribution
capacity and inventory in a timely,  cost-efficient  manner, it could reduce the
inventory we have available for sale,  adversely affecting our profitability and
operating cash flows.

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:

           o   difficulty  integrating acquired  technologies,  operations,  and
               personnel with our existing business;

           o   diversion  of  management's  attention  in  connection  with both
               negotiating the acquisitions and integrating the assets;

           o   the need for additional financing;

           o   strain on  managerial  and  operational  resources as  management
               tries to oversee larger operations; and

           o    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.

ITEM 2.        PROPERTIES

           We  relocated  our  executive  offices and  distribution  center to a
179,000  square foot facility in Sunrise,  Florida in July 2003. The facility is
leased through  December 2017 pursuant to a lease which  currently  provides for
monthly rent of approximately $82,000 with specified increases.

           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,  real  estate  taxes  and  certain  other  costs.  Some  of
Perfumania's  leases permit the  termination  of the lease if specified  minimum
sales levels are not met. See Note 11 to our Consolidated  Financial  Statements
included in Item 8 hereof, for additional  information with respect to our store
leases.

ITEM 3.        LEGAL PROCEEDINGS

           We are  involved  in legal  proceedings  in the  ordinary  course  of
business.  Management  cannot  presently  predict the outcome of these  matters,
although  management  believes  that the ultimate  resolution  of these  matters
should not have a materially  adverse effect on our financial position or result
of operations.

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

           On December 12, 2003, we held our annual meeting of shareholders.  At
the annual meeting, the shareholders  elected Ilia Lekach,  Donovan Chin, Carole
Ann Taylor,  Joseph  Bouhadana,  Miles Raper,  and Daniel Bengio to the Board of
Directors.  In addition, the shareholders ratified the appointment of Deloitte &
Touche LLP as our independent auditors. The following table reflects the results
of the meeting:



                                     - 10 -
<PAGE>

ELECTION OF DIRECTORS:
---------------------

<TABLE>
<CAPTION>
                                          SHARES       SHARES VOTED          SHARES VOTED          ABSTAIN/
           TOTAL                          VOTED             FOR                 AGAINST            WITHHELD         NON-VOTES
----------------------------              -----      -----------------   -------------------       --------         ---------

<S>                                     <C>              <C>                     <C>                <C>               <C>
Ilia Lekach                             2,316,120        2,287,582               --                 28,538            93,211

Donovan Chin                            2,316,120        2,278,782               --                 37,338            93,211

Carole Ann Taylor                       2,316,120        2,308,646               --                  7,474            93,211

Daniel Bengio                           2,316,120        2,314,396               --                  1,724            93,211

Joseph Bouhadana                        2,316,120        2,308,596               --                  7,524            93,211

Miles Raper                             2,316,120        2,314,446               --                  1,674            93,211

RATIFICATION OF AUDITORS:
------------------------

                                          SHARES       SHARES VOTED          SHARES VOTED          ABSTAIN/
           TOTAL                          VOTED             FOR                 AGAINST            WITHHELD         NON-VOTES
----------------------------              -----      -----------------   -------------------       --------         ---------

Ratify Appointment of Deloitte &        2,316,120       2,314,030                2,090                --              93,211
Touche LLP
</TABLE>

           On February 6, 2004,  Miles  Raper,  Donovan  Chin and Daniel  Bengio
resigned as members of the Company's Board of Directors,  and Stephen  Nussdorf,
Paul  Garfinkle  and  Michael  W. Katz were  elected to the  Company's  Board of
Directors. Effective February 10, 2004, Mr. Lekach's employment with the Company
was  terminated  and Mr. Lekach ceased serving as an employee and officer of the
Company.  In addition,  on February 10, 2004, Mr. Lekach resigned from the Board
of Directors and Stephen L. Nussdorf was appointed the Company's Chairman of the
Board and Michael W. Katz was appointed the Company's  Chief  Executive  Officer
and President.

                                    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.

        FISCAL 2003                      HIGH                     LOW
----------------------------     --------------------     --------------------

First Quarter                            $5.00                    $2.61
Second Quarter                           12.00                     2.60
Third Quarter                            15.69                     9.92
Fourth Quarter                           15.50                    11.00

        FISCAL 2002                      HIGH                     LOW
----------------------------     --------------------     --------------------

First Quarter                            $3.32                    $2.00
Second Quarter                            5.45                     2.40
Third Quarter                             5.50                     3.80
Fourth Quarter                            4.25                     3.69

           As of April 27, 2004, there were 66 holders of record, which excluded
common stock held in street name.  The closing  sales price for the common stock
on April 27, 2004 was $11.50 per share.


                                     - 11 -
<PAGE>

REVERSE STOCK-SPLIT

           Our Board of Directors  authorized a one-for-four reverse stock-split
of our  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 for
periods  ended  prior to March  20,  2003 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.

EQUITY COMPENSATION PLAN INFORMATION

           The following  table sets forth  information  as of January 31, 2004,
with respect to our  compensation  plans under which our equity  securities  are
authorized for issuance.


<TABLE>
<CAPTION>
                                                                                                    Number of securities remaining
                                    Number of securities to be                                      available for future issuance
                                     issued upon exercise of         Weighted-average exercise     under equity compensation plans
                                   outstanding options, warrants   price of outstanding options,  excluding securities reflected in
                                           and rights                   warrants and rights                 column (a)(1)
                                   -----------------------------   -----------------------------  ---------------------------------
<S>                                           <C>                              <C>                             <C>
 Plan Category:                               (a)                              (b)                             (c)
 Equity compensation plans
    approved by stockholders                   809,238                            $4.99                          156,368
 Equity compensation plans
    not approved by stockholders                    --                               --                               --
                                         --------------                   --------------                  ---------------

 Total                                         809,238                            $4.99                          156,368
                                         ==============                   ==============                  ===============
</TABLE>


     (1)  The number of shares available  under our 2000 Stock Option Plan shall
          automatically  increase each year by 3% of the shares of common  stock
          of the Company outstanding at the end of the immediate preceding year.

ITEM 6.        SELECTED INANCIAL DATA

           The selected  financial  data  presented  below  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 2003 refers to the fiscal year that began
on February 2, 2003 and ended on January 31, 2004.


                                     - 12 -
<PAGE>


<TABLE>
<CAPTION>
                                                                                    FISCAL YEAR ENDED
                                                       ---------------------------------------------------------------------------
                                                         JANUARY 31,     FEBRUARY 1,    FEBRUARY 2,    FEBRUARY 3,    JANUARY 29,
                                                            2004            2003           2002           2001            2000
                                                       ---------------  -------------  -------------  -------------  -------------
                                                                  (IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
<S>                                                      <C>             <C>            <C>            <C>            <C>
STATEMENT OF OPERATIONS DATA:
Net sales, retail division                               $    198,479    $   199,369    $   184,142    $   185,371    $   155,953
Net sales, wholesale division                                  14,089          2,145          9,210         21,199         36,975
                                                       ---------------  -------------  -------------  -------------  -------------
  Total net sales                                             212,568        201,514        193,352        206,570        192,928
                                                       ---------------  -------------  -------------  -------------  -------------
Gross profit, retail division                                  81,923         84,159         78,468         79,218         68,613
Gross profit, wholesale division                                1,454            435          1,767          4,216          7,019
                                                       ---------------  -------------  -------------  -------------  -------------
  Total gross profit                                           83,377         84,594         80,235         83,434         75,632
                                                       ---------------  -------------  -------------  -------------  -------------

Selling, general and administrative expenses                   82,297         76,178         72,918         79,884         71,354
Provision for doubtful accounts                                    --             --             55             55             60
Change of control expenses                                      4,931             --             --             --             --

Provision for receivables from affiliate                           --          1,961             --             --             --
Provision for impairment of assets
  and store closings                                              593            663            727         32,894(1)       3,427
Depreciation and amortization                                   6,103          6,024          6,825          5,819          4,725
                                                       ---------------  -------------  -------------  -------------  -------------
  Total operating expenses                                     93,924         84,826         80,525        108,652         79,566
                                                       ---------------  -------------  -------------  -------------  -------------
Loss from operations                                          (10,547)          (232)          (290)       (25,218)        (3,934)
Other income (expense)
  Interest expense, net                                        (2,153)        (1,883)        (3,095)        33,399(1)      (6,589)
  Share of loss of partially-owned affiliate                       --             --             --         (1,388)        (3,165)
  Gain on sale of affiliate's common stock                         --             --             --          9,999         14,974
  Realized loss on investments                                   (172)          (711)            --         (4,819)             -
  Miscellaneous (expense) income, net                              --             --           (18)             85           (118)
                                                       ---------------  -------------  -------------  -------------  -------------
Income (loss) before income taxes                             (12,872)        (2,826)        (3,403)        (6,120)         1,168
Benefit (provision) for income taxes                               --             --            211             --           (124)
                                                       ---------------  -------------  -------------  -------------  -------------
Net income (loss)                                        $    (12,872)   $    (2,826)   $    (3,192)   $    (6,120)   $     1,044
                                                       ===============  =============  =============  =============  =============
Weighted average shares outstanding:
  Basic                                                     2,454,340      2,528,326      2,420,467      2,360,456      2,054,660
  Diluted                                                   2,454,340      2,528,326      2,420,467      2,360,456      2,566,905

Basic income (loss) per share                            $      (5.24)   $     (1.12)   $     (1.32)   $     (2.59)   $      0.51
Diluted income (loss) per share                          $      (5.24)   $     (1.12)   $     (1.32)   $     (2.59)   $      0.41

SELECTED OPERATING DATA:
Number of stores open at end of period                            232            238            247            257            276%
Comparable store sales increase                                   1.1%          10.2%           2.5%          16.9%          12.9%

BALANCE SHEET DATA:
Working capital (deficiency)                             $     (9,090)   $     1,804    $     2,760    $     7,015    $     8,687
Total assets                                                   92,463        103,423        102,559        107,329        105,656
Long-term debt, less current portion                            7,746          7,752          5,204         11,531          5,032
Total shareholders' equity                                     10,222         21,853         22,603         26,395         30,689
</TABLE>

           (1)  Amounts   reflect  a  revision  of  the   presentation   of  the
perfumania.com acquisition.  The revised presentation increases the gain on sale
of Affiliate's common stock by $23.4 million from $10.0 million to $33.4 million
and reflects a $234 million  provision to reflect an  improvement of goodwill at
the  date of the  Acquisition,  May  10,  2002.  For a  further  discussion  see
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations--Acquisition of perfurmania.com.

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  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:


                                     - 13 -
<PAGE>

                             PERCENTAGE OF NET SALES
<TABLE>
<CAPTION>
                                                                        FISCAL YEAR
                                                            2003           2002          2001
                                                        ------------   ------------  -----------
<S>                                                          <C>            <C>           <C>
Net sales, retail division............................       93.4%          98.9%         95.2%
Net sales, wholesale division.........................        6.6            1.1           4.8
                                                        ---------      ---------     ---------
   Total net sales....................................      100.0          100.0         100.0
                                                        ---------      ---------     ---------
Gross profit, retail division.........................       38.5           41.8          40.6
Gross profit, wholesale division......................        0.7            0.0           0.1
                                                        ---------      ---------     ---------
   Total gross profit.................................       39.2           42.0          41.5
                                                        ---------      ---------     ---------
Selling, general and administrative expenses..........       38.7           37.8          37.7
Change of control expense.............................        2.3            --            --
Provision for impairment of receivable from affiliate         --             1.0           --
Provision  for impairment of assets and
   store closings.....................................        0.3            0.3           0.4
Depreciation and amortization.........................        2.9            3.0           3.5
                                                        ---------      ---------     ---------
   Total operating expenses...........................       44.2           42.1          41.6
                                                        ---------      ---------     ---------
Loss from operations before other expense.............       (5.0)          (0.1)         (0.2)
                                                        ---------      ---------     ---------
Other expense:
   Interest expense, net..............................       (1.0)          (0.9)         (1.6)
   Realized loss on investments.......................       (0.1)          (0.4)          --
Loss before income taxes..............................       (6.0)          (1.4)         (1.8)
Benefit for income taxes..............................                                     0.1
                                                        ---------      ---------     ---------
 Net loss.............................................       (6.1)%         (1.4)%        (1.7)%
                                                        ---------      ---------     ---------
</TABLE>

FORWARD LOOKING STATEMENTS

          Some of the  statements in this Annual Report on Form 10-K,  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 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  and refinance our credit facility on acceptable  terms,
our  ability  to comply  with the  covenants  in our  credit  facility,  general
economic conditions including a continued 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 this
Annual Report on Form 10-K. 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.

CRITICAL ACCOUNTING ESTIMATES

           Our   consolidated   financial   statements  have  been  prepared  in
accordance with accounting principles generally accepted in the United States of
America.  Preparation 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
significant  accounting  policies  can be  found  in Note 2 to the  Consolidated
Financial Statements.

           We  consider  an  accounting  policy to be  critical  if it  requires
significant  judgment  and  estimates  in its  application.  We have  identified
certain  accounting  policies that we consider  critical to our business and our
results of operations  and have provided below  additional  information on those
policies.

INVENTORY ADJUSTMENTS AND RESERVES

           Inventories  are  stated at the lower of cost or  market,  cost being
determined  on a weighted  average  cost  basis.  We review our  inventory  on a
regular basis for excess and  potentially  slow moving  inventory based on prior
sales,   forecasted   demand,   historical   experience  and  through   specific
identification  of  obsolete  or  damaged  merchandise  and we record  inventory
writeoffs in accordance with our expectations.  If there are material changes to
these estimates, additional writeoffs could be necessary.

IMPAIRMENT OF LONG-LIVED ASSETS

           When facts and  circumstances  indicate that the values of long-lived
assets, including intangibles,  may be impaired, an evaluation of recoverability
is performed by comparing the carrying  value of the assets to projected  future
cash flows in addition to other quantitative and qualitative analyses.  Inherent


                                     - 14 -
<PAGE>

in this process is  significant  management  judgment as to the  projected  cash
flows.  Upon  indication  that  the  carrying  value of such  assets  may not be
recoverable,  the Company  recognizes  an  impairment  loss as a charge  against
current  operations.  Cash  flows  for  retail  assets  are  identified  at  the
individual store level.  Judgments are also made as to whether  under-performing
stores  should  be  closed.  Even if a  decision  has been  made not to close an
under-performing  store, the assets at that store may be impaired.  If there are
material  changes to these judgments or estimates,  additional  charges could be
necessary.

COMPARISON OF FISCAL YEARS 2003 AND 2002

REVENUES:

<TABLE>
<CAPTION>
                                                                For the year ended
                   ------------------------------------------------------------------------------------------------------------
                                                                 ($ in thousands)

                                             Percentage of                              Percentage of      Percentage Increase
                     January 31, 2004          Revenues          February 1, 2003          Revenues            (Decrease)
                   --------------------- --------------------  --------------------  -------------------- ---------------------

<S>                             <C>                   <C>                 <C>                     <C>                   <C>
Wholesale                       $14,089                 6.6%                $2,145                  1.1%                556.8%

Retail                          198,479                93.4%               199,369                 98.9%                  (0.4)%
                   --------------------- --------------------  --------------------  -------------------- ---------------------

Total Revenues                 $212,568               100.0%              $201,514                100.0%                  5.5%
                   ===================== ====================  ====================  ==================== =====================
</TABLE>

           Net sales increased due to an increase in wholesale sales,  offset by
a decrease in retail sales. The increase in wholesale sales was due primarily to
$11.4 million of sales made to Quality King.  The Company,  through its supplier
relationships,  is able to  obtain  certain  merchandise  at better  prices  and
quantities  than  Quality  King.   Wholesale  sales  in  2004  are  expected  to
approximate  fiscal  year  levels.  See  Note  5 to our  Consolidated  Financial
Statements included in Item 8, hereof for further  discussion.  Comparable store
sales  measure  the sales from  stores that have been open for one year or more.
Perfumania's comparable store sales increased 1.1% in fiscal year 2003. However,
the average number of stores operated decreased from 242 during fiscal year 2002
to  235  in  fiscal   year  2003   primarily   due  to  the  closure  of  older,
underperforming   stores.  We  believe  that  Perfumania's   retail  sales  were
negatively  impacted  for part of fiscal  year 2003 by the  overall  soft United
States economy,  the war in Iraq and disruption in our inventory supplies due to
the relocation of our distribution facility.

COST OF REVENUES:

<TABLE>
<CAPTION>
                                                  For the year ended
                             ----------------------------------------------------------------
                                                   ($ in thousands)
                                                                        Percentage Increase
                              January 31, 2004     February 1, 2003         (Decrease)
                            --------------------- --------------------  --------------------

<S>                                     <C>                  <C>                    <C>
Wholesale                                $12,635               $1,710                638.9%

Retail                                   116,556              115,210                  1.2%
                            --------------------- --------------------  --------------------

Total cost of Revenues                  $129,191             $116,920                 10.5%
                            ===================== ====================  ====================
</TABLE>

GROSS PROFIT:

<TABLE>
<CAPTION>
                                                  For the year ended
                             ----------------------------------------------------------------
                                                   ($ in thousands)
                                                                        Percentage Increase
                              January 31, 2004     February 1, 2003         (Decrease)
                            --------------------- --------------------  --------------------

<S>                                     <C>                  <C>                     <C>
Wholesale                                 $1,454                 $435                 234.3%

Retail                                    81,923               84,159                  (2.7)%
                            --------------------- --------------------  --------------------

Total gross profit                       $83,377              $84,594                  (1.4)%
                            ===================== ====================  ====================
</TABLE>


                                     - 15 -
<PAGE>

           Gross profit decreased as a result of lower sales and gross profit in
the retail  division  offset by higher sales and gross  profit in the  wholesale
division.

           Gross  profit  for the retail  division  decreased  principally  as a
result of lower retail sales.  Based on a comprehensive  review of the Company's
merchandise offerings conducted by management, approximately 3,400 stock keeping
units ("skus") of our 25,000 skus were identified which we intend to discontinue
offering for sale in Perfumania's  retail stores. We recorded writeoffs totaling
approximately  $2.6  million as of fiscal year end 2003,  which  represents  the
difference  between the estimated  selling value and the historical cost of this
inventory. This writeoff is included in cost of goods sold and accounts for 1.4%
of the decrease in our retail  gross profit as a percentage  of net retail sales
for fiscal year 2003.

           The  increase in gross  profit in the  wholesale  division was due to
higher wholesale sales as discussed above.  Wholesale sales historically yield a
lower gross margin compared to retail sales.

GROSS PROFIT MARGIN PERCENTAGES:


                                         For the year ended
                            --------------------------------------------

                              January 31, 2004     February 1, 2003
                            --------------------- --------------------

Wholesale                                  10.3%                20.3%
Retail                                     41.7%                43.0%

Gross profit margin                        39.2%                42.0%


           The  decrease  in  wholesale   gross  profit  margins  was  primarily
attributable to larger number of units per wholesale  transaction in fiscal 2003
compared to fiscal  2002.  Large unit  orders  yield  lower  margins  than small
orders.

OPERATING EXPENSES:


<TABLE>
<CAPTION>
                                                  For the year ended
                            ----------------------------------------------------------------
                                                   ($ in thousands)
                                                                        Percentage Increase
                              January 31, 2004     February 1, 2003         (Decrease)
                            --------------------- --------------------  --------------------

<S>                                     <C>                  <C>                     <C>
Selling, general and
  administrative                         $82,297              $76,178                   8.0%

Change of control expenses                 4,931                   --                    --

Asset impairment charges                     593                  663                 (10.6)%

Receivable impairment
  charges                                     --                1,961                    --

Depreciation and
  amortization                             6,103                6,024                   1.3%
                            --------------------- --------------------  --------------------

Total operating expenses                 $93,924              $84,826                  10.7%
                            ===================== ====================  ====================
</TABLE>

           The  increase in  selling,  general  and  administrative  expenses is
attributable  primarily to higher  employee  compensation  costs and other store
operating costs.  During fiscal 2003 we also incurred increased expenses for the
relocation of our corporate  headquarters and distribution center as well as the
implementation of new Point of Sale software in our stores.  The majority of our
selling, general and administrative expenses relate to the retail division.

           Change of control  expenses of  approximately  $4.9 million in fiscal
year  2003  represents  expenses  incurred  as a result of the  Nussdorf  Option
Agreement which was entered into effective January 30, 2004 between Ilia Lekach,
our then  Chairman  of the Board and Chief  Executive  Officer,  IZJD Corp.  and
Pacific  Investment Group Inc., each of which are wholly-owned by Mr. Lekach and
Deborah Lekach, Mr. Lekach's wife, and Stephen and Glenn Nussdorf. Approximately
$2.6  million  of  these  expenses  represent  amounts  paid to  certain  of our
executive  officers  and a  consultant  pursuant to  employment  and  consulting
agreements and approximately $2.3 million represents a non-cash charge for stock

                                     - 16 -
<PAGE>

option  expenses,   also  relating  to  these  same  employment  and  consulting
agreements. See further discussion in Item 1 and also Note 5 to our Consolidated
Financial Statements in Item 8, hereof.

           The asset  impairment  charges in both fiscal  years relate to retail
store locations with negative cash flows that were either closed or are targeted
for closure.

           The provision  for receivables  during  fiscal year  2002  relates to
an affiliate  receivable  which management  determined was not collectible.  See
further discussion at Note 5 of the Notes to Consolidated Financial Statements.

LOSS FROM  OPERATIONS:

<TABLE>
<CAPTION>
                                                  For the year ended
                            ----------------------------------------------------------------
                                                   ($ in thousands)

                              January 31, 2004     February 1, 2003     Percentage Increase
                            --------------------- --------------------  --------------------

<S>                                      <C>                     <C>                <C>
Loss from operations                     $10,547                 $232               4446.1%
</TABLE>

OTHER EXPENSE:

<TABLE>
<CAPTION>
                                                  For the year ended
                            ----------------------------------------------------------------
                                                   ($ in thousands)
                                                                        Percentage Increase
                              January 31, 2004     February 1, 2003         (Decrease)
                            --------------------- --------------------  --------------------

<S>                                       <C>                  <C>                    <C>
Interest expense                          $2,179               $2,072                  5.2%

Loss on investments                          172                  711                 (75.8)%
                            --------------------- --------------------  --------------------

Total other expense                       $2,351               $2,783                 (15.5)%
                            ===================== ====================  ====================
</TABLE>

           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 year 2003.

           The  realized  loss on  investments  in fiscal year 2002 was due to a
decline in the market prices on  securities  available for sale that resulted in
the Company  recording a non-cash  charge.  During  fiscal year 2003 the Company
recorded a loss from the sale of these same investments.  See further discussion
at Note 9 of the Notes to Consolidated Financial Statements.

NET LOSS:

<TABLE>
<CAPTION>
                                                  For the year ended
                             ----------------------------------------------------------------
                                                   ($ in thousands)

                              January 31, 2004     February 1, 2003     Percentage Increase
                            --------------------- --------------------  --------------------

<S>                                      <C>                   <C>                   <C>
Net Loss                                 $12,872               $2,826                355.5%
</TABLE>

           Due to the above  reasons  our net loss was  increased  as  indicated
above.


                                     - 17 -
<PAGE>

COMPARISON OF FISCAL YEARS 2002 AND 2001

REVENUES:

<TABLE>
<CAPTION>
                                                                           For the year ended
                                     --------------------------------------------------------------------------------------------
                                                                            ($ in thousands)

                                                          Percentage of                        Percentage of   Percentage Increase
                                     February 1, 2003        Revenues      February 2, 2002      Revenues          (Decrease)
                                     -----------------  ----------------- ------------------ ----------------- -------------------

<S>                                          <C>                  <C>              <C>                 <C>                 <C>
Wholesale                                      $2,145               1.1%             $9,210              4.7%              (76.7)%

Retail                                        199,369              98.9%            184,142             95.3%                8.3%
                                     -----------------  ----------------- ------------------ ----------------- -------------------

Total Revenues                               $201,514             100.0%           $193,352            100.0%                4.2%
                                     =================  ================= ================== ================= ===================
</TABLE>

           The  increase  in net  sales  during  fiscal  year 2002 was due to an
increase in retail sales offset by a decrease in wholesale  sales.  The increase
in sales was principally due to a 10.2% increase in comparable  store sales. The
average number of stores operated  decreased from 250 during fiscal year 2001 to
242 in fiscal year 2002. The increase in Perfumania's comparable store sales was
due to an improved  merchandise  assortment and product promotions at our retail
stores.  The decrease in  wholesale  sales was due to  management's  decision to
concentrate on the more profitable retail operations.
COST OF REVENUES:


<TABLE>
<CAPTION>
                                                  For the year ended
                             ----------------------------------------------------------------
                                                   ($ in thousands)
                                                                        Percentage Increase
                               February 1, 2003     February 2, 2002         (Decrease)
                            --------------------- --------------------  --------------------

<S>                                     <C>                <C>                   <C>
Wholesale                                 $1,710             $7,443              (77.0)%

Retail                                   115,210            105,674               8.6%
                            --------------------- --------------------  --------------------

Total cost of Revenues                  $116,920           $113,117               3.4%
                            ===================== ====================  ====================
</TABLE>

GROSS PROFIT:

<TABLE>
<CAPTION>
                                                  For the year ended
                            ----------------------------------------------------------------
                                                   ($ in thousands)
                                                                        Percentage Increase
                               February 1, 2003     February 2, 2002         (Decrease)
                            --------------------- --------------------  --------------------

<S>                                     <C>                <C>                  <C>
Wholesale                                  $435             $1,767              (75.4)%

Retail                                   84,159             78,468                7.3%
                            --------------------- --------------------  --------------------

Total gross profit                      $84,594            $80,235                5.4%
                            ===================== ====================  ====================
</TABLE>

           Gross  profit  increased as a result of higher sales and gross profit
in the retail  division  offset by lower sales and gross profit in the wholesale
division. Gross profit for the retail division increased principally as a result
of higher retail sales volume. Gross profit for the wholesale division decreased
due to lower wholesale sales.  Wholesale sales  historically yield a lower gross
margin compared to retail sales.


                                     - 18 -
<PAGE>

GROSS PROFIT MARGIN PERCENTAGES:

                                         For the year ended
                            --------------------------------------------

                               February 1, 2003     February 2, 2002
                            --------------------- --------------------


Wholesale                                20.3%              19.2%
Retail                                   42.2%              42.6%

Gross profit margin                      42.0%              41.5%

OPERATING EXPENSES:

<TABLE>
<CAPTION>
                                                  For the year ended
                            ----------------------------------------------------------------
                                                   ($ in thousands)
                                                                        Percentage Increase
                               February 1, 2003     February 2, 2002         (Decrease)
                            --------------------- --------------------  --------------------

<S>                                      <C>                  <C>                   <C>
Selling, general and
  administrative                         $76,178              $72,918                  4.5%

Asset impairment charges                     663                  727                 (8.8)%

Provision for doubtful
  accounts                                    --                   55                   --

Receivable impairment
  charges                                  1,961                   --                   --

Depreciation and
  amortization                             6,024                6,825                (11.7)%
                            --------------------- --------------------  --------------------

Total operating expenses                 $84,826              $80,525                  5.3%
                            ===================== ====================  ====================
</TABLE>

           The  increase in  selling,  general  and  administrative  expenses is
attributable   primarily  to  higher  employee  compensation  costs,   including
incentive  compensation  paid to store personnel due to higher retail sales. The
majority of our  selling,  general  and  administrative  expenses  relate to the
retail division.

           The asset  impairment  charges in both fiscal  years relate to retail
store locations with negative cash flows that were either closed or are targeted
for closure.

           The provision for receivable during fiscal year 2002 relates to
an  affiliate  receivable  from  Nimbus  which  management  determined  was  not
collectible. No comparable receivable impairment was recorded during fiscal year
2001. See further  discussion at Note 5 of the Notes to  Consolidated  Financial
Statements.

           Depreciation and amortization decreased primarily due to the adoption
of SFAS 142 on February 3, 2002,  which  eliminated the amortization of goodwill
and other intangible assets with indefinite useful lives.

LOSS FROM OPERATIONS:

<TABLE>
<CAPTION>
                                                  For the year ended
                            ----------------------------------------------------------------
                                                   ($ in thousands)
                                                                        Percentage Increase
                               February 1, 2003     February 2, 2002         (Decrease)
                            --------------------- --------------------  --------------------

<S>                                      <C>                  <C>                  <C>
Loss from operations                     $232                 $290                 (20.0)%
</TABLE>


                                     - 19 -
<PAGE>

OTHER EXPENSE:

<TABLE>
<CAPTION>
                                                  For the year ended
                            ----------------------------------------------------------------
                                                   ($ in thousands)
                                                                        Percentage Increase
                               February 1, 2003     February 2, 2002         (Decrease)
                            --------------------- --------------------  --------------------

<S>                                     <C>                <C>                 <C>
Interest expense                        $2,072             $3,396              (39.0)%
Loss on investments                        711                 --                 --
Other                                       --                 18                 --
                            --------------------- --------------------  --------------------

                                        $2,783             $3,414              (18.5)%
                            ===================== ====================  ====================
</TABLE>

           The decrease in interest  expense  (net) was  primarily  due to lower
interest rates and a reduction in the outstanding  balance of convertible  notes
payable.

           The  realized  loss on  investments  in fiscal  year 2002 is due to a
decline in the market prices on securities  available for sale which resulted in
the Company recording a non-cash charge. See further discussion at Note 9 of the
Notes to Consolidated Financial Statements.

NET LOSS:

<TABLE>
<CAPTION>
                                                  For the year ended
                            -----------------------------------------------------------------
                                                   ($ in thousands)

                               February 1, 2003     February 2, 2002     Percentage Increase
                            --------------------- --------------------  ---------------------

<S>                                     <C>                <C>                 <C>
Net Loss                                $2,826             $3,192              (11.5)%
</TABLE>

           As a result of the  foregoing  our net loss was reduced as  indicated
above.

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 2003 and 2002, we financed  these  requirements
primarily  through  cash flows  from  operations,  borrowings  under our line of
credit, capital equipment leases and other short-term borrowings.

           A summary of our cash flows is as follows:

                                                     For the year ended
                                                      January 31, 2004
                                                    ----------------------
                                                      ($ in thousands)

     Summary Cash Flow Information:
     Cash provided by operations                                  $15,073
     Cash used in investing activities                             (5,728)
     Cash used in financing activities                            (10,348)
                                                    ----------------------

          Decrease in cash and cash equivalents                    (1,003)
     Cash and cash equivalents, February 1, 2003                    2,965
                                                    ----------------------
     Cash and cash equivalents, January 31, 2004                   $1,961
                                                    ======================


                                     - 20 -
<PAGE>

           Perfumania's  senior  secured  credit  facility with GMAC  Commercial
Finance LLC ("GMAC")  provides for borrowings of up to $40.0  million,  of which
$30.5 million was  outstanding  and $5.6 million was available as of January 31,
2004, to support 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 January 31, 2004,  the credit  facility bore interest at 4.6%.
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 maintenance of minimum net
worth, and certain key ratios, as defined by the lender. As of January 31, 2004,
Perfumania was not in compliance with its tangible net worth ratio, fixed charge
ratio,  leverage ratio and capital expenditures  limitation.  On April 30, 2004,
Perfumania obtained a waiver from GMAC for all instances of non-compliance as of
January 31, 2004.

           On May 12, 2004, Perfumania 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.

           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 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. Advances will be secured by a first
lien an all assets of Perfumania.

           In March 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.

           In January 2004 we incurred  approximately  $4.9 million in change of
control  expenses  incurred  as a  result  of  the  Nussdorf  Option  Agreement.
Approximately  $2.6 million of these expenses  represent amounts paid to certain
of our executive officers and a consultant pursuant to employment and consulting
agreements and approximately $2.3 million represents a non-cash charge for stock
option  expenses,   also  relating  to  these  same  employment  and  consulting
agreements.

           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 provided that we had the monthly
option to repurchase the then approximate $4.9 million outstanding 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 varied as per a specified redemption schedule.  In the
event that we exercised  our monthly  option,  the note holders were  restricted
from  converting  any part of the  remaining  outstanding  and unpaid  principal
balance of such holder's  notes into our common stock.  During fiscal year 2002,
we repaid approximately $4.2 million to the note-holders.

           In December  2002,  we entered into an Amendment to the February 2002
Convertible  Note  Option  Repurchase  Agreement.   The  Amendment  provided  an
extension  of the  maturity  date of the  Series  C and D  Convertible  Notes to
September 15, 2003 with a monthly  option to repurchase the  approximately  $1.2
million in Notes over the extended  maturity  date.  During  fiscal year 2003 we
repaid the remaining outstanding balance to the note-holders.

           On June 30, 2003 and  September  30, 2002,  Perfumania  signed a $5.0
million and a $3.0  million  subordinated  note  agreement,  respectively,  with
Parlux.  The notes were in  consideration  for the reduction of $5.0 million and
$3.0 million in trade payables due to Parlux in the respective  years. The notes
were due on  February  29,  2004 and  March  31,  2003,  with  various  periodic
principal  payments,  bore interest at prime plus 1% and was subordinated to all
bank  related  indebtedness.  As of January 31, 2004 and  February 1, 2003,  the
outstanding  principal  balance  due on the notes  was  $250,000  and  $100,000,
respectively.  The notes were  repaid in full in  February  2004 and April 2003,
respectively,and in accordance with their terms.

           In fiscal year 2003,  net cash provided by operating  activities  was
approximately  $10.2 million compared with $5.7 million in fiscal year 2002. The
increase in net cash provided by operating  activities was  principally a result
of the net change in our inventories,  accounts  payable to affiliates,  accrued
expenses and other  liabilities.  Due to  management's  comprehensive  review of
certain  skus;  which  the  Company  does not plan to  reorder  and  intends  to
discontinue  offering  for sale,  inventory  purchases  were  delayed  at fiscal
year-end 2003.

                                     - 21 -
<PAGE>

           Net  cash  used in  investing  activities  in  fiscal  year  2003 was
approximately  $5.7  million,  compared  with $1.9 million for fiscal year 2002.
Investing activities generally represent spending for the renovation of existing
stores and new store  openings.  Approximately  $1.1 million of the $5.7 million
used in investing  activities is attributable to the relocation of the Company's
corporate  office  and  distribution  center to  Sunrise,  Florida in the second
quarter of fiscal year 2003.  The balance is due to the opening of 11 new stores
and the  remodel/relocation  of 12 stores.  We intend to focus on  continuing to
improve the  profitability  of our existing  stores and anticipate  that we will
open no more than 15  stores in fiscal  2004.  Currently,  our  average  capital
expenditure for opening a store is approximately  $160,000,  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 fourth quarter.

           In fiscal  year  2003,  net cash  used in  financing  activities  was
approximately  $5.5 million compared with $2.4 million for fiscal year 2002. The
change was  principally  due to the use of $1.5  million  to redeem  convertible
notes  payable,  $1.1 million for capital lease  obligations,  net repayments of
bank  borrowings  of $1.6  million and $1.5  million for the  repurchase  of our
common stock (see further discussion below).

           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, in February 2002, the Board
approved an increase in the stock  repurchase  program by an additional  250,000
shares and in April 2002, the Board approved an increase in the stock repurchase
program by an additional 100,000 shares.  Pursuant to these  authorizations,  we
have repurchased  approximately 898,000 shares of common stock for approximately
$8.6 million since December  1999,  including  approximately  118,000 shares for
$1.5 million in fiscal year 2003.

           Management  believes that  Perfumania's new borrowing  capacity under
the credit  facility,  projected cash flows from operations and other short term
borrowings  will be sufficient  to support our working  capital  needs,  capital
expenditures and debt service for at least the next twelve months.  There can be
no assurance that management's plans and expectations will be successful.

<TABLE>
<CAPTION>
                                                                  Payments due by period
                                              ------------------------------------------------------------------
                                                                      ($ in thousands)

                                                           less than 1                              more than 5
Contractual Obligations                          Total        years        1-3 years    3-5 years      years
--------------------------------------------  ------------ ------------- ------------ ------------- ------------
<S>                                               <C>              <C>        <C>           <C>         <C>
Long-Term Debt Obligations                             --            --           --            --           --
Capital Lease Obligations                         $17,567          $259       $3,087        $2,153      $12,068
Operating Lease Obligations                        60,729        12,021       19,046        10,827       18,835
Purchase Obligations                                   --            --           --            --           --
Other Long-Term Liabilities Reflected on the
   Registrant's Balance Sheet under GAAP               --            --           --            --           --
                                              ------------ ------------- ------------ ------------- ------------

Total                                             $78,296       $12,280      $22,133       $12,980      $30,903
                                              ============ ============= ============ ============= ============
</TABLE>

SEASONALITY AND QUARTERLY RESULTS

           Our operations  historically have been seasonal, with higher sales in
the fourth fiscal  quarter than the other three fiscal  quarters.  Significantly
higher fourth quarter retail sales result from increased purchases of fragrances
as gift items during the 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.  Results of any interim
period are not necessarily indicative of the results that may be expected during
a full fiscal year.

RECENT ACCOUNTING STANDARDS

           In May 2003, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial  Accounting  Standards ("SFAS") No. 150,  "Accounting for
Certain  Financial  Instruments  and  Characteristics  of both  Liabilities  and
Equity." This statement  established  standards for how an issuer classifies and
measures certain financial  instruments with characteristics of both liabilities
and equity.  It requires that an issuer classify a financial  instrument that is
within its scope as a liability (or asset in some  circumstance).  Many of those
instruments were previously classified as equity. The statement is effective for
financial instruments entered into or modified after May 31, 2003, and otherwise
is  effective at the  beginning  of the first  interim  period  beginning  after
December 15, 2003.  The adoption of SFAS No. 150 did not have a material  impact
on our consolidated financial position, results of operations or disclosures.

                                     - 22 -
<PAGE>

           In April 2003, the FASB issued SFAS No. 149,  "Amendment of Statement
133 on Derivative and Hedging Activities." In general, this statement amends and
clarifies  accounting for derivative  instruments,  including certain derivative
instruments  embedded in other contracts,  and for hedging activities under SFAS
No. 133.  This  statement is effective  for  contracts  entered into or modified
after June 30, 2003,  and for hedging  relationships  designated  after June 30,
2003.  The  adoption  of SFAS No.  149 did not  have a  material  impact  on our
consolidated financial position, results of operations or disclosures.

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.

ITEM 7A.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

           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 January 31, 2004 and February 1, 2003,
our  primary  source of funds for  working  capital and other needs is a line of
credit that provides for borrowings up to $40 million.

           Of the $38.7 million and $42.1  million of  short-term  and long-term
borrowings  on our balance  sheet as of January  31, 2004 and  February 1, 2003,
respectively,  approximately  20.7% and 23.7%,  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. For fiscal year 2003, the credit  facility
bore  interest at an average  rate of 3.9%. A  hypothetical  10% adverse move in
interest  rates would  increase  fiscal years 2003 and 2002 interest  expense by
approximately $0.1 million in both years.

ITEM 8.        FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

<TABLE>
<CAPTION>
                                                                                            PAGE
                                                                                            ----
<S>                                                                                           <C>
    E Com Ventures, Inc. and Subsidiaries

    Independent Auditors' Report........................................................      24

    Consolidated Balance Sheets as of January 31, 2004 and February 1, 2003.............      25

    Consolidated Statements of Operations for the Fiscal Years Ended January 31, 2004,
    February 1, 2003 and February 2, 2002...............................................      26

    Consolidated Statements of Changes in Shareholders' Equity for the Fiscal Years
    Ended January 31, 2004, February 1, 2003, and February 2, 2002......................      27

    Consolidated Statements of Cash Flows for the Fiscal Years Ended January 31, 2004,
    February 1, 2003, and February 2, 2002..............................................      28

    Notes to Consolidated Financial Statements..........................................      29

    Schedule II - Valuation and Qualifying Accounts and Reserves........................      43
</TABLE>


                                     - 23 -
<PAGE>

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 January 31, 2004 and February 1,
2003,  and  the  related  consolidated  statements  of  operations,  changes  in
shareholders'  equity and cash  flows for each of the three  years in the period
ended January 31, 2004. 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 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 January  31, 2004 and  February 1, 2003,  and the results of
their  operations and their cash flows for each of the three years in the period
ended January 31, 2004,  in  conformity  with  accounting  principles  generally
accepted in the United States of America.


/s/ DELOITTE & TOUCHE LLP
Certified Public Accountants

Miami, Florida
April 30, 2004,  except for the fourth paragraph of Note 6,
as to which the date is May 12, 2004.

                                     - 24 -
<PAGE>

                      E COM VENTURES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
ASSETS:                                                        JANUARY 31, 2004             FEBRUARY 1, 2003
                                                          ---------------------------    ------------------------
<S>                                                              <C>                           <C>
Current assets:
Cash and cash equivalents                                        $         1,961,310           $       2,964,645
Trade receivables, net                                                       777,186                     744,456
Advances to suppliers                                                        114,041                   1,814,935
Inventories                                                               60,877,451                  68,717,163
Prepaid expenses and other current assets                                  1,347,452                   1,169,524
Notes and interest receivable from shareholder and
  officer                                                                    327,311                          --
Investments available for sale                                                    --                     210,607
                                                          ---------------------------    ------------------------
  Total current assets                                                    65,404,751                  75,621,330

Property and equipment, net                                               24,414,624                  24,556,691
Goodwill                                                                   1,904,448                   1,904,448
Other assets, net                                                            739,575                   1,340,155
                                                          ---------------------------    ------------------------
  Total assets                                                   $        92,463,398          $      103,422,624
                                                          ===========================    ========================

LIABILITIES AND SHAREHOLDERS' EQUITY:

Current liabilities:
Bank line of credit                                              $        30,472,027           $      32,081,831
Current portion of long-term debt                                                 --                      31,860
Accounts payable, non-affiliates                                          16,459,786                  20,905,826
Accounts payable, affiliates                                              17,440,492                  13,331,718
Accrued expenses and other liabilities                                     9,614,287                   5,168,634
Subordinated note payable, affiliate                                         250,000                     100,000
Current portion of obligations under capital leases                          258,700                     981,784
Convertible notes payable                                                         --                   1,215,215
                                                          ---------------------------    ------------------------
  Total current liabilites                                                74,495,292                  73,816,868


Long-term portion of obligations under capital leases                      7,746,262                   7,752,315
                                                          ---------------------------    ------------------------
  Total liabilities                                                       82,241,554                  81,569,183
                                                          ---------------------------    ------------------------

Commitments and contingencies (See Note 11)

Shareholders' equity:
Preferred stock, $0.10 par value, 1,000,000
   shares authorized, none issued                                                 --                          --
Common stock, $.01 par value, 6,250,000 shares
   authorized; 3,285,758 and 3,215,761 shares issued
   in fiscal years 2003 and 2002, respectively                                32,858                      32,158
Additional paid-in capital                                                73,666,193                  71,387,794
Treasury stock, at cost, 898,249 and 779,952 shares
   in fiscal years 2003 and 2002, respectively                            (8,576,944)                 (7,085,940)
Accumulated deficit                                                      (54,900,263)                (42,028,563)
Notes and interest receivable from shareholder and
   officer                                                                        --                    (311,604)
Accumulated other comprehensive loss                                              --                    (140,404)
                                                          ---------------------------    ------------------------

  Total shareholders' equity                                              10,221,844                  21,853,441
                                                          ---------------------------    ------------------------
  Total liabilities and shareholders' equity                     $        92,463,398          $      103,422,624
                                                          ===========================    ========================
</TABLE>

          See accompanying notes to consolidated financial statements.

                                     - 25 -
<PAGE>

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

<TABLE>
<CAPTION>
                                                           FOR THE FISCAL YEARS ENDED
                                            ---------------------------------------------------------
                                              JANUARY 31,          FEBRUARY 1,          FEBRUARY 2,
                                                 2004                 2003                 2002
                                            ----------------    -----------------    ----------------
<S>                                          <C>                  <C>                 <C>
Net sales                                    $  212,567,569       $  201,513,897      $  193,351,611

Cost of goods sold                              129,190,549          116,919,385         113,116,861
                                            ----------------    -----------------    ----------------
Gross profit
                                                 83,377,020           84,594,512          80,234,750
                                            ----------------    -----------------    ----------------

Operating expenses:
  Selling, general and administrative
expenses                                         82,297,031           76,177,549          72,972,938
  Change of control expenses                      4,931,221                   --                  --
  Provision for receivables
      from an affiliate                                  --            1,961,355                  --
  Provision for impairment of
      assets and store closings                     593,109              663,391             727,001
  Depreciation and amortization                   6,102,823            6,024,400           6,824,861
                                            ----------------    -----------------    ----------------
    Total operating expenses
                                                 93,924,184           84,826,695          80,524,800
                                            ----------------    -----------------    ----------------

Loss from operations                            (10,547,164)            (232,183)           (290,050)
                                            ----------------    -----------------    ----------------

Other income (expense):
  Interest expense:
    Affiliates                                     (109,217)             (43,049)           (102,269)
    Other                                        (2,070,034)          (2,029,290)         (3,293,929)
                                            ----------------    -----------------    ----------------

                                                 (2,179,251)          (2,072,339)         (3,396,198)
                                            ----------------    -----------------    ----------------
  Interest income:
    Affiliates                                       15,707              173,526             272,944
    Other                                            10,687               16,176              28,065
                                            ----------------    -----------------    ----------------
                                                     26,394              189,702             301,009
                                            ----------------    -----------------    ----------------

  Realized loss on investments                     (171,679)            (710,880)                 --
  Miscellaneous expense, net                             --                   --             (17,716)
                                            ----------------    -----------------    ----------------
    Total other expense                            (171,679)            (710,880)            (17,716)
                                            ----------------    -----------------    ----------------

Loss before income taxes                        (12,871,700)          (2,825,700)         (3,402,955)
Benefit for income taxes                                 --                   --             211,298
                                            ----------------    -----------------    ----------------
    Net loss                                 $  (12,871,700)      $   (2,825,700)     $   (3,191,657)
                                            ================    =================    ================

Basic loss per common share                  $        (5.24)      $        (1.12)     $        (1.32)
                                            ================    =================    ================
Diluted loss per common share                $        (5.24)      $        (1.12)     $        (1.32)
                                            ================    =================    ================

Weighted average number of shares outstanding:
  Basic                                           2,454,340            2,528,326           2,420,467
                                            ================    =================    ================
  Diluted                                         2,454,340            2,528,326           2,420,467
                                            ================    =================    ================
</TABLE>

         See accompanying notes to consolidated financial statements.


                                     - 26 -
<PAGE>

                      E COM VENTURES, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
        FOR THE FISCAL YEARS ENDED JANUARY 31, 2004, FEBRUARY 1, 2003 AND
                                FEBRUARY 2, 2002

<TABLE>
<CAPTION>
                                                                                                   ACCUMULATED
                                 COMMON STOCK          ADDITIONAL          TREASURY STOCK            OTHER
                             ---------------------      PAID-IN       -----------------------    COMPREHENSIVE     ACCUMULATED
                              SHARES       AMOUNT       CAPITAL       SHARES        AMOUNT        INCOME (LOSS)       DEFICIT
                             ----------    -------    ------------    --------    -----------    --------------    -------------
<S>                          <C>           <C>        <C>             <C>        <C>               <C>           <C>
  Balance at February 3,
    2001                     2,930,570     $29,306    $72,014,273     408,632    $(5,643,377)      $(150,095)    $(36,011,206)

  Components of
  comprehensive loss:
    Net loss                        --         --              --          --             --              --       (3,191,657)
    Unrealized gain
      on investments                --         --              --          --             --         391,429               --

    Total comprehensive
      loss                          --         --              --          --             --              --               --

  Exercise of stock options      4,750         48           9,452          --             --              --               --
  Purchase of treasury
  stock                             --         --              --     358,170     (1,395,261)             --               --
  Conversion of debt and
    accrued interest to
    common stock                44,985        449         115,009          --             --              --               --
  Net change in notes and
    interest receivable
    from shareholder
    and officer                     --         --              --          --             --              --               --
  Premium repayment of
    convertible notes
    payable                         --         --        (683,333)         --             --              --               --
                             ----------    -------    ------------    --------   ------------     -----------    -------------


  Balance at February 2,
    2002                     2,980,305     29,803      71,455,401     766,802     (7,038,638)        241,334      (39,202,863)


  Components of
   comprehensive loss:
    Net loss                        --         --              --          --             --              --       (2,825,700)
    Unrealized loss
      on investments                --         --              --          --             --        (381,738)              --

    Total comprehensive
      loss                          --         --              --          --             --              --               --


  Exercise of stock options     59,808        598         112,949          --             --              --               --
  Purchase of treasury
  stock                             --         --              --      13,150        (47,302)             --               --
  Conversion of debt and
    accrued interest to
    common stock               175,648      1,757         515,277          --             --              --               --
  Net change in notes and
    interest receivable
    from shareholder
    and officer                     --         --              --          --             --              --               --
  Premium repayment of
    convertible notes
    payable                         --         --        (695,833)         --             --              --               --
                             ----------    -------    ------------    --------   ------------     -----------    -------------

  Balance at February 1,
    2003                     3,215,761     32,158      71,387,794     779,952     (7,085,940)       (140,404)     (42,028,563)

  Components of
    comprehensive loss:
    Net loss                        --         --              --          --             --              --      (12,871,700)
    Unrealized gain
      on investments                --         --              --          --             --         140,404               --

    Total comprehensive
      loss                          --         --              --          --             --              --               --

  Exercise of stock options     69,997        700         235,805          --             --              --               --
  Purchase of treasury
    stock                           --         --              --     118,297     (1,491,004)             --               --

  Stock compensation                --         --       2,285,640          --             --              --               --
  Net change in notes and
    interest receivable
    from shareholder and
    officer                         --         --              --          --             --              --               --
  Premium repayment of
    convertible notes
    payable                         --         --        (243,046)         --             --              --               --
                             ----------    -------    ------------    --------   ------------     -----------    -------------

  Balance at January 31,
  2004                        3,285,758    $32,858    $ 73,666,193     898,249   $(8,576,944)             --      (54,900,263)
                             ==========    =======    ============    ========   ============     ===========    =============
</TABLE>


                                   NOTES AND
                                   INTEREST
                                   RECEIVABLE
                                     FROM
                                  SHAREHOLDERS
                                  AND OFFICERS       TOTAL
                               -----------------  -------------
  Balance at February 3,
    2001                          $(3,844,278)    $ 26,394,623
                                                  -------------
  Components of
  comprehensive loss:
    Net loss                               --       (3,191,657)
    Unrealized gain
      on investments                       --          391,429
                                                  -------------
    Total comprehensive
      loss                                 --       (2,800,228)
                                                  -------------
  Exercise of stock options                --            9,500
  Purchase of treasury
  stock                                    --       (1,395,261)
  Conversion of debt and
    accrued interest to
    common stock                           --          115,458
  Net change in notes and
    interest receivable
    from shareholder
    and officer                       962,654          962,654
  Premium repayment of
    convertible notes
    payable                                --         (683,333)
                             -----------------    -------------


  Balance at February 2,
    2002                           (2,881,624)      22,603,413
                                                  -------------

  Components of
   comprehensive loss:
    Net loss                               --       (2,825,700)
    Unrealized loss
      on investments                       --         (381,738)
                                                  -------------
    Total comprehensive
      loss                                 --       (3,207,438)
                                                  -------------

  Exercise of stock options                --          113,547
  Purchase of treasury
  stock                                    --          (47,302)
  Conversion of debt and
    accrued interest to
    common stock                           --          517,034
  Net change in notes and
    interest receivable
    from shareholder
    and officer                     2,570,020        2,570,020
  Premium repayment of
    convertible notes
    payable                                --         (695,833)
                             -----------------    -------------

  Balance at February 1,
    2003                             (311,604)      21,853,441

  Components of
    comprehensive loss:
    Net loss                               --      (12,871,700)
    Unrealized gain
      on investments                       --          140,404
                                                  -------------
    Total comprehensive
      loss                                 --      (12,731,296)
                                                  -------------
  Exercise of stock options                --          236,505
  Purchase of treasury
    stock                                  --       (1,491,004)

  Stock compensation                       --        2,285,640
  Net change in notes and
    interest receivable
    from shareholder and
    officer                           311,604          311,604
  Premium repayment of
    convertible notes
    payable                                --         (243,046)
                             -----------------    -------------

  Balance at January 31,
  2004                            $        --     $ 10,221,844
                             =================    =============


                                     - 27 -
<PAGE>

                      E COM VENTURES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                FOR THE FISCAL YEARS ENDED
                                                                ------------------------------------------------------------
                                                                January 31, 2004      February 1, 2003     February 2, 2002
                                                                ------------------    -----------------    -----------------
<S>                                                              <C>                   <C>                   <C>
Cash flows from operating activities:
Net loss                                                         $    (12,871,700)     $    (2,825,700)      $    (3,191,657)
Adjustments to reconcile net loss to net cash
    provided by operating activities:
  Provision for doubtful accounts                                              --                   --                55,000
  Provision for receivables from affiliate                                     --            1,961,355                    --
  Provision for impairment of assets and store closings                   593,109              663,391               727,001
  Write off of investories                                                897,874            1,189,734              1,693,169
  Depreciation and amortization                                         6,102,823            6,024,400             6,824,861
  Writeoff of discontinued inventory                                    2,558,805                   --                    --
  Realized loss on investments                                            171,679              710,880                    --
  Stock compensation                                                    2,285,640                   --                    --
  Change in operating assets and liabilities:
    Trade receivables                                                     (32,730)            (109,215)            1,216,166
    Advances to suppliers                                               1,700,894            1,611,590             2,510,581
    Inventories                                                         5,280,907             (329,593)           (5,885,858)
    Prepaid expenses and other current assets                            (193,635)             166,763             1,515,592
    Due from affiliate                                                         --           (1,150,186)             (659,623)
    Other assets                                                          368,363              216,091               278,757
    Accounts payable, non-affiliate                                    (4,446,040)          (4,593,171)            8,471,392
    Accounts payable, affiliate                                         4,258,774            4,138,159               538,808
    Accrued expenses and other liabilities                              4,445,653             (788,111)             (933,988)
    Income taxes payable                                                       --                   --               (72,707)
                                                                ------------------    -----------------    -----------------
Net cash provided by operating activities                              10,222,542            5,696,653            11,394,325
                                                                ------------------    -----------------    -----------------
Cash flows from investing activities:
  Additions to property and equipment                                  (5,907,018)          (1,893,664)           (1,614,636)
  Proceeds from investments available for sale                            179,332               10,515                    --
                                                                ------------------    -----------------    -----------------
Net cash used in investing activities                                  (5,727,686)          (1,883,149)           (1,614,636)
                                                                ------------------    -----------------    -----------------
Cash flows from financing activities:
  Net borrowings and (repayments) under bank line
    of credit and notes payable                                        (1,641,664)             892,950            (3,954,816)
  Principal payments under capital lease obligations                   (1,143,767)          (1,771,037)           (1,479,795)
  Net advances to shareholders and officers                                    --             (400,000)             (171,000)
  Proceeds from note and interest receivable, shareholder and
    officer                                                                    --            2,970,020              692,702
  Repayments of convertible notes payable                              (1,458,261)          (4,207,824)           (4,100,000)
  Proceeds from exercise of stock options                                 236,505              113,547                9,500
  Purchases of treasury stock                                          (1,491,004)             (47,302)           (1,395,261)
                                                                ------------------    -----------------    -----------------
    Net cash used in financing activities                              (5,498,191)          (2,449,646)          (10,398,670)
                                                                ------------------    -----------------    -----------------
(Decrease) increase in cash and cash equivalents                       (1,003,335)           1,363,858              (618,981)
Cash and cash equivalents at beginning of period                        2,964,645            1,600,787             2,219,768
                                                                ------------------    -----------------    -----------------
Cash and cash equivalents at end of period                         $    1,961,310       $    2,964,645       $    1,600,787
                                                                ==================    =================    =================
</TABLE>

          See accompanying notes to consolidated financial statements.


                                     - 28 -
<PAGE>

                      E COM VENTURES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          FOR THE FISCAL YEARS ENDED JANUARY 31, 2004, FEBRUARY 1, 2003
                              AND FEBRUARY 2, 2002

NOTE 1 - NATURE OF BUSINESS

           E  Com  Ventures,   Inc.,  a  Florida  corporation  ("ECOMV"  or  the
"Company"),   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., a Florida  corporation  which is an Internet  retailer of
fragrances and other specialty items.

           Perfumania  operates under the name Perfumania.  Perfumania's  retail
stores are located in regional malls,  manufacturers' outlet malls, airports and
on a stand-alone basis in suburban strip shopping centers.  The number of retail
stores in operation at January 31, 2004,  February 1, 2003, and February 2, 2002
were 232, 238 and 247, respectively.

           Effective January 30, 2004, Ilia Lekach,  the Company's then Chairman
of the Board and Chief  Executive  Officer,  IZJD Corp.  and Pacific  Investment
Group Inc., each of which are wholly-owned by Mr. Lekach and Deborah Lekach, Mr.
Lekach's  wife  (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 exercisable in specified installments.

           As of April 26,  2004,  Mr.  Lekach has  exercised  stock  options to
acquire  318,750  common  shares   resulting  in  proceeds  to  the  Company  of
approximately  $851,000 and the Nussdorfs have acquired  595,954 shares from Mr.
Lekach pursuant to the Nussdorf Option  Agreement.  Mr. Lekach has stock options
for another  125,000  shares  required to be issued to Mr. Lekach by the Company
pursuant to the terms of his employment agreement as a consequence of the change
of  control.  These  125,000  options  may only be issued by the  Company to Mr.
Lekach upon  approval of an amendment to the  Company's  2000 Stock Option Plan.
Such  an  amendment  was  approved  at  a  special   meeting  of  the  Company's
shareholders on April 29, 2004.  Proceeds to the Company will be $500,000 if Mr.
Lekach  exercises all of the 125,000  options.  Assuming the Nussdorfs  exercise
their option to acquire the  remaining  125,000  shares  subject to the Nussdorf
Option Agreement,  the Nussdorfs would own an aggregate  1,128,144 shares of the
Company's common stock or  approximately  39.7% of the total number of shares of
the Company's common stock as of April 26, 2004.

           Effective February 10, 2004, Mr. Lekach's employment with the Company
was  terminated  and Mr. Lekach ceased serving as an employee and officer of the
Company.  In addition,  on February 10, 2004, Mr. Lekach resigned from the Board
of Directors and Stephen L. Nussdorf was appointed the Companys' Chairman of the
Board and Michael Katz was appointed the Company's Chief  Executive  Officer and
President.

           See further discussion at Note 5.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

           Significant  accounting  principles and practices used by the Company
in the preparation of the accompanying  consolidated financial statements are as
follows:

FISCAL YEAR END

           The Company's  fiscal year ends the Saturday closest to January 31 to
enable the  Company's  operations  to be reported in a manner which more closely
coincides with general retail  reporting  practices and the financial  reporting
needs of the Company. In the accompanying notes, fiscal year 2003, 2002 and 2001
refer to the years ended  January  31,  2004,  February 1, 2003 and  February 2,
2002, respectively.

MANAGEMENT ESTIMATES

           The preparation of financial statements in conformity with accounting
principles   generally  accepted  in  the  United  States  of  America  requires
management to make estimates and assumptions that affect the reported amounts of
assets and  liabilities  and disclosure of contingent  assets and liabilities at
the date of the financial  statements  and the reported  amounts of revenues and
expenses during the reporting  period.  The most  significant  estimates made by
management in the accompanying  consolidated  financial statements relate to the
allowance for doubtful accounts,  inventory  reserves,  self-insured health care
reserves,  long-lived  asset  impairments and estimated useful lives of property
and equipment. Actual results could differ from those estimates.


                                     - 29 -
<PAGE>

PRINCIPLES OF CONSOLIDATION

           The  consolidated  financial  statements  include  accounts  of E Com
Ventures, Inc. and its wholly owned subsidiaries.  All significant  intercompany
balances and transactions have been eliminated in consolidation.

REVENUE RECOGNITION

           Revenue from  wholesale  transactions  is recorded  upon  shipment of
inventory when risk of ownership and title transfers to the buyer.  Revenue from
store sales is recorded net of discounts when the customer pays at the register.
Revenue from  Internet  sales is  recognized at the time products are shipped to
customers.  Customers typically receive Internet product sales within a few days
of being shipped. Returns of store and Internet sales are allowed within 30 days
of  purchase  and are  limited  to  exchanges.  Because  returns  are  primarily
exchanged, there is no significant effect on revenue.

CASH AND CASH EQUIVALENTS

           The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

ADVANCES TO SUPPLIERS

           Advances to  suppliers  represent  prepayments  to vendors on pending
inventory purchase orders.

INVENTORIES

           Inventories, consisting of finished goods, are stated at the lower of
cost or market, cost being determined on a weighted average cost basis. The cost
of inventory includes product cost and freight charges. Writeoffs of potentially
slow moving or damaged inventory are recorded based on management's  analysis of
inventory levels, future sales forecasts and through specific  identification of
obsolete or damaged merchandise. The Company's writeoffs were approximately $3.5
million and $1.2  million for the years ended  January 31, 2004 and  February 1,
2003, respectively.

           Of the Company's  approximately  25,000 stock keeping units ("skus"),
management  has identified  3,400 skus which the Company  intends to discontinue
offering for sale in  Perfumania's  retail stores.  The Company does not plan to
reorder  any of these skus and  intends to sell  through  its  existing  on hand
inventory  of these  skus  during  fiscal  year  2004.  The  total  cost of this
inventory as of January 31, 2004 was approximately $9.4 million. The Company has
recorded  an  income  statement  charge of  approximately  $2.6  million,  which
represents the difference  between the estimated  selling value and the weighted
average cost of this inventory. This charge is included in cost of goods sold on
the  accompanying  consolidated  statement  of  operations  for the year  ending
January 31, 2004.

PROPERTY AND EQUIPMENT

           Property  and  equipment  is  carried  at  cost,   less   accumulated
depreciation   and   amortization.   Depreciation   is   calculated   using  the
straight-line  method over the  estimated  useful  lives of the related  assets.
Leasehold  improvements  are amortized over the shorter of the term of the lease
including  probable  renewal  periods,  or the  estimated  useful  lives  of the
improvements, generally ten years. Costs of major additions and improvements are
capitalized and expenditures for maintenance and repairs which do not extend the
useful life of the asset are expensed  when  incurred.  Gains or losses  arising
from sales or retirements are included in income currently.

GOODWILL

           Goodwill represents the excess purchase price paid over net assets of
businesses  acquired  resulting from the  application of the purchase  method of
accounting.  In accordance  with accounting  rules that became  effective at the
beginning of fiscal year 2002,  goodwill is no longer  amortized,  but is tested
annually for  impairment at the end of the Company's  fiscal year. For each year
through fiscal year 2001,  goodwill was amortized on a straight-line  basis over
five years.  Accumulated amortization of goodwill at the end of each of the past
two fiscal years was approximately $1.0 million.

OTHER INTANGIBLE ASSETS

           Intangible  assets  include  store  design,  real  estate  leases and
non-compete  agreements  based upon their  relative  fair  values at the date of
acquisition  as determined by management  with the  assistance of an independent
valuation   consultant.   Intangible  assets  do  not  include   goodwill.   The

                                     - 30 -
<PAGE>

amortization  of intangible  assets  amounted to  approximately  $0.2 million in
fiscal  years 2003,  2002 and 2001.  Amortization  of  intangible  assets in the
amount of $0.2 million per year is  anticipated  for each of the next two years,
which is the remaining life of these assets.

INCOME TAXES

           Income tax expense is based  principally on pre-tax financial income.
Deferred tax assets and liabilities  are recognized for the differences  between
the  financial  reporting  carrying  values  and the tax  bases  of  assets  and
liabilities  and are measured  using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse. A valuation allowance is
recognized to reduce net deferred tax assets to amounts that management believes
are expected to be realized.

BASIC AND DILUTED INCOME (LOSS) PER SHARE

           Basic income  (loss) per common share is computed by dividing  income
(loss)  attributable to common  shareholders  by the weighted  average number of
common shares  outstanding  during the period.  Diluted income (loss) per common
share includes,  in periods in which they have a dilutive  effect,  the dilutive
effect of those common stock  equivalents  where the average market price of the
common shares  exceeds the exercise  prices for the  respective  years.  For all
periods  presented in the  accompanying  consolidated  statements of operations,
incremental  shares attributed to common stock equivalents and convertible notes
were not included because the results would be anti-dilutive.

           Basic and diluted loss per share are computed as follows:

<TABLE>
<CAPTION>
                                                                                 FISCAL YEAR
                                                             ---------------------------------------------------
                                                                  2003              2002              2001
                                                             ---------------   ---------------   ---------------
<S>                                                           <C>                <C>               <C>
Numerator:
  Net loss:                                                   $ (12,871,700)     $ (2,825,700)     $ (3,191,657)
                                                              ==============    ==============    ==============

Denominator:
  Denominator for basic loss per share                            2,454,340         2,528,326         2,420,467

Effect of dilutive securities:
  Options to purchase common
    stock and convertible notes                                          --                --               ---
                                                             ---------------   ---------------   ---------------
  Denominator for dilutive  loss per  share                       2,454,340         2,528,326         2,420,467
                                                              ==============    ==============    ==============
Antidilutive securities not included
  in the diluted loss per share computation:
  Options to purchase common stock                                  696,436           666,501           606,594
  Exercise price                                             $1.64 - $21.52    $1.64 - $21.52    $1.64 - $21.52
</TABLE>

FAIR VALUE OF FINANCIAL INSTRUMENTS

           Statement  of Financial  Accounting  Standards  No. 107  "Disclosures
about Fair Value of Financial  Instruments" ("SFAS 107"), requires disclosure of
the fair value of financial  instruments  held by the Company.  SFAS 107 defines
the fair value of a financial  instrument as the amount at which the  instrument
could be  exchanged  in a  current  transaction  between  willing  parties.  The
following methods and assumptions were used to estimate fair value:

-          The  carrying  amounts  of  cash  and  cash   equivalents,   accounts
           receivable and accounts  payable  approximate fair value due to their
           short-term nature;

-          The fair value of investments  are based on quoted market prices,  if
           available, and;

-          The fair  value of the  Company's  bank line of  credit,  convertible
           notes payable, obligations under capital leases and loans payable are
           based on current interest rates and repayment terms of the individual
           notes.

                                     - 31 -
<PAGE>

ASSET IMPAIRMENT

           The  Company  reviews  long-lived  assets and makes a  provision  for
impairment  whenever  events  or  changes  in  circumstances  indicate  that the
projected cash flows of related activities may not provide for cost recovery. An
impairment loss is generally  recorded when the net book value of assets exceeds
projected  undiscounted  future cash flows.  The  impairment  loss is determined
based on the  difference  between  the net book  value and the fair value of the
assets. The estimated fair value is based on anticipated  discounted future cash
flows.  Any  impairment  is charged to  operations  in the period in which it is
identified.

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  and  earnings  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 fiscal  years  2003,  2002 and 2001.  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 for fiscal years
2003, 2002 and 2001:

<TABLE>
<CAPTION>
                                                                                      FISCAL YEAR
                                                ---------------------------- --- ---------------------- --- -----------------------
                                                            2003                         2002                        2001
                                                ----------------------------    -----------------------    ------------------------
<S>                                                     <C>                         <C>                         <C>
Net loss as reported                                    $      (12,871,700)         $      (2,825,700)          $      (3,191,657)
Add: Total fair value of stock based
  employee compensation expense not included
  in reported net loss, net                                     (1,425,284)                  (478,449)                   (396,704)
                                                ----------------------------    -----------------------    ------------------------

Proforma net loss                                       $      (14,296,984)         $      (3,304,149)          $      (3,588,361)
                                                 ===========================     ======================     =======================

Proforma net loss per share:

  Basic                                                 $            (5.83)         $           (1.31)          $           (1.47)
                                                 ===========================     ======================     =======================
  Diluted                                               $            (5.83)         $           (1.31)          $           (1.47)
                                                 ===========================     ======================     =======================
</TABLE>

UNREALIZED GAIN (LOSS) ON INVESTMENTS

           Equity  securities  classified  as available for sale are adjusted to
fair market value as of the balance  sheet date based on quoted  market  prices.
The  related  unrealized  gain  (loss)  on  investments  is  reflected  in other
comprehensive income (loss) and accumulated other comprehensive income (loss) on
the consolidated  statements of changes in shareholders' equity and consolidated
balance sheets, respectively.  Realized losses on investments resulting from the
sale or  other-than-temporary  declines  in fair  market  values  of  securities
classified as available for sale are included in the results of operations.

PRE-OPENING EXPENSES

           Pre-opening  expenses  related to opening new stores are  expensed as
incurred.

SHIPPING AND HANDLING FEES AND COSTS

           Income  generated  from  shipping and handling  fees is classified as
revenues.  The Company  classifies the costs related to shipping and handling as
cost of goods sold.

                                     - 32 -
<PAGE>

ADVERTISING COSTS

           Advertising  expense  for the fiscal  years  2003,  2002 and 2001 was
approximately $1,876,000,  $1,286,000 and $1,105,000,  respectively, and charged
to expense when incurred.  Cooperative advertising amounts received from vendors
for fiscal  years  2003,  2002 and 2001 were  $200,000,  $200,000  and  $60,000,
respectively, and recorded as an offset to advertising expense.

RECLASSIFICATION

           Certain fiscal year 2002 and 2001 amounts have been  reclassified  to
conform with the fiscal 2003 presentation.

RECENT ACCOUNTING PRONOUNCEMENTS

           In May 2003, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial  Accounting  Standards ("SFAS") No. 150,  "Accounting for
Certain  Financial  Instruments  with  Characteristics  of both  Liabilities and
Equity." This statement  established  standards for how an issuer classifies and
measures certain financial  instruments with characteristics of both liabilities
and equity.  It requires that an issuer classify a financial  instrument that is
within its scope as a liability (or asset in some  circumstance).  Many of those
instruments were previously classified as equity. The statement is effective for
financial instruments entered into or modified after May 31, 2003, and otherwise
is  effective at the  beginning  of the first  interim  period  beginning  after
December 15, 2003.  The adoption of SFAS No. 150 did not have a material  impact
on our consolidated financial position, results of operations or disclosures.

           In April 2003, the FASB issued SFAS No. 149,  "Amendment of Statement
No. 133 on Derivative and Hedging Activities." In general, this statement amends
and  clarifies   accounting  for  derivative   instruments,   including  certain
derivative  instruments embedded in other contracts,  and for hedging activities
under SFAS No. 133. This  statement is effective  for contracts  entered into or
modified after June 30, 2003,  and for hedging  relationships  designated  after
June 30, 2003.  The  adoption of SFAS No. 149 did not have a material  impact on
our consolidated financial position, results of operations or disclosures.

NOTE 3 - STATEMENTS OF CASH FLOWS

Supplemental disclosures of non-cash investing and financing activities:

<TABLE>
<CAPTION>
                                                                     FISCAL YEAR ENDED
                                            --------------------------------------------------------------------
          NON-CASH TRANSACTIONS                January 31, 2004       February 1, 2003       February 2, 2002
------------------------------------------  ---------------------- ---------------------- ----------------------
<S>                                               <C>                    <C>                    <C>
Equipment and building under capital leases       $       414,630        $     7,764,203        $        68,201
Unrealized gain (loss) on investments                     140,404               (381,738)               391,429
Subordinated debt issued to affiliate                   5,000,000              3,000,000              3,000,000
Change in investment as a result of
  transfer of shares in an affiliate                           --                     --                440,952
Conversion of debt and accrued interest
  payable in exchange for common stock                         --                517,034                115,458

Cash paid during the period for:
  Interest                                        $     2,034,666       $      2,196,062        $     3,466,420
  Income taxes                                                 --                     --                150,000
</TABLE>


                                     - 33 -
<PAGE>

NOTE 4 - PROPERTY AND EQUIPMENT

           Property and equipment consisted of:

<TABLE>
<CAPTION>
                                                       FISCAL YEAR ENDED
                                           -----------------------------------------     Estimated Useful Lives
                                            January 31, 2004      February 1, 2003             (In Years)
                                           -------------------   -------------------    -------------------------
<S>                                           <C>                   <C>                   <C>
Furniture, fixtures and equipment             $    21,221,687       $    21,017,998                5-7

Leasehold improvements                             25,369,583            21,758,680                10
                                                                                          shorter of 5 years or
Equipment under capital leases                      6,774,897             6,774,897            lease term

Building under capital lease                        7,725,420             7,310,790                15
                                            ------------------    ------------------

                                                   61,091,587            56,862,365
Less:
  Accumulated depreciation and
  amortization                                    (36,676,963)          (32,305,674)
                                            ------------------    ------------------
                                              $    24,414,624       $    24,556,691
                                            ==================    ==================
</TABLE>

           See Note 11 for further discussion of capital leases.

           Depreciation  and  amortization  expense for fiscal years 2003, 2002,
and 2001 was $6,102,823,  $6,024,400 and $6,019,720,  respectively.  Accumulated
depreciation  for building and equipment under capital leases was $5,428,802 and
$4,208,728 as of January 31, 2004 and February 1, 2003, respectively.

NOTE 5 - RELATED PARTY TRANSACTIONS

           Notes  receivable from Ilia Lekach,  the Company's former Chairman of
the Board of Directors and Chief Executive  Officer,  were $327,311 and $311,604
as of  January  31,  2004 and  February  1, 2003,  respectively.  The notes were
unsecured,  mature in five years and bear  interest  at prime plus 1% per annum.
Principal and interest were payable in full at maturity.  Total interest  income
recognized during fiscal years 2003, 2002, and 2001 was  approximately  $16,000,
$174,000  and  $264,000,   respectively.   Accrued   interest   receivable   was
approximately  $27,000 and $12,000 as of January 31, 2004 and  February 1, 2003.
The loan and all accrued interest was fully repaid in March 2004.

           Ilia Lekach was also Chairman and interim CEO of Nimbus  Group,  Inc.
("Nimbus"),  formerly  known as  TakeToAuction.com  ("TTA"),  a  public  company
previously  committed to the development of a private jet air taxi network.  TTA
initially sold consumer products on Internet auction sites.

           From fiscal year 2000 through fiscal year 2002, the Company  acquired
approximately  1,003,000 shares of Nimbus common stock. The investment in Nimbus
was shown on our balance sheets as investments available for sale. During fiscal
year 2003 we disposed of our holding in Nimbus in open market  transactions at a
loss of approximately $172,000.

           Purchases of products from Parlux Fragrances, Inc. ("Parlux"),  whose
Chairman of the Board of Directors and Chief  Executive  Officer is Ilia Lekach,
amounted to  approximately  $27,701,000,  $11,613,000  and $19,598,000 in fiscal
years  2003,  2002  and  2001,  representing  approximately  23%,  10% and  17%,
respectively,  of the  Company's  total  purchases.  The amount due to Parlux on
January  31,  2004 and  February  1,  2003  was  approximately  $14,506,000  and
$10,739,000,  respectively,  of which  both  amounts  include a  $250,000  and a
$100,000  subordinated  interest  bearing secured note payable as of January 31,
2004 and  February  1, 2003,  respectively.  Accounts  payable due to Parlux are
non-interest  bearing.  The amount due to Parlux,  exclusive of the secured note
payable,  are included in the accounts  payable  affiliates in the  accompanying
consolidated balance sheets.

           On June  30,  2003  and  September  30,  2002,  Perfumania  signed  a
$5,000,000 and a $3,000,000  subordinated note agreements with Parlux. The notes
were in  consideration  for the reduction of $5,000,000  and $3,000,000 in trade
payables due to Parlux in the respective  years.  The notes were due on February
29, 2004 and March 31,  2003,  respectively,  with  various  periodic  principal
payments,  bore  interest  at prime  plus 1% and were  subordinated  to all bank
related  indebtedness.  As  of  January  31,  2004  and  February  1,  2003  the
outstanding  principal  balance  due on the notes  was  $250,000  and  $100,000,
respectively.  The notes were  repaid in full in  February  2004 and April 2003,
respectively, and in accordance with their terms.

                                     - 34 -
<PAGE>

           The Company  purchased  approximately  $6,368,000 and  $10,562,000 of
merchandise in fiscal years 2003 and 2002, respectively, from a company owned by
Zalman Lekach,  a former director of the Company,  and a brother of Ilia Lekach.
The amount due to Zalman  Lekach's  company at January 31, 2004 and  February 1,
2003 was approximately $1,617,000 and $1,383,000, respectively, and are included
in accounts payable affiliates in the accompanying consolidated balance sheets.

           The Company  purchased  approximately  $4,305,000  and  $6,021,000 of
merchandise in fiscal years 2003 and 2002, respectively, from a company owned by
another brother of Ilia Lekach. The amount due to this company was approximately
$771,000 and $1,310,000, respectively, at January 31, 2004 and February 1, 2003,
and are included in accounts payable affiliates in the accompanying consolidated
balance sheets.

           As discussed in Note 1, effective January 30, 2004, Ilia Lekach,  the
Company's  then  Chairman of the Board and Chief  Executive  Officer and several
other parties controlled by 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 in specified installments.

           In  addition,  pursuant  to and in  accordance  with the terms of the
Nussdorf Option Agreement,  the Nussdorfs have been granted an irrevocable proxy
for the term set forth in the  Agreement to vote any shares owned by Lekach that
are the subject of the Nussdorf Option Agreement.

           As of April 26, 2004,  Mr.  Lekach has  exercised  options to acquire
318,750 of those shares and the Nussdorfs have acquired  595,954 shares pursuant
to the Nussdorf Option Agreement.  Assuming the Nussdorfs  exercise their option
to  acquire  the  remaining  125,000  shares  subject  to  the  Nussdorf  Option
Agreement,  the  Nussdorfs  would own an aggregate  of  1,128,144  shares of the
Company's common stock or  approximately  39.7% of the total number of shares of
the Company's common stock outstanding.

           As a consequence of the change in control provisions set forth in the
employment   agreements  of  Mr.  Lekach,   various  executive  officers  and  a
consultant,  the Company  issued a total of 244,252  options  for the  Company's
common stock in January 2004.  Since the various  exercise prices of the options
were less than the market price of the Company's common stock on the grant date,
the Company incurred a non-cash charge of approximately $2,286,000. In addition,
pursuant to the same employment and consulting  agreements,  the Company accrued
approximately $2,645,000 in January 2004, representing amounts subsequently paid
to said  persons as a result of the change of control.  These  charges  totaling
approximately  $4,931,000  are  included in "Change of control  expenses" on the
accompanying consolidated statement of operations for the year ended January 31,
2004.

           The   Nussdorfs   are  officers  and   principals   of  Quality  King
Distributors,  Inc.  ("Quality  King").  During  fiscal  year 2003,  the Company
purchased  approximately  $5,960,000 of  merchandise  from Quality King and sold
approximately  $11,366,000  of different  merchandise to Quality King. In fiscal
year 2002, there were approximately  $944,000 of purchases from Quality King and
approximately $1,000,000 of merchandise sold to Quality King. The amounts due to
Quality  King at  January  31,  2004 and  February  1, 2003  were  approximately
$797,000 and $15,000 respectively.

                                     - 35 -
<PAGE>

NOTE 6 - BANK LINE OF CREDIT AND NOTES PAYABLE

           The bank line of credit and notes payable consist of the following:

<TABLE>
<CAPTION>
                                                                                January 31, 2004       February 1, 2003
                                                                              --------------------   --------------------
<S>                                                                               <C>                    <C>
Bank line of credit, which is classified as a current liability, interest
  payable monthly,  secured by a pledge of substantially all
  of Perfumania's assets (see below)                                              $    30,472,027        $    32,081,831
                                                                               ===================    ===================

Note payable bearing interest at 9.7% payable in a monthly installment of
  $11,050 including interest, through March 2003, secured by fixtures             $            --        $        31,860
Less:  current portion                                                                         --                (31,860)
                                                                               -------------------    -------------------
Long-term portion                                                                 $            --        $            --
                                                                               ===================    ===================
</TABLE>

           Perfumania's  senior  secured  credit  facility with GMAC  Commercial
Finance LLC ("GMAC")  provides  for  borrowings  of up to $40 million,  of which
$30.5 million was  outstanding  and $5.6 million was available as of January 31,
2004, to support 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 January 31, 2004,  the credit  facility bore interest at 4.6%.
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 maintenance of minimum net
worth, and certain key ratios, as defined by the lender. As of January 31, 2004,
Perfumania was not in compliance with its tangible net worth ratio, fixed charge
ratio,  leverage ratio and capital expenditures  limitation.  On April 30, 2004,
Perfumania obtained a waiver from GMAC for all instances of non-compliance as of
January 31, 2004.

           As shown in these financial  statements,  we have incurred a net loss
of $12.9  million for the period  ended  January 31, 2004.  In  addition,  as of
January 31, 2004,  we had a working  capital  deficiency  of $9.1 million and an
accumulated  deficit of $54.9  million.  As of  January  31,  2004,  we had cash
balances  totaling  approximately  $2.0  million  and  an  additional  borrowing
capacity of $5.6  million  under our bank line of credit  which is  scheduled to
expire in May 2005.  Management  believes 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
management's  plans and  expectations  will be  successful.  If we are unable to
generate  sufficient  cash flows from  operations  in the future to service  our
obligations,  finance our existing debt and achieve improved  operating results,
we could face liquidity and working capital  constraints,  which could adversely
impact future operations and growth and, thereby, may raise a question as to our
ability to remain a going concern.

           On May 12, 2004, Perfumania 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.  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 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. Advances will be secured by a first
lien an all assets of Perfumania.

           During fiscal year 2003, the Company paid approximately $1,458,000 to
the  holders of its Series C and D  Convertible  Notes,  in  accordance  with an
amended  Convertible  Note Option  Repurchase  Agreement.  This  represented the
remaining  balance of  approximately  $1,215,000  of  principal  and $243,000 of
premiums.

           In March 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.

                                     - 36 -
<PAGE>

NOTE 7 - IMPAIRMENT OF ASSETS

           Based  on a review  of the  Company's  retail  store  locations  with
negative cash flows, the Company recognized non-cash impairment charges relating
to its retail  operation of  approximately  $0.6 million,  $0.7 million and $0.7
million  during fiscal years 2003,  2002 and 2001,  respectively.  These charges
were  determined  based on the  difference  between the carrying  amounts of the
assets,   representing  primarily  fixtures  and  leasehold   improvements,   at
particular store locations and the fair values of the assets on a store-by-store
basis.  The  estimated  fair values are based on  anticipated  future cash flows
discounted  at a rate  commensurate  with the risk  involved.  These  impairment
losses are included in provision for  impairment of assets and store closings in
the accompanying consolidated statements of operations.

NOTE 8 - INCOME TAXES

           The benefit for income taxes is comprised of the following amounts:

                                          FISCAL YEAR ENDED
                      ----------------------------------------------------------
                       January 31, 2004    February 1, 2003    February 2, 2002
                      ------------------- ------------------- ------------------
Current:
  Federal                    $        --         $        --      $     211,298
  State                               --                  --                 --
                      ------------------- ------------------- ------------------
                                      --                  --            211,298
                      ------------------- ------------------- ------------------

Deferred:
  Federal                             --                  --                 --
  State                               --                  --                 --
                      ------------------- ------------------- ------------------
                                      --                  --                 --
                      ------------------- ------------------- ------------------
Total tax
  benefit                    $        --         $        --      $     211,298
                       ==================  ==================  =================

           The fiscal year 2001 tax benefit is primarily  due to a change in the
Federal tax law, which provided a longer carryforward  period for the use of net
operating losses.

           The income tax benefit  differs from the amount  obtained by applying
the statutory Federal income tax rate to pretax income as follows:

<TABLE>
<CAPTION>
                                                                  FISCAL YEAR ENDED
                                               ----------------------------------------------------------
                                                January 31, 2004   February 1, 2003    February 2, 2002
                                               ------------------ ------------------- -------------------
<S>                                                <C>                  <C>                <C>
Benefit at federal statutory rates                 $   4,376,378        $    960,738       $   1,157,005
Non-deductible expenses                               (1,504,335)           (283,319)           (937,956)
Change in the valuation allowance                     (3,224,513)           (584,247)           (372,561)
Other                                                    352,470             (93,172)            364,810
                                                -----------------  ------------------  ------------------
Benefit for income taxes                           $          --        $        --       $     211,298
                                                =================  ==================  ==================
</TABLE>

                                     - 37 -
<PAGE>

           Net  deferred  tax assets  reflect  the tax  effect of the  following
differences between financial statement carrying amounts and tax basis of assets
and liabilities:

                                                    FISCAL YEAR ENDED
                                          -------------------------------------
                                             January 31,         February 1,
                                                2004                2003
                                          -----------------   -----------------
Assets:
  Net operating loss & tax credit
    carryforwards                             $  5,962,433        $  5,518,987

  Capital loss carryforward                      1,455,119                  --

  Inventories                                    1,708,735             820,368

  Property and equipment                         3,291,432           2,343,692

  Allowance for doubtful accounts & other               --             110,295

  Reserves                                         167,436              83,566

  Goodwill                                         306,002             322,933

  Unrealized loss on securities                         --           1,508,416

  Deferred compensation                            715,983                  --

  Other                                            372,532              46,902
                                           ----------------    ----------------
Total deferred tax assets                       13,979,672          10,755,159

Valuation allowance                            (13,979,672)        (10,755,159)
                                           ----------------    ----------------
Net deferred tax assets                      $          --        $         --
                                           ================    ================

           A  valuation  allowance  is  provided  for  deferred  tax  assets  in
accordance with SFAS No. 109, Accounting for Income Taxes as management believes
it is more likely than not that the benefit of the  deferred  tax asset will not
be realized.  . Realization  of future tax benefits  related to the deferred tax
assets is dependent on many factors, including the Company's ability to generate
taxable income within the net operating loss carryforward period. Management has
considered  these  factors  in  reaching  its  conclusion  as to  the  valuation
allowance for financial reporting purposes.  As of January 31, 2004, the Company
has net operating loss carryforwards of approximately $15.6 million, which begin
to expire in the year 2019.

NOTE 9 - SHAREHOLDERS' EQUITY

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 financial statements and notes for periods ended prior to that date
have been retroactively adjusted to reflect this change.

INVESTMENTS AVAILABLE FOR SALE

           The  Company's  former  Chairman  of the Board  and  Chief  Executive
Officer,  Ilia Lekach,  was also Chairman and interim CEO of Nimbus Group,  Inc.
("Nimbus"),  a public  company  previously  committed  to the  development  of a
private jet air taxi network.

           From fiscal year 2000 through  fiscal year 2003 the Company  acquired
approximately  1,003,000 shares of Nimbus common stock. The investment in Nimbus
was shown on the Company's  balance sheet as  investments  available for sale of
approximately  $211,000  representing  the market value of $0.21 per share as of
February 1, 2003. The Company subsequently  disposed of its holding in Nimbus in
open market transactions at a loss of approximately $172,000.

           As of February 1, 2003, the market price for Nimbus' common stock was
below  the  Company's  average  cost per  share of $4.13.  In  consideration  of
accounting guidance that considers a six to nine month decline in stock price to
be other than temporary, the Company recorded a non-cash charge of approximately
$700,000 in realized  loss on  investments  on the  consolidated  statements  of
operations for fiscal year 2002.

           All  investments are accounted for as  available-for-sale  securities
and are  carried  at fair  value  based on  quoted  market  prices  pursuant  to
Statement of Financial  Accounting  Standards No. 115,  "Accounting  for Certain
Investments  in Debt and  Equity  Securities".  Unrealized  gains and losses are
included in comprehensive income (loss) and are included in shareholders' equity
as  accumulated  other  comprehensive  loss in the  amount  of  $140,404  on the
accompanying consolidated balance sheet as of February 1, 2003.

PREFERRED STOCK

           The Company's Articles of Incorporation  authorize the issuance of up
to 1,000,000  shares of preferred  stock. The preferred stock may be issued from
time to time at the discretion of the Board of Directors  without  stockholders'
approval.  The  Board of  Directors  is  authorized  to issue  these  shares  in

                                     - 38 -
<PAGE>

different  series and,  with respect to each series,  to determine  the dividend
rate, and provisions regarding redemption,  conversion,  liquidation  preference
and other rights and privileges.  As of January 31, 2004, no preferred stock had
been issued.

TREASURY STOCK

           As of February 2, 2001, the Company's board of Directors had approved
the  repurchase by the Company of up to 625,000  shares of the Company's  common
stock,   reflecting   management's   belief  that  the  Company's  common  stock
represented a significant  value at its then current  trading price. In February
2002,  the Board  approved  an increase  in the stock  repurchase  program by an
additional  250,000  shares and in April 2002,  the Board approved an additional
increase in the stock  repurchase  program of 100,000 shares.  Pursuant to these
authorizations,  the Company has  repurchased  approximately  898,000  shares of
common stock for  approximately  $8.6 million as of January 31, 2004,  including
approximately 118,000 shares for $1.5 million in fiscal year 2003.

STOCK OPTION PLANS

           Under the Company's  2000 Stock Option Plan (the "Stock Option Plan")
and 2000 Directors Stock Option Plan (the "Directors Plan")  (collectively,  the
"Plans"),  both of which  superseded  the previously  existing  plans  effective
October 2000,  375,000 shares of common stock and 30,000 shares of common stock,
respectively,  were  initially  reserved for issuance  upon exercise of options.
Additionally,  the number of shares  available under the Stock Option Plan shall
automatically  increase  each year by 3% of the  shares  of common  stock of the
Company  outstanding at the end of the immediate  preceding  year. The Company's
Board of Directors, or a committee thereof, administers and interprets the Stock
Option Plan. The Stock Option Plan provides for the granting of both  "incentive
stock  options" (as defined in Section 422A of the  Internal  Revenue  Code) and
non-statutory stock options.  Options can be granted under the Stock Option Plan
on such terms and at such prices as determined by the Board, except that the per
share  exercise  price of options will not be less than the fair market value of
the common stock on the date of grant. Only non-employee  directors are eligible
to receive  options under the Directors Plan. The Directors Plan provides for an
automatic  grant of an option to  purchase  500  shares  of  common  stock  upon
election as a director of the Company and an automatic  grant of 1,000 shares of
common stock upon such  person's  re-election  as a director of the Company,  in
both  instances at an exercise price equal to the fair value of the common stock
on the date of grant.

           Due to the  transaction  described  in Note 1, a  change  in  control
occurred which resulted in the issuance of 244,252 options which are immediately
exercisable.  The  Company  incurred  a charge of  approximately  $2,286,000  in
non-cash compensation expense as a result of the issuance of these options which
represent  the  difference  between the market price and  exercise  price on the
issuance date of these options.

           In  calculating  the proforma  net loss per share for 2003,  2002 and
2001,  as shown in Note 2, the fair value of each option  grant is  estimated on
the  date of  grant  using  the  Black-Scholes  option-pricing  model  with  the
following  weighted  average  assumptions  used for grants in fiscal years 2003,
2002 and 2001:

                              2003                2002               2001
                        -----------------   ----------------   -----------------

Expected life (years)        7 years             7 years            7 years
Interest rate                 3.68%              4.88%               4.80%
Volatility                    165%                148%               158%
Dividend yield                 0%                  0%                 0%

           Options granted under the Stock Option Plan are exercisable after the
period or periods specified in the option  agreement,  and options granted under
the Directors Plan are exercisable immediately.  Options granted under the Plans
are not exercisable after the expiration of 10 years from the date of grant.

                                     - 39 -
<PAGE>

           A summary of the Company's option activity,  and related  information
for each of the three fiscal years ended January 31, 2004 is as follows:

<TABLE>
<CAPTION>
                                                 2003                             2002                             2001
                                    -------------------------------  -------------------------------  ------------------------------
                                                        Weighted                         Weighted                         Weighted
                                                         Average                          Average                         Average
                                                       Exercisable                      Exercisable                      Exercisable
                                         Shares           Price          Shares            Price          Shares           Price
                                    ----------------  -------------  ---------------   -------------  ---------------   ------------
<S>                                         <C>            <C>              <C>            <C>               <C>           <C>
Outstanding at beginning of year            666,501        $  5.32          606,594        $   5.60          570,115       $   6.44

Granted                                     254,252           4.79          160,000            3.67           78,625           3.40

Exercised                                   (69,996)          3.38          (59,807)           1.90           (4,750)          2.00

Cancelled                                   (41,519)         11.93          (40,286)           8.19          (37,396)         14.12
                                     ---------------                  --------------                   --------------
Outstanding at end of year                  809,238        $  4.99          666,501        $   5.32          606,594       $   5.60
                                     ===============                  ==============                   ==============


Options exercisable at end of year          696,436        $  5.10          449,714        $   5.80          480,304       $   5.24
Weighted-average fair value of
 options granted during the year            254,252        $  4.79          160,000        $   3.31           78,625       $   3.31
</TABLE>

           The  following  table  summarizes  information  about  stock  options
outstanding at January 31, 2004:

<TABLE>
<CAPTION>
                                                OPTIONS OUTSTANDING              OPTIONS EXERCISABLE
                                                              Weighted                          Weighted
                                             Weighted          Average                          Average
                                              Average         Remaining                        Remaining
     RANGE OF              NUMBER            Exercise        Contractual        NUMBER          Exercise
 EXERCISE PRICES         OUTSTANDING           Price            Life         EXERCISABLE         Price
-------------------   -----------------   ---------------   -------------  ----------------   ------------
<S>                            <C>             <C>                  <C>            <C>            <C>
   $1.64 - $2.27               258,570         $    1.92            5.80           258,570        $  1.92

   $2.48 - $3.88               121,096              3.50            8.43            96,627           3.50

   $4.00 - $4.00               250,000              4.00            9.00           166,667           4.00

  $4.14 - $21.52               179,572             11.78            7.00           174,572          11.74
                       ----------------                                     ---------------
                               809,238         $    4.99            7.40           696,436        $  5.10
                       ================                                     ===============
</TABLE>

NOTE 10- EMPLOYEE BENEFIT PLANS

           The Company has a 401(k)  Savings and  Investment  Plan ("the Plan").
Pursuant to such Plan,  participants may make  contributions to the Plan up to a
maximum of 20% of total  compensation  or $12,000,  whichever  is less,  and the
Company, at its discretion, may match such contributions to the extent of 25% of
the  first  6%  of  a  participant's   contribution.   The  Company's   matching
contributions vest over a 4-year period. In addition to matching  contributions,
the Company may make additional  contributions on a discretionary basis in order
to  comply  with  certain   Internal   Revenue  Code   regulations   prohibiting
discrimination in favor of highly compensated employees.  The Company's matching
contributions during fiscal years 2003, 2002 and 2001 were not significant.

NOTE 11 - COMMITMENTS AND CONTINGENCIES

           The Company is self-insured  for employee  medical benefits under the
Company's  group  health  plan.  The Company  maintains  stop loss  coverage for
individual  medical claims in excess of $80,000 and for annual  Company  medical
claims  which exceed  approximately  $2.2  million in the  aggregate.  While the
ultimate  amount of claims  incurred are  dependent on future  developments,  in
management's opinion, recorded reserves are adequate to cover the future payment
of claims. However, it is possible that recorded reserves may not be adequate to
cover the future payment of claims.  Adjustments,  if any, to estimates recorded
resulting  from ultimate  claim  payments will be reflected in operations in the
periods  in which such  adjustments  are known.  The  self-insurance  reserve at
January 31, 2004 and February 1, 2003 was  approximately  $441,000 and $220,000,
respectively, which is included in accrued expenses and other liabilities in the
accompanying consolidated balance sheets.

           The Company leases space for its retail stores.  The lease terms vary
from month to month  leases to ten year  leases,  in some cases with  options to
renew for longer  periods.  Various leases contain clauses which adjust the base
rental rate by the prevailing  Consumer Price Index,  as well as additional rent
based on a percentage of gross sales in excess of a specified amount.

                                     - 40 -
<PAGE>

           Rent expense for fiscal years 2003, 2002, and 2001 was  approximately
$15,559,000,  $15,879,000, and $15,482,000,  respectively.  Future minimum lease
commitments  under  non-cancelable  operating  leases at January 31, 2004 are as
follows:

            FISCAL YEAR
------------------------------------
2004                                       $    12,021,020

2005                                            10,429,042

2006                                             8,616,614

2007                                             6,691,418

2008                                             4,136,147

Thereafter                                      18,834,881
                                        -------------------
Total future minimum lease payments        $    60,729,122
                                        ===================

           The Company's  capitalized  leases consist of a corporate  office and
distribution  facility in Sunrise,  Florida,  as well as computer  hardware  and
software.  The lease for the corporate office and  distribution  facility is for
approximately 15 years with monthly rent ranging from  approximately  $73,000 to
$104,000.  The lease terms for the computer  hardware and software vary from one
to three years.  The following is a schedule of future  minimum  lease  payments
under  capital  leases  together with the present value of the net minimum lease
payments, at January 31, 2004:

             FISCAL YEAR
--------------------------------------
2004                                       $     1,156,069

2005                                             1,105,637

2006                                             1,083,906

2007                                             1,072,752

2008                                             1,080,201

Thereafter                                      12,068,416
                                        -------------------
Total future minimum lease payments             17,566,981

Less: Amount representing interest              (9,562,019)
                                        -------------------
Present value of minimum lease
 payments                                        8,004,962

Less: Current portion                             (258,700)
                                        -------------------
                                           $     7,746,262
                                        ===================

           The  depreciation  expense  relating to capital leases is included in
depreciation   and  amortization   expense  in  the  accompanying   consolidated
statements of operations.

           The  Company  is party to an  irrevocable  standby  letter  of credit
totaling  approximately  $0.1  million as of January  31,  2004 which  serves as
security for performance of an equipment lease. The letter of credit requirement
expires October 2004.  Management  believes that the carrying values approximate
fair value and does not expect any material losses from their  resolution  since
performance is not likely to be required.

           The Company is involved in various legal  proceedings in the ordinary
course of business.  Management  cannot  presently  predict the outcome of these
matters,  although  management  believes  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 12 - 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.

                                     - 41 -
<PAGE>

<TABLE>
<CAPTION>
                                                                       FISCAL YEARS
                                              ---------------------------------------------------------------
                                                    2003                  2002                   2001
                                              -----------------   --------------------   --------------------
<S>                                              <C>                   <C>                    <C>
Net sales to external custormers:
  Retail                                         $ 198,478,506         $  199,369,331         $  184,141,191
  Wholesale                                         14,089,063              2,144,566              9,210,420
                                              -----------------   --------------------   --------------------
                                                 $ 212,567,569         $  201,513,897         $  193,351,611
                                               ================    ===================    ===================
Gross profit:
  Retail                                         $  81,923,375         $   84,159,461         $   78,467,943
  Wholesale                                          1,453,645                435,051              1,766,807
                                              -----------------   --------------------   --------------------
                                                 $  83,377,020         $   84,594,512         $   80,234,750
                                               ================    ===================    ===================
</TABLE>

NOTE 13- QUARTERLY FINANCIAL DATA (UNAUDITED)

           Unaudited summarized financial results for fiscal years 2003 and 2002
follows (in thousands, except for per share data):

<TABLE>
<CAPTION>
2003 QUARTER                           FIRST          SECOND         THIRD          FOURTH
                                    ------------   ------------   ------------   ------------
<S>                                   <C>             <C>            <C>           <C>
Net sales                             $  36,888       $ 50,748       $ 48,058      $  76,874
Gross profit                             16,815         20,573         17,980         30,442
Net loss                                 (2,930)          (924)        (3,725)        (5,293)
Net loss per basic share                  (1.19)         (0.37)         (1.51)         (2.16)
Net loss per diluted share                (1.19)         (0.37)         (1.51)         (2.16)

<CAPTION>
2002 QUARTER                           FIRST          SECOND         THIRD          FOURTH
                                    ------------   ------------   ------------   ------------
<S>                                      <C>          <C>            <C>              <C>
Net sales                                40,169       $ 48,089       $ 43,112         70,144
Gross profit                             17,329         19,999         17,902         29,364
Net income (loss)                        (1,940)          (686)        (4,960)         4,760
Net income (loss) per basic share         (0.80)         (0.28)         (1.92)          1.81
Net income (loss) per dilutedshare        (0.80)         (0.28)         (1.92)          1.81
</TABLE>

           The Company realizes higher sales, gross profit and net income in the
fourth  fiscal  quarter  than the other three  fiscal  quarters due to increased
purchases of fragrances as gift items during the holiday season. Included in the
fourth quarter results for the year ended January 31, 2004 is approximately $4.9
million attributable to change of control expenses and $2.6 million attributable
to a writedown of inventory  which the Company  intends to discontinue  offering
for sale in its stores.

                                     - 42 -
<PAGE>

ITEM 9.    CHANGES  IN  AND DISAGREEMENTS  WITH   ACCOUNTANTS  ON ACCOUNTING AND
           FINANCIAL DISCLOSURE

           None.

ITEM 9A.   CONTROLS AND PROCEDURES

           Our  Chief  Executive   Officer  and  Chief  Financial  Officer  have
concluded, based on their evaluation as of January 31, 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 January 31, 2004 that
have materially  affected,  or are reasonably likely to materially  affect,  our
internal control over financial reporting.

                                     - 43 -
<PAGE>

                                    PART III.


ITEM 10.   DIRECTORS  AND  EXECUTIVE  OFFICERS  OF  THE  REGISTRANT

           Except as disclosed below, the information called for by this item is
incorporated  by  reference  from  E  Com  Ventures,   Inc.  Annual  Meeting  of
Shareholders  - Notice  and  Proxy  Statement  - 2004 (to be filed  pursuant  to
Regulation  14A not later than 120 days  after the close of the fiscal  year) in
accordance with General Instruction 6 to the Annual Report on Form 10-K.

           The Company  has  adopted a Code of Business  Conduct and Ethics that
applies to all of the Company's officers,  directors and employees.  The Code of
Business Conduct and Ethics is filed as an exhibit to this Annual Report on Form
10-K.

ITEM 11.   EXECUTIVE  COMPENSATION

           The information  called for by this item is incorporated by reference
from E Com Ventures,  Inc.  Annual  Meeting of  Shareholders  - Notice and Proxy
Statement - 2004 (to be filed pursuant to Regulation 14A not later than 120 days
after the close of the fiscal year) in accordance with General  Instruction 6 to
the Annual Report on Form 10-K.

ITEM 12.   SECURITY  OWNERSHIP  OF  CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
           RELATED STOCKHOLDER MATTERS

           The information is required by Item 403 of Regulation S-K relating to
the ownership of our common stock by certain  beneficial  owners and  management
and is  incorporated  by reference from E Com Ventures,  Inc.  Annual Meeting of
Shareholders  - Notice  and  Proxy  Statement  - 2004 (to be filed  pursuant  to
Regulation  14A not later than 120 days  after the close of the fiscal  year) in
accordance with General Instruction 6 to the Annual Report on Form 10-K.

ITEM 13.   CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS

           The  information  is  incorporated  by reference from E Com Ventures,
Inc.  Annual Meeting of  Shareholders - Notice and Proxy Statement - 2004 (to be
filed  pursuant to Regulation 14A not later than 120 days after the close of the
fiscal year) in  accordance  with General  Instruction 6 to the Annual Report on
Form 10-K.

ITEM 14.   PRINCIPAL  ACCOUNTANT  FEES  AND  SERVICES

           The  information  is  incorporated  by reference from E Com Ventures,
Inc.  Annual Meeting of  Shareholders - Notice and Proxy Statement - 2004 (to be
filed  pursuant to Regulation 14A not later than 120 days after the close of the
fiscal year) in  accordance  with General  Instruction 6 to the Annual Report on
Form 10-K.

                                    PART IV.

ITEM 15.   EXHIBITS,  FINANCIAL  STATEMENT  SCHEDULES  AND  EPORTS  ON FORM 8-K.

           (a) The  following  documents  are  filed  as part of this report:

                  (1)    Financial Statements

           An index to financial  statements  for the fiscal years ended January
31, 2004, February 1, 2003 and February 2, 2002 appears on page 23.

                                     - 44 -
<PAGE>

      All other financial statement schedules are omitted because they are
not applicable, or the required information is otherwise shown in the financial
                          statements or notes thereto.

                  (3)    Exhibits

<TABLE>
<CAPTION>
                                                                                                        PAGE NUMBER
                                                                                                      OR INCORPORATED
                                                                                                       BY REFERENCE
           EXHIBIT                                       DESCRIPTION                                       FROM
           -------                                       -----------                                       ----

<S>            <C>                                                                                          <C>
               3.1       Amended and Restated Articles of Incorporation                                     (1)

               3.2       Bylaws                                                                             (2)

              10.5       1991 Stock Option Plan, as amended                                                 (3)

              10.6       1992 Directors Stock Option Plan, as amended                                       (3)

              10.7       Series A Securities Purchase Agreement                                             (4)

              10.8       Series B Securities Purchase Agreement                                             (5)

              10.9       Series C Securities Purchase Agreement                                             (6)

              10.10      Series D Securities Purchase Agreement                                             (6)

              10.11      2000 Stock Option Plan                                                             (7)

              10.12      2000 Directors Stock Option Plan                                                   (7)

              10.13      Amended and Restated Revolving Credit and Security Agreement with GMAC             (9)
                         Commercial Credit LLC, and Congress Financial Corporation (Florida),
                         date May 12, 2004

              10.14      Nussdorf Subordinated Secured Demand Note                                          (9)

              10.15      Lease agreement with Victory  Investment  Group,  LLC, dated October 21,           (8)
                         2002

              10.16      Waiver and  Amendment to the  Revolving  Credit and  Security  Agreement
                         with GMAC Commercial Credit LLC, dated April 30,2004                               (9)

              10.17      Amendment to the 2000 Stock Option Plan                                           (10)

              14.1       Code of Business Conduct and Ethics                                                (9)

              21.1       Subsidiaries of the Registrant                                                     (9)

              23.1       Consent of Deloitte & Touche LLP                                                   (9)

              31.1       Certification of the Chief Executive Officer pursuant to Section 302 of            (9)
                         the Sarbanes-Oxley Act of 2002

              31.2       Certification of the Chief Financial Officer pursuant to Section 302 of            (9)
                         the Sarbanes-Oxley Act of 2002

              32.1       Certification of the Chief Executive  Officer pursuant to Section 906 of           (9)
                         the Sarbanes-Oxley Act of 2002

              32.2       Certification of the Chief Financial  Officer pursuant to Section 906 of           (9)
                         the Sarbanes-Oxley Act of 2002
</TABLE>


                                     - 45 -
<PAGE>

---------------------

(1)        Incorporated  by  reference  to the  exhibit of the same  description
           filed with the Company's 1993 Form 10-k (filed April 28,1994).

(2)        Incorporated  by  reference  to the  exhibit of the same  description
           filed  with  the  Company's  Registration  Statement  on Form S-1 (No
           33-46833).

(3)        Incorporated  by  reference  to the  exhibit of the same  description
           filed with the Company's 1995 Form 10-K (filed April 26, 1996).

(4)        Incorporated  by  reference  to the  exhibit of the same  description
           filed with the  Company's  Registration  Statement  on Form S-1 filed
           June 11, 1999 (No. 333-80525).

(5)        Incorporated  by  reference  to the  exhibit of the same  description
           filed with the Company's  Registration Statement on Form S-1/A, filed
           August 31, 1999 (No. 333-80525).

(6)        Incorporated  by  reference  to the  exhibit of the same  description
           filed with the  Company's  Registration  Statement  on Form S-3 filed
           April 25, 2000 (No. 333-35580).

(7)        Incorporated  by  reference  to the  exhibit of the same  description
           filed with the Company's Proxy Statement (filed October 6, 2000).

(8)        Incorporated  by  reference  to the  exhibit of the same  description
           filed with the Company's 2002 Form 10-K (filed April 30, 2003).

(9)        Filed Herewith.

(10)       Incorporated by reference to Appendix A to the Company's Proxy Stated
           (filed April 16, 2004).

           (b)        Reports on Form 8-K

                      No reports on Form 8-K were filed  during the fiscal  year
                      ended January 31, 2004 except those  disclosed in our 2003
                      Quarterly Reports in Form 10-Q,

                                     - 46 -
<PAGE>

SIGNATURES

           Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, May 12, 2004.

                                           E Com Ventures, Inc.

                                           By: /s/ MICHAEL W. KATZ
                                           -----------------------
                                           Michael W. Katz,
                                           Chief Executive Officer and President
                                           (Principal Executive Officer)


                                           By: /s/ A. MARK YOUNG
                                           ---------------------
                                           A. Mark Young,
                                           Chief Financial Officer
                                           (Principal Accounting Officer)

           Pursuant to the requirements of the Securities  Exchange act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
          SIGNATURE                              TITLE                                    DATE
          ---------                              -----                                    ----
<S>                                              <C>                                      <C>
          /s/ MICHAEL W.  KATZ                   Chief Executive Officer and              May 12, 2004
          ------------------------------         President
          Michael W. Katz                        (Principal Executive Officer)



          /s/ STEPHEN NUSSDORF                   Chairman of the Board of Directors       May 12, 2004
          ------------------------------
          Stephen Nussdorf


          /s/ JEFFREY GELLER                     President and Chief Operating            May 12, 2004
          ------------------------------         Officer of Perfumania, Inc.
          Jeffrey Geller


          /s/ A. MARK YOUNG                      Chief Financial Officer,                 May 12, 2004
          ------------------------------         (Principal Accounting Officer)
          A. Mark Young


          /s/ DONOVAN CHIN                       Chief Financial Officer                  May 12, 2004
          ------------------------------         Perfumania, Inc.,
          Donovan Chin


          /s/ CAROLE ANN TAYLOR                  Director                                 May 12, 2004
          ------------------------------
          Carole Ann Taylor


          /s/ JOSEPH BOUHADANA                   Director                                 May 12, 2004
          ------------------------------
          Joseph Bouhadana


          /s/ PAUL GARFINKLE                     Director                                 May 12, 2004
          ------------------------------
          Paul Garfinkle
</TABLE>


                                     - 47 -