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|     |                                                                                                           
|---- | ----------------------------------------------------------------------------------------------------------
|     | SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549                                                 
|     |                                                                                                           
|     | FORM 10-K                                                                                                 
|     |                                                                                                           
|[x]  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)      
|     |                                                                                                           
|     | FOR THE FISCAL YEAR ENDED FEBRUARY 2, 2002 OR                                                             
|     |                                                                                                           
|[  ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
|     |                                                                                                           
|     | COMMISSION FILE NUMBER 0-19714                                                                            
|     |                                                                                                           
|     | E COM VENTURES, INC                                                                                       
|     |                                                                                                           
|     | (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)                                                    
|     |                                                                                                           
|     | FLORIDA (State or other jurisdiction of incorporation or organization)                                    
|     |                                                                                                           
|     | 65-0977964 (I.R.S. Employer Identification Number)                                                        
|     |                                                                                                           
|     | 11701 NW 101 ST. ROAD, MIAMI, FL (Address of principal executive offices)                                 
|     |                                                                                                           
|     | 33178 (Zip Code)                                                                                          
|     |                                                                                                           
|     | (305) 889-1600 (Registrants telephone number, including area code)                                       
|     |                                                                                                           
|     | Securities registered pursuant to Section 12(g) of the Act:                                               
|     |                                                                                                           
|     | Common Stock, $.01 par value
(Title of Class)                                                             

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this form 10-K [  ].

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

DOCUMENTS INCORPORATED BY REFERENCE

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





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TABLE OF CONTENTS



|                                             |                                                                                               |  |  |  |  |  |  | 
|-------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I.                                     
|                                             | ITEM 1. BUSINESS                                                                             
|                                             | ITEM 2. PROPERTIES                                                                           
|                                             | ITEM 3. LEGAL PROCEEDINGS                                                                    
|                                             | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|PART II.                                    
|                                             | ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                
|                                             | ITEM 6. SELECTED FINANCIAL DATA                                                              
|                                             | ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                             | ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS                         
|                                             | ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                          
|                                             | ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
|PART III.                                   
|                                             | ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                  
|                                             | ITEM 11. EXECUTIVE COMPENSATION                                                              
|                                             | ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                      
|                                             | ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                      
|PART IV.                                    
|                                             | ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.                    
|SIGNATURES                                  
|Amended & Restated Articles of Incorporation
|Employment Agreement with Ilia Lekach       
|Subsidiaries of the Company                 
|Consent of PricewaterhouseCoopers LLP       
|Consent of Deloitte & Touche LLP            



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TABLE OF CONTENTS

|         |  |                                                                                       |  |     
|-------- |  | ------------------------------------------------------------------------------------- |  | ----
|ITEM     |  |                                                                                       |  | PAGE
|         |  |                                                                                       |  |     
|PART I  
|         |  |                                                                                       |  |     
|1.       |  | Business                                                                              |  | 3   
|2.       |  | Properties                                                                            |  | 9   
|3.       |  | Legal Proceedings                                                                     |  | 9   
|4.       |  | Submission of Matters to a Vote of Security Holders                                   |  | 9   
|         |  |                                                                                       |  |     
|PART II 
|         |  |                                                                                       |  |     
|5.       |  | Market for Registrants Common Equity and Related Stockholder Matters                 |  | 10  
|6.       |  | Selected Financial Data                                                               |  | 11  
|7.       |  | Managements Discussion and Analysis of Financial Condition
and Results of Operations |  | 12  
|7A       |  | Quantitative and Qualitative Disclosures About Market Risks                           |  | 21  
|8.       |  | Financial Statements and Supplementary Data                                           |  | 22  
|9.       |  | Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures |  | 48  
|         |  |                                                                                       |  |     
|PART III
|         |  |                                                                                       |  |     
|10.      |  | Directors and Executive Officers of the Registrant                                    |  | 49  
|11.      |  | Executive Compensation                                                                |  | 49  
|12.      |  | Security Ownership of Certain Beneficial Owners and Management                        |  | 49  
|13.      |  | Certain Relationships and Related Transactions                                        |  | 49  
|         |  |                                                                                       |  |     
|PART IV 
|         |  |                                                                                       |  |     
|14.      |  | Exhibits, Financial Statement Schedules and Reports on Form 8-K                       |  | 50  

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FORWARD-LOOKING STATEMENTS

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




PART I.




ITEM 1. BUSINESS

BUSINESS STRATEGY

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

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

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

RETAIL SEGMENT

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

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

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

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

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

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

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

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

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

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

WHOLESALE SEGMENT

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

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

PERFUMANIA.COM

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

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

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

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

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

SOURCES OF SUPPLY

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

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

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

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

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

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

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

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

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

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

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

DISTRIBUTION

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

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

COMPETITION

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

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

EMPLOYEES

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

TRADE NAME AND SERVICE MARK

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

INVESTMENT IN NIMBUS GROUP, INC.

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

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

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

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

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

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

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

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




ITEM 2. PROPERTIES

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

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




ITEM 3. LEGAL PROCEEDINGS

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




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

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

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

ELECTION OF DIRECTORS:

|                         |  |        |           |              |  |              |           |          |  |           |   |  |  |  |         |  |  |  |        | 
|------------------------ |  | ------ | --------- | ------------ |  | ------------ | --------- | -------- |  | --------- | - |  |  |  | ------- |  |  |  | ------ | 
|                         |  | SHARES |           | SHARES VOTED |  | SHARES VOTED |           | ABSTAIN/ | 
|TOTAL                    |  | VOTED  |           | FOR          |  | AGAINST      |           | WITHHELD |  | NON-VOTES
|                         |  |        |           |              |  |              |           |          |  |          
|Ilia Lekach              |  |        | 2,286,663 |              |  |              | 2,067,139 |          |  |           |  |  |  |  | 219,524 |  |  |  | 86,440 | 
|A. Mark Young            |  |        | 2,286,663 |              |  |              | 2,069,482 |          |  |           |  |  |  |  | 217,181 |  |  |  | 86,440 | 
|Jeffrey Geller           |  |        | 2,286,663 |              |  |              | 2,069,405 |          |  |           |  |  |  |  | 217,258 |  |  |  | 86,440 | 
|Donovan Chin             |  |        | 2,286,663 |              |  |              | 2,069,355 |          |  |           |  |  |  |  | 217,308 |  |  |  | 86,440 | 
|Carole Ann Taylor        |  |        | 2,286,663 |              |  |              | 2,069,420 |          |  |           |  |  |  |  | 217,243 |  |  |  | 86,440 | 
|Zalman Lekach            |  |        | 2,286,663 |              |  |              | 2,067,086 |          |  |           |  |  |  |  | 219,577 |  |  |  | 86,440 | 
|Horacio Groisman, M.D    |  |        | 2,286,663 |              |  |              | 2,069,382 |          |  |           |  |  |  |  | 217,281 |  |  |  | 86,440 | 
|Ana Maria Fernandez Haar |  |        | 2,286,663 |              |  |              | 2,069,480 |          |  |           |  |  |  |  | 217,183 |  |  |  | 86,440 | 
|James Fellus             |  |        | 2,286,663 |              |  |              | 2,069,420 |          |  |           |  |  |  |  | 217,243 |  |  |  | 86,440 | 

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RATIFICATION OF AUDITORS:

|                                            |  |        |           |              |  |              |           |          |  |           |         |  |  |  |     |  |  |  |        | 
|------------------------------------------- |  | ------ | --------- | ------------ |  | ------------ | --------- | -------- |  | --------- | ------- |  |  |  | --- |  |  |  | ------ | 
|                                            |  | SHARES |           | SHARES VOTED |  | SHARES VOTED |           | ABSTAIN/ |  |           |         | 
|TOTAL                                       |  | VOTED  |           | FOR          |  | AGAINST      |           | WITHHELD |  | NON-VOTES
|                                            |  |        |           |              |  |              |           |          |  |          
|Ratify Appointment
of Deloitte &
Touche LLP |  |        | 2,286,663 |              |  |              | 2,007,564 |          |  |           | 278,347 |  |  |  | 752 |  |  |  | 86,440 | 




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 2001    |  | HIGH |      | LOW
|               |  |      |      |    
|First Quarter  |  | $    | 4.76 |     |  | $ | 2.12 | 
|Second Quarter |  |      | 4.48 |     |  |   | 2.80 | 
|Third Quarter  |  |      | 4.40 |     |  |   | 2.20 | 
|Fourth Quarter |  |      | 4.12 |     |  |   | 2.04 | 

|               |  |      |       |     |  |   |       | 
|-------------- |  | ---- | ----- | --- |  | - | ----- | 
|FISCAL 2000    |  | HIGH |       | LOW
|               |  |      |       |    
|First Quarter  |  | $    | 31.25 |     |  | $ | 11.00 | 
|Second Quarter |  |      | 14.50 |     |  |   | 6.25  | 
|Third Quarter  |  |      | 7.75  |     |  |   | 3.63  | 
|Fourth Quarter |  |      | 5.00  |     |  |   | 1.88  | 

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

REVERSE STOCK-SPLIT

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

DIVIDEND POLICY

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

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ITEM 6. SELECTED FINANCIAL DATA

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

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

|                                                                                           |                                            |   |                                                        |           |                  |   |                  |           |                  |   |                  |           |   |   |         |           |  |   |         |           | 
|------------------------------------------------------------------------------------------ | ------------------------------------------ | - | ------------------------------------------------------ | --------- | ---------------- | - | ---------------- | --------- | ---------------- | - | ---------------- | --------- | - | - | ------- | --------- |  | - | ------- | --------- | 
|                                                                                           |                                            |   | FISCAL YEAR ENDED                                     
|                                                                                           |                                            |   |                                                       
|                                                                                           |                                            |   | FEBRUARY 2, 2002                                       |           | FEBRUARY 3, 2001 |   | JANUARY 29, 2000 |           | JANUARY 30, 1999 |   | JANUARY 31, 1998
|                                                                                           |                                            |   |                                                        |           |                  |   |                  |           |                  |   |                 
|                                                                                           |                                            |   | (IN
THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
|STATEMENT OF OPERATIONS DATA:                                                              |                                            |   |                                                        |           |                  |   |                  |           |                  |   |                  |           |   |   |         |           |  |   |         |          
|Net sales, retail division                                                                 |                                            | $ | 184,142                                                |           |                  | $ | 185,371          |           |                  | $ | 155,953          |           |   | $ | 134,790 |           |  | $ | 129,562 |          
|Net sales, wholesale division                                                              |                                            |   | 9,210                                                  |           |                  |   | 21,199           |           |                  |   | 36,975           |           |   |   | 40,466  |           |  |   | 34,032  |          
|                                                                                           |                                            |   |                                                        |           |                  |   |                  |           |                  |   |                  |           |   |   |         |           |  |   |         |          
|                                                                                           | Total net sales                            |   |                                                        | 193,352   |                  |   |                  | 206,570   |                  |   |                  | 192,928   |   |   |         | 175,256   |  |   |         | 163,594   | 
|                                                                                           |                                            |   |                                                        |           |                  |   |                  |           |                  |   |                  |           |   |   |         |           |  |   |         |          
|Gross profit, retail division                                                              |                                            |   | 78,468                                                 |           |                  |   | 79,218           |           |                  |   | 68,613           |           |   |   | 57,072  |           |  |   | 58,032  |          
|Gross profit, wholesale division                                                           |                                            |   | 1,767                                                  |           |                  |   | 4,216            |           |                  |   | 7,019            |           |   |   | 7,545   |           |  |   | 7,942   |          
|                                                                                           |                                            |   |                                                        |           |                  |   |                  |           |                  |   |                  |           |   |   |         |           |  |   |         |          
|                                                                                           | Total gross profit                         |   |                                                        | 80,235    |                  |   |                  | 83,434    |                  |   |                  | 75,632    |   |   |         | 64,617    |  |   |         | 65,974    | 
|                                                                                           |                                            |   |                                                        |           |                  |   |                  |           |                  |   |                  |           |   |   |         |           |  |   |         |          
|Selling, general & administrative expenses                                                 |                                            |   | 72,918                                                 |           |                  |   | 79,884           |           |                  |   | 71,354           |           |   |   | 72,502  |           |  |   | 64,219  |          
|Provision for doubtful accounts                                                            |                                            |   | 55                                                     |           |                  |   | 55               |           |                  |   | 60               |           |   |   |        |           |  |   | 1,730   |          
|Provision (recovery) for impairment of assets
and store closings                           |                                            |   | 727                                                    |           |                  |   | (506             | )         |                  |   | 3,427            |           |   |   | 1,035   |           |  |   | 2,515   |          
|Depreciation & amortization                                                                |                                            |   | 6,825                                                  |           |                  |   | 5,819            |           |                  |   | 4,725            |           |   |   | 4,480   |           |  |   | 4,698   |          
|                                                                                           |                                            |   |                                                        |           |                  |   |                  |           |                  |   |                  |           |   |   |         |           |  |   |         |          
|                                                                                           | Total operating expenses                   |   |                                                        | 80,525    |                  |   |                  | 85,252    |                  |   |                  | 79,566    |   |   |         | 78,017    |  |   |         | 73,162    | 
|                                                                                           |                                            |   |                                                        |           |                  |   |                  |           |                  |   |                  |           |   |   |         |           |  |   |         |          
|(Loss) income from operations before other
income (expense)                                |                                            |   | (290                                                   | )         |                  |   | (1,818           | )         |                  |   | (3,934           | )         |   |   | (13,400 | )         |  |   | (7,188  | )        
|Other income (expense)
Interest expense, net                                               |                                            |   | (3,095                                                 | )         |                  |   | (8,179           | )         |                  |   | (6,589           | )         |   |   | (4,882  | )         |  |   | (4,696  | )        
|                                                                                           | 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               |   |                                                        |          |                  |   |                  | (4,819    | )                |   |                  |          |   |   |         |          |  |   |         |          | 
|                                                                                           | Miscellaneous (expense) income, net        |   |                                                        | (18       | )                |   |                  | 85        |                  |   |                  | (118      | ) |   |         | 645       |  |   |         | 762       | 
|                                                                                           |                                            |   |                                                        |           |                  |   |                  |           |                  |   |                  |           |   |   |         |           |  |   |         |          
|Income (loss) before income taxes                                                          |                                            |   | (3,403                                                 | )         |                  |   | (6,120           | )         |                  |   | 1,168            |           |   |   | (17,637 | )         |  |   | (11,122 | )        
|Benefit (provision) for income taxes                                                       |                                            |   | 211                                                    |           |                  |   |                 |           |                  |   | (124             | )         |   |   | (1,337  | )         |  |   | 321     |          
|                                                                                           |                                            |   |                                                        |           |                  |   |                  |           |                  |   |                  |           |   |   |         |           |  |   |         |          
|Income (loss) before cumulative effect of change
in accounting principle                   |                                            |   | (3,192                                                 | )         |                  |   | (6,120           | )         |                  |   | 1,044            |           |   |   | (18,974 | )         |  |   | (10,801 | )        
|Cumulative effect of change in accounting
principle, net of income tax benefit of $381     |                                            |   |                                                       |           |                  |   |                 |           |                  |   |                 |           |   |   |        |           |  |   | (632    | )        
|                                                                                           |                                            |   |                                                        |           |                  |   |                  |           |                  |   |                  |           |   |   |         |           |  |   |         |          
|Net income (loss)                                                                          |                                            | $ | (3,192                                                 | )         |                  | $ | (6,120           | )         |                  | $ | 1,044            |           |   | $ | (18,974 | )         |  | $ | (11,433 | )        
|                                                                                           |                                            |   |                                                        |           |                  |   |                  |           |                  |   |                  |           |   |   |         |           |  |   |         |          
|Weighted average shares outstanding:                                                       |                                            |   |                                                        |           |                  |   |                  |           |                  |   |                  |           |   |   |         |           |  |   |         |          
|                                                                                           | Basic                                      |   |                                                        | 2,420,467 |                  |   |                  | 2,360,456 |                  |   |                  | 2,054,660 |   |   |         | 1,664,971 |  |   |         | 1,756,309 | 
|                                                                                           | Diluted                                    |   |                                                        | 2,420,467 |                  |   |                  | 2,360,456 |                  |   |                  | 2,566,905 |   |   |         | 1,664,971 |  |   |         | 1,756,309 | 
|Basic income (loss) per share before cumulative
effect of change in accounting principle   |                                            | $ | (1.32                                                  | )         |                  | $ | (2.59            | )         |                  | $ | 0.51             |           |   | $ | (11.40  | )         |  | $ | (6.51   | )        
|Diluted income (loss) per share before cumulative
effect of change in accounting principle |                                            | $ | (1.32                                                  | )         |                  | $ | (2.59            | )         |                  | $ | 0.41             |           |   | $ | (11.40  | )         |  | $ | (6.51   | )        
|Basic income (loss) per share after cumulative
effect of change in accounting principle    |                                            | $ | (1.32                                                  | )         |                  | $ | (2.59            | )         |                  | $ | 0.51             |           |   | $ | (11.40  | )         |  | $ | (6.51   | )        
|Diluted income (loss) per share after cumulative
effect of change in accounting principle  |                                            | $ | (1.32                                                  | )         |                  | $ | (2.59            | )         |                  | $ | 0.41             |           |   | $ | (11.40  | )         |  | $ | (6.51   | )        
|SELECTED OPERATING DATA:                                                                   |                                            |   |                                                        |           |                  |   |                  |           |                  |   |                  |           |   |   |         |           |  |   |         |          
|Number of stores open at end of period                                                     |                                            |   | 247                                                    |           |                  |   | 257              |           |                  |   | 276              |           |   |   | 289     |           |  |   | 285     |          
|Comparable store sales increase                                                            |                                            |   | 2.5                                                    | %         |                  |   | 16.9             | %         |                  |   | 12.9             | %         |   |   | 0.0     | %         |  |   | 0.0     | %        
|BALANCE SHEET DATA:                                                                        |                                            |   |                                                        |           |                  |   |                  |           |                  |   |                  |           |   |   |         |           |  |   |         |          
|Working capital (deficiency)                                                               |                                            | $ | 3,908                                                  |           |                  | $ | 7,015            |           |                  | $ | 8,687            |           |   | $ | (3,835  | )         |  | $ | 18,473  |          
|Total assets                                                                               |                                            |   | 102,559                                                |           |                  |   | 107,329          |           |                  |   | 105,656          |           |   |   | 95,129  |           |  |   | 113,908 |          
|Long-term debt, less current portion (1)                                                   |                                            |   | 6,352                                                  |           |                  |   | 11,531           |           |                  |   | 5,032            |           |   |   | 3,404   |           |  |   | 5,643   |          
|Total shareholders equity                                                                 |                                            |   | 22,603                                                 |           |                  |   | 26,395           |           |                  |   | 30,689           |           |   |   | 17,636  |           |  |   | 35,169  |          



---

|(1) |  | Amount includes redeemable common equity of $471 as of January 30, 1999
but does not include long-term severance payables of $284, $191 and
$1,038 as of February 3, 2001, January 29, 2000 and January 30, 1999,
respectively.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

GENERAL

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

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

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

PERCENTAGE OF NET SALES

|                                                                 |                                             |  |             |       |      |  |      |       |   |  |      |       |  
|---------------------------------------------------------------- | ------------------------------------------- |  | ----------- | ----- | ---- |  | ---- | ----- | - |  | ---- | ----- | -
|                                                                 |                                             |  | FISCAL YEAR
|                                                                 |                                             |  |            
|                                                                 |                                             |  | 2001        |       | 2000 |  | 1999
|                                                                 |                                             |  |             |       |      |  |     
|Net sales, retail division                                       |                                             |  | 95.2        | %     |      |  | 89.7 | %     |   |  | 80.8 | %    
|Net sales, wholesale division                                    |                                             |  | 4.8         |       |      |  | 10.3 |       |   |  | 19.2 |      
|                                                                 |                                             |  |             |       |      |  |      |       |   |  |      |      
|                                                                 | Total net sales                             |  |             | 100.0 |      |  |      | 100.0 |   |  |      | 100.0 |  
|                                                                 |                                             |  |             |       |      |  |      |       |   |  |      |      
|Gross profit, retail division                                    |                                             |  | 42.6        |       |      |  | 42.7 |       |   |  | 44.0 |      
|Gross profit, wholesale division                                 |                                             |  | 19.2        |       |      |  | 19.9 |       |   |  | 19.0 |      
|                                                                 |                                             |  |             |       |      |  |      |       |   |  |      |      
|                                                                 | Total gross profit                          |  |             | 41.4  |      |  |      | 40.4  |   |  |      | 39.2  |  
|                                                                 |                                             |  |             |       |      |  |      |       |   |  |      |      
|Selling, general and administrative expenses                     |                                             |  | 37.7        |       |      |  | 38.7 |       |   |  | 36.9 |      
|Provision (recovery) for impairment of assets and
store closings |                                             |  | 0.4         |       |      |  | (0.2 | )     |   |  | 1.8  |      
|Depreciation and amortization                                    |                                             |  | 3.5         |       |      |  | 2.8  |       |   |  | 2.5  |      
|                                                                 |                                             |  |             |       |      |  |      |       |   |  |      |      
|                                                                 | Total operating expenses                    |  |             | 41.6  |      |  |      | 41.3  |   |  |      | 41.2  |  
|                                                                 |                                             |  |             |       |      |  |      |       |   |  |      |      
|Loss from operations before other income (expense)               |                                             |  | (0.2        | )     |      |  | (0.9 | )     |   |  | (2.0 | )    
|                                                                 |                                             |  |             |       |      |  |      |       |   |  |      |      
|Other income (expense):                                          |                                             |  |             |       |      |  |      |       |   |  |      |      
|                                                                 | Interest expense, net                       |  |             | (1.6  | )    |  |      | (4.0  | ) |  |      | (3.4  | )
|                                                                 | Equity in loss of partially-owned affiliate |  |             |      |      |  |      | (0.7  | ) |  |      | (1.7  | )
|                                                                 | Gain on sale of affiliates common stock    |  |             |      |      |  |      | 4.9   |   |  |      | 7.8   |  
|                                                                 | Realized loss on investments                |  |             |      |      |  |      | (2.3  | ) |  |      |      |  
|                                                                 | Miscellaneous expense, net                  |  |             |      |      |  |      |      |   |  |      | (0.1  | )
|                                                                 |                                             |  |             |       |      |  |      |       |   |  |      |      
|(Loss) income before income taxes                                |                                             |  | (1.8        | )     |      |  | (3.0 | )     |   |  | 0.6  |      
|Benefit (provision) for income taxes                             |                                             |  | 0.1         |       |      |  |     |       |   |  | (0.1 | )    
|                                                                 |                                             |  |             |       |      |  |      |       |   |  |      |      
|Net income (loss)                                                |                                             |  | (1.7        | )%    |      |  | (3.0 | )%    |   |  | 0.5  | %    
|                                                                 |                                             |  |             |       |      |  |      |       |   |  |      |      

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RESULTS OF OPERATIONS

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

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

WE MAY HAVE PROBLEMS RAISING MONEY NEEDED IN THE FUTURE

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

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

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

PERFUMANIAS BUSINESS HAS BEEN AFFECTED BY AN ECONOMIC DOWNTURN

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

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

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

PERFUMANIA NEEDS TO SUCCESSFULLY MANAGE ITS GROWTH

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

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

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

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OUR COMMON STOCK MAY BE DELISTED

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

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

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

WE ARE SUBJECT TO INTENSE COMPETITION

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

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

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



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

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

COMPARISON OF FISCAL YEARS 2001 AND 2000

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

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

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

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

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

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

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

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

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

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

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

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

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

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COMPARISON OF FISCAL YEARS 2000 AND 1999

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

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

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

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

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

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

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

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

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

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

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

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

LIQUIDITY AND CAPITAL RESOURCES

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

SEASONALITY AND QUARTERLY RESULTS

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

RECENT ACCOUNTING STANDARDS

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

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

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

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

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

CHANGES IN FOREIGN EXCHANGE RATES CREATE RISK

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

CRITICAL ACCOUNTING POLICIES

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




ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

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

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

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

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

|                                                                                                                                               |  |      |    | 
|---------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                                                               |  | PAGE
|                                                                                                                                               |  |     
|E
Com Ventures, Inc. and Subsidiaries                                                                                                          |  |      |    | 
|Independent
Auditors Report, Deloitte & Touche LLP                                                                                            |  |      | 23 | 
|Report of Independent Certified Public Accountants, PricewaterhouseCoopers LLP                                                                 |  |      | 24 | 
|Consolidated Balance Sheets as of February 2, 2002 and February 3, 2001                                                                        |  |      | 25 | 
|Consolidated Statements of Operations for the Fiscal Years Ended February 2,
2002, February 3, 2001 and January 29, 2000                       |  |      | 26 | 
|Consolidated Statements of Changes in Shareholders Equity for the Fiscal
Years Ended February 2, 2002, February 3, 2001, and January 29, 2000 |  |      | 27 | 
|Consolidated Statements of Cash Flows for the Fiscal Years Ended February 2,
2002, February 3, 2001, and January 29, 2000                      |  |      | 28 | 
|Notes to Consolidated Financial Statements                                                                                                     |  |      | 29 | 
|Schedule II  Valuation and Qualifying Accounts and Reserves                                                                                   |  |      | 48 | 

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INDEPENDENT AUDITORS REPORT

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

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

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

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

/s/ DELOITTE & TOUCHE LLP
Certified Public Accountants

Miami, Florida
April 22, 2002

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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

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

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

PricewaterhouseCoopers LLP
Miami, Florida
May 12, 2000

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E COM VENTURES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

|                                                                                                                                             |                                            |                  |             |                  |  |   |             |             | 
|-------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ---------------- | ----------- | ---------------- |  | - | ----------- | ----------- | 
|ASSETS:                                                                                                                                      |                                            | FEBRUARY 2, 2002 |             | FEBRUARY 3, 2001
|                                                                                                                                             |                                            |                  |             |                 
|Current assets:                                                                                                                              |                                            |                  |             |                  |  |   |             |            
|Cash and cash equivalents                                                                                                                    |                                            | $                | 1,600,787   |                  |  | $ | 2,219,768   |            
|Trade receivables, net of allowances of $67,293 and
$56,337 in fiscal years 2001 and 2000, respectively                                      |                                            |                  | 635,240     |                  |  |   | 1,906,406   |            
|Advances to suppliers                                                                                                                        |                                            |                  | 3,426,525   |                  |  |   | 5,937,106   |            
|Inventories, net of reserve of $1,693,169 and $2,202,843
in fiscal years 2001 and 2000, respectively                                         |                                            |                  | 68,387,570  |                  |  |   | 62,501,712  |            
|Prepaid expenses and other current assets                                                                                                    |                                            |                  | 2,147,456   |                  |  |   | 3,003,425   |            
|Investments available for sale                                                                                                               |                                            |                  | 1,313,740   |                  |  |   | 565,311     |            
|                                                                                                                                             |                                            |                  |             |                  |  |   |             |            
|                                                                                                                                             | Total current assets                       |                  |             | 77,511,318       |  |   |             | 76,133,728  | 
|Property and equipment, net                                                                                                                  |                                            |                  | 21,348,967  |                  |  |   | 26,412,851  |            
|Goodwill and other intangible assets                                                                                                         |                                            |                  | 2,740,315   |                  |  |   | 3,558,397   |            
|Other assets, net                                                                                                                            |                                            |                  | 958,026     |                  |  |   | 1,223,841   |            
|                                                                                                                                             |                                            |                  |             |                  |  |   |             |            
|                                                                                                                                             | Total assets                               |                  | $           | 102,558,626      |  |   | $           | 107,328,817 | 
|                                                                                                                                             |                                            |                  |             |                  |  |   |             |            
|LIABILITIES
AND SHAREHOLDERS EQUITY:                                                                                                        |                                            |                  |             |                  |  |   |             |            
|Current liabilities:                                                                                                                         |                                            |                  |             |                  |  |   |             |            
|Bank line of credit                                                                                                                          |                                            | $                | 30,734,662  |                  |  | $ | 33,526,504  |            
|Current portion of long-term debt                                                                                                            |                                            |                  | 454,219     |                  |  |   | 1,210,554   |            
|Accounts payable, non-affiliates                                                                                                             |                                            |                  | 17,924,889  |                  |  |   | 12,453,497  |            
|Accounts payable, affiliates                                                                                                                 |                                            |                  | 16,767,667  |                  |  |   | 13,412,811  |            
|Accrued expenses and other liabilities                                                                                                       |                                            |                  | 5,956,743   |                  |  |   | 6,892,051   |            
|Income taxes payable                                                                                                                         |                                            |                  |            |                  |  |   | 72,707      |            
|Subordinated note payable, affiliate                                                                                                         |                                            |                  | 100,000     |                  |  |   |            |            
|Current portion of obligations under capital leases                                                                                          |                                            |                  | 1,664,827   |                  |  |   | 1,551,093   |            
|                                                                                                                                             |                                            |                  |             |                  |  |   |             |            
|                                                                                                                                             | Total current liabilities                  |                  |             | 73,603,007       |  |   |             | 69,119,217  | 
|Long-term debt, less current portion                                                                                                         |                                            |                  | 31,860      |                  |  |   | 438,499     |            
|Long-term portion of obligations under capital leases                                                                                        |                                            |                  | 1,076,106   |                  |  |   | 2,601,434   |            
|Convertible notes payable                                                                                                                    |                                            |                  | 5,244,240   |                  |  |   | 8,775,044   |            
|                                                                                                                                             |                                            |                  |             |                  |  |   |             |            
|                                                                                                                                             | Total liabilities                          |                  |             | 79,955,213       |  |   |             | 80,934,194  | 
|                                                                                                                                             |                                            |                  |             |                  |  |   |             |            
|Commitments and contingencies                                                                                                                |                                            |                  |            |                  |  |   |            |            
|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; 2,980,305 and 2,930,570 shares issued
in fiscal years 2001 and 2000, respectively |                                            |                  | 29,803      |                  |  |   | 29,306      |            
|Additional paid-in capital                                                                                                                   |                                            |                  | 71,455,401  |                  |  |   | 72,014,273  |            
|Treasury stock, at cost, 766,802 and 408,632 shares
in fiscal years 2001 and 2000, respectively                                              |                                            |                  | (7,038,638  | )                |  |   | (5,643,377  | )          
|Accumulated deficit                                                                                                                          |                                            |                  | (39,202,863 | )                |  |   | (36,011,206 | )          
|Notes and interest receivable from shareholder and officers                                                                                  |                                            |                  | (2,881,624  | )                |  |   | (3,844,278  | )          
|Accumulated other comprehensive income (loss)                                                                                                |                                            |                  | 241,334     |                  |  |   | (150,095    | )          
|                                                                                                                                             |                                            |                  |             |                  |  |   |             |            
|                                                                                                                                             | Total shareholders equity                 |                  |             | 22,603,413       |  |   |             | 26,394,623  | 
|                                                                                                                                             |                                            |                  |             |                  |  |   |             |            
|                                                                                                                                             | Total liabilities and shareholders equity |                  | $           | 102,558,626      |  |   | $           | 107,328,817 | 
|                                                                                                                                             |                                            |                  |             |                  |  |   |             |            

See accompanying notes to consolidated financial statements.

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

|                                               |                                                                  |                              |             |                           |            |                  |             |                  |            |   |             |            |            |  
|---------------------------------------------- | ---------------------------------------------------------------- | ---------------------------- | ----------- | ------------------------- | ---------- | ---------------- | ----------- | ---------------- | ---------- | - | ----------- | ---------- | ---------- | -
|                                               |                                                                  |                              |             | FOR THE FISCAL YEAR ENDED
|                                               |                                                                  |                              |             |                          
|                                               |                                                                  |                              |             | February 2, 2002          |            | February 3, 2001 |             | January 29, 2000
|                                               |                                                                  |                              |             |                           |            |                  |             |                 
|Net sales                                      |                                                                  | $                            | 193,351,611 |                           |            | $                | 206,569,581 |                  |            | $ | 192,928,109 |           
|Cost of goods sold                             |                                                                  |                              | 113,116,861 |                           |            |                  | 123,135,117 |                  |            |   | 117,295,771 |           
|                                               |                                                                  |                              |             |                           |            |                  |             |                  |            |   |             |           
|Gross profit                                   |                                                                  |                              | 80,234,750  |                           |            |                  | 83,434,464  |                  |            |   | 75,632,338  |           
|                                               |                                                                  |                              |             |                           |            |                  |             |                  |            |   |             |           
|Operating expenses:                            |                                                                  |                              |             |                           |            |                  |             |                  |            |   |             |           
|                                               | Selling, general and administrative expenses                     |                              |             | 72,972,938                |            |                  |             | 79,938,537       |            |   |             | 71,414,106 |           
|                                               | Provision (recovery) for impairment of
assets and store closings |                              |             | 727,001                   |            |                  |             | (505,587         | )          |   |             | 3,427,151  |           
|                                               | Depreciation and amortization                                    |                              |             | 6,824,861                 |            |                  |             | 5,818,964        |            |   |             | 4,725,691  |           
|                                               |                                                                  |                              |             |                           |            |                  |             |                  |            |   |             |           
|                                               |                                                                  | Total operating expenses     |             |                           | 80,524,800 |                  |             |                  | 85,251,914 |   |             |            | 79,566,948 |  
|                                               |                                                                  |                              |             |                           |            |                  |             |                  |            |   |             |           
|Loss from operations                           |                                                                  |                              | (290,050    | )                         |            |                  | (1,817,450  | )                |            |   | (3,934,610  | )         
|                                               |                                                                  |                              |             |                           |            |                  |             |                  |            |   |             |           
|Other income (expense):                        |                                                                  |                              |             |                           |            |                  |             |                  |            |   |             |           
|                                               | Interest expense:                                                |                              |             |                           |            |                  |             |                  |            |   |             |            |           
|                                               |                                                                  | Affiliates                   |             |                           | (102,269   | )                |             |                  | (308,545   | ) |             |            | (142,808   | )
|                                               |                                                                  | Other                        |             |                           | (3,293,929 | )                |             |                  | (8,230,910 | ) |             |            | (6,698,693 | )
|                                               |                                                                  |                              |             |                           |            |                  |             |                  |            |   |             |           
|                                               |                                                                  |                              | (3,396,198  | )                         |            |                  | (8,539,455  | )                |            |   | (6,841,501  | )         
|                                               |                                                                  |                              |             |                           |            |                  |             |                  |            |   |             |           
|                                               | Interest income:                                                 |                              |             |                           |            |                  |             |                  |            |   |             |            |           
|                                               |                                                                  | Affiliates                   |             |                           | 272,944    |                  |             |                  | 287,649    |   |             |            | 94,100     |  
|                                               |                                                                  | Other                        |             |                           | 28,065     |                  |             |                  | 73,240     |   |             |            | 158,732    |  
|                                               |                                                                  |                              |             |                           |            |                  |             |                  |            |   |             |           
|                                               |                                                                  |                              | 301,009     |                           |            |                  | 360,889     |                  |            |   | 252,832     |           
|                                               |                                                                  |                              |             |                           |            |                  |             |                  |            |   |             |           
|                                               | Share of loss of partially-owned affiliate                       |                              |             |                          |            |                  |             | (1,388,248       | )          |   |             | (3,164,439 | )         
|                                               | Gain on sale of affiliates common stock                         |                              |             |                          |            |                  |             | 9,998,454        |            |   |             | 14,973,868 |           
|                                               | Realized loss on investments                                     |                              |             |                          |            |                  |             | (4,819,441       | )          |   |             |           |           
|                                               | Miscellaneous income (expense), net                              |                              |             | (17,716                   | )          |                  |             | 84,960           |            |   |             | (117,968   | )         
|                                               |                                                                  |                              |             |                           |            |                  |             |                  |            |   |             |           
|                                               |                                                                  | Total other income (expense) |             |                           | (17,716    | )                |             |                  | (4,302,841 | ) |             |            | 5,102,792  |  
|                                               |                                                                  |                              |             |                           |            |                  |             |                  |            |   |             |           
|(Loss) income before income taxes              |                                                                  |                              | (3,402,955  | )                         |            |                  | (6,120,291  | )                |            |   | 1,168,182   |           
|Benefit (provision) for income taxes           |                                                                  |                              | 211,298     |                           |            |                  |            |                  |            |   | (124,000    | )         
|                                               |                                                                  |                              |             |                           |            |                  |             |                  |            |   |             |           
|                                               |                                                                  | Net (loss) income            |             | $                         | (3,191,657 | )                |             | $                | (6,120,291 | ) |             | $          | 1,044,182  |  
|                                               |                                                                  |                              |             |                           |            |                  |             |                  |            |   |             |           
|Basic (loss) income per common share           |                                                                  | $                            | (1.32       | )                         |            | $                | (2.59       | )                |            | $ | 0.51        |           
|                                               |                                                                  |                              |             |                           |            |                  |             |                  |            |   |             |           
|Diluted (loss) income per common share         |                                                                  | $                            | (1.32       | )                         |            | $                | (2.59       | )                |            | $ | 0.41        |           
|                                               |                                                                  |                              |             |                           |            |                  |             |                  |            |   |             |           
|Weighted average number of shares
outstanding: |                                                                  |                              |             |                           |            |                  |             |                  |            |   |             |           
|                                               | Basic                                                            |                              |             | 2,420,467                 |            |                  |             | 2,360,456        |            |   |             | 2,054,660  |           
|                                               |                                                                  |                              |             |                           |            |                  |             |                  |            |   |             |           
|                                               | Diluted                                                          |                              |             | 2,420,467                 |            |                  |             | 2,360,456        |            |   |             | 2,566,905  |           
|                                               |                                                                  |                              |             |                           |            |                  |             |                  |            |   |             |           

See accompanying notes to consolidated financial statements.

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



|                                                                         |                                |  |              |   |            |   |                |   |        |   |            |   |  |  |          |   |  |   |            |   | 
|------------------------------------------------------------------------ | ------------------------------ |  | ------------ | - | ---------- | - | -------------- | - | ------ | - | ---------- | - |  |  | -------- | - |  | - | ---------- | - | 
|                                                                         |                                |  | Common Stock |   | Additional |   | Treasury Stock
|                                                                         |                                |  |              |   | Paid-In    |   |               
|                                                                         |                                |  | Shares       |   | Amount     |   | Capital        |   | Shares |   | Amount    
|                                                                         |                                |  |              |   |            |   |                |   |        |   |           
|Balance at January 30, 1999                                              |                                |  | 2,153,623    |   |            | $ | 21,536         |   |        | $ | 54,504,618 |   |  |  | 378,102  |   |  | $ | (5,413,002 | )
|                                                                         |                               
|Components of comprehensive income:                                     
|                                                                         | Net income                     |  |              |  |            |   |                |  |        |   |            |  |  |  |          |  |  |   |            |  | 
|                                                                        
|                                                                         | Total comprehensive income     |  |              |  |            |   |                |  |        |   |            |  |  |  |          |  |  |   |            |  | 
|                                                                        
|Exercise of stock options                                                |                                |  | 86,346       |   |            |   | 863            |   |        |   | 168,889    |   |  |  |         |   |  |   |           |  
|Purchase of treasury stock                                               |                                |  |             |   |            |   |               |   |        |   |           |   |  |  | 203,912  |   |  |   | (3,419,957 | )
|Issuance of common stock                                                 |                                |  | 58,823       |   |            |   | 588            |   |        |   | (588       | ) |  |  |         |   |  |   |           |  
|Conversion of debt and
accrued interest to common
stock                  |                                |  | 21,805       |   |            |   | 218            |   |        |   | 317,404    |   |  |  |         |   |  |   |           |  
|Net change in notes and
interest receivable from
shareholder and officer |                                |  |             |   |            |   |               |   |        |   |           |   |  |  |         |   |  |   |           |  
|Beneficial conversion
feature of notes payable                           |                                |  |             |   |            |   |               |   |        |   | 1,365,384  |   |  |  |         |   |  |   |           |  
|Equity in partially-owned affiliate                                      |                                |  |             |   |            |   |               |   |        |   | 9,746,256  |   |  |  |         |   |  |   |           |  
|Issuance of treasury stock                                               |                                |  |             |   |            |   |               |   |        |   | (592,208   | ) |  |  | (378,102 | ) |  |   | 5,413,002  |  
|                                                                         |                                |  |              |   |            |   |                |   |        |   |            |   |  |  |          |   |  |   |            |  
|Balance at January 29, 2000                                              |                                |  | 2,320,597    |   |            |   | 23,205         |   |        |   | 65,509,755 |   |  |  | 203,912  |   |  |   | (3,419,957 | )
|                                                                         |                               
|Components of comprehensive loss:                                        |                               
|                                                                         | Net loss                       |  |              |  |            |   |                |  |        |   |            |  |  |  |          |  |  |   |            |  | 
|                                                                         | Unrealized loss on investments |  |              |  |            |   |                |  |        |   |            |  |  |  |          |  |  |   |            |  | 
|                                                                        
|                                                                         | Total comprehensive loss       |  |              |  |            |   |                |  |        |   |            |  |  |  |          |  |  |   |            |  | 
|                                                                        
|Exercise of stock options                                                |                                |  | 46,056       |   |            |   | 461            |   |        |   | 148,502    |   |  |  |         |   |  |   |           |  
|Purchase of treasury stock                                               |                                |  |             |   |            |   |               |   |        |   |           |   |  |  | 204,720  |   |  |   | (2,223,420 | )
|Conversion of debt and
accrued interest to common
stock                  |                                |  | 563,917      |   |            |   | 5,640          |   |        |   | 3,719,252  |   |  |  |         |   |  |   |           |  
|Net change in notes
and interest receivable from
shareholder and officer |                                |  |             |   |            |   |               |   |        |   |           |   |  |  |         |   |  |   |           |  
|Beneficial conversion
feature of notes payable                           |                                |  |             |   |            |   |               |   |        |   | 2,636,764  |   |  |  |         |   |  |   |           |  
|                                                                         |                                |  |              |   |            |   |                |   |        |   |            |   |  |  |          |   |  |   |            |  
|Balance at February 3, 2001                                              |                                |  | 2,930,570    |   |            |   | 29,306         |   |        |   | 72,014,273 |   |  |  | 408,632  |   |  |   | (5,643,377 | )
|                                                                        
|Components of comprehensive loss:                                       
|                                                                         | Net loss                       |  |              |  |            |   |                |  |        |   |            |  |  |  |          |  |  |   |            |  | 
|                                                                         | Unrealized gain
on investments |  |              |  |            |   |                |  |        |   |            |  |  |  |          |  |  |   |            |  | 
|                                                                        
|                                                                         | 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 | )
|                                                                         |                                |  |              |   |            |   |                |   |        |   |            |   |  |  |          |   |  |   |            |  

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                                                         |                                |   |               |          |             |   |                   |            |                     |   |            |   |  |   |            |            |  
|------------------------------------------------------------------------ | ------------------------------ | - | ------------- | -------- | ----------- | - | ----------------- | ---------- | ------------------- | - | ---------- | - |  | - | ---------- | ---------- | -
|                                                                         |                                |   | Accumulated   |          |             |   |                   |            | Notes and          
|                                                                         |                                |   | Other         |          |             |   |                   |            | Interest Receivable
|                                                                         |                                |   | Comprehensive |          | Accumulated |   | From Shareholders
|                                                                         |                                |   | Income (Loss) |          | Deficit     |   | and Officers      |            | Total              
|                                                                         |                                |   |               |          |             |   |                   |            |                    
|Balance at January 30, 1999                                              |                                | $ |              |          |             | $ | (30,935,097       | )          |                     | $ | (542,143   | ) |  | $ | 17,635,912 |           
|                                                                         |                                |   |               |          |             |   |                   |            |                     |   |            |   |  |   |            |           
|Components of comprehensive income:                                     
|                                                                         | Net income                     |   |               |         |             |   |                   | 1,044,182  |                     |   |            |  |  |   |            | 1,044,182  |  
|                                                                         |                                |   |               |          |             |   |                   |            |                     |   |            |   |  |   |            |           
|                                                                         | Total comprehensive income     |   |               |         |             |   |                   |           |                     |   |            |  |  |   |            | 1,044,182 
|                                                                         |                                |   |               |          |             |   |                   |            |                     |   |            |   |  |   |           
|Exercise of stock options                                                |                                |   |              |          |             |   |                  |            |                     |   |           |   |  |   | 169,752    |           
|Purchase of treasury stock                                               |                                |   |              |          |             |   |                  |            |                     |   |           |   |  |   | (3,419,957 | )         
|Issuance of common stock                                                 |                                |   |              |          |             |   |                  |            |                     |   |           |   |  |   |           |           
|Conversion of debt and
accrued interest to common
stock                  |                                |   |              |          |             |   |                  |            |                     |   |           |   |  |   | 317,622    |           
|Net change in notes and
interest receivable from
shareholder and officer |                                |   |              |          |             |   |                  |            |                     |   | (990,506   | ) |  |   | (990,506   | )         
|Beneficial conversion
feature of notes payable                           |                                |   |              |          |             |   |                  |            |                     |   |           |   |  |   | 1,365,384  |           
|Equity in partially-owned affiliate                                      |                                |   |              |          |             |   |                  |            |                     |   |           |   |  |   | 9,746,256  |           
|Issuance of treasury stock                                               |                                |   |              |          |             |   |                  |            |                     |   |           |   |  |   | 4,820,794  |           
|                                                                         |                                |   |               |          |             |   |                   |            |                     |   |            |   |  |   |            |           
|Balance at January 29, 2000                                              |                                |   | 2,320,597     |          |             |   | (29,890,915       | )          |                     |   | (1,532,649 | ) |  |   | 30,689,439 |            |  
|                                                                         |                                |   |               |          |             |   |                   |            |                     |   |            |   |  |   |            |           
|Components of comprehensive loss:                                       
|                                                                         | Net loss                       |   |               |         |             |   |                   | (6,120,291 | )                   |   |            |  |  |   |            | (6,120,291 | )
|                                                                         | Unrealized loss on investments |   |               | (150,095 | )           |   |                   |           |                     |   |            |  |  |   |            | (150,095   | )
|                                                                         |                                |   |               |          |             |   |                   |            |                     |   |            |   |  |   |            |           
|                                                                         | Total comprehensive loss       |   |               |         |             |   |                   |           |                     |   |            |  |  |   |            | (6,270,386 | )
|                                                                         |                                |   |               |          |             |   |                   |            |                     |   |            |   |  |   |            |           
|Exercise of stock options                                                |                                |   |              |          |             |   |                  |            |                     |   |           |   |  |   | 148,963    |           
|Purchase of treasury stock                                               |                                |   |              |          |             |   |                  |            |                     |   |           |   |  |   | (2,223,420 | )         
|Conversion of debt and
accrued interest to common
stock                  |                                |   |              |          |             |   |                  |            |                     |   |           |   |  |   | 3,724,892  |           
|Net change in notes
and interest receivable from
shareholder and officer |                                |   |              |          |             |   |                  |            |                     |   | (2,311,629 | ) |  |   | (2,311,629 | )         
|Beneficial conversion
feature of notes payable                           |                                |   |              |          |             |   |                  |            |                     |   |           |   |  |   | 2,636,764  |           
|                                                                         |                                |   |               |          |             |   |                   |            |                     |   |            |   |  |   |            |           
|Balance at February 3, 2001                                              |                                |   | (150,095      | )        |             |   | (36,011,206       | )          |                     |   | (3,844,278 | ) |  |   | 26,394,623 |           
|                                                                         |                                |   |               |          |             |   |                   |            |                     |   |            |   |  |   |            |           
|Components of comprehensive loss:                                        |                               
|                                                                         | Net loss                       |   |               |         |             |   |                   | (3,191,657 | )                   |   |            |  |  |   |            | (3,191,657 | )
|                                                                         | Unrealized gain
on investments |   |               | 391,429  |             |   |                   |           |                     |   |            |  |  |   |            | 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                                              |                                | $ | 241,334       |          |             | $ | (39,202,863       | )          |                     | $ | (2,881,624 | ) |  | $ | 22,603,413 |           
|                                                                         |                                |   |               |          |             |   |                   |            |                     |   |            |   |  |   |            |           

References to share amounts in the schedule above reflect the effect of the one for four reverse stock-split.
See accompanying notes to consolidated financial statements.

27



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##### Table of Contents



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

|                                                                                                   |                                                                             |                                                     |            |                           |             |                  |            |                  |            |   |            |             |             |  
|-------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | --------------------------------------------------- | ---------- | ------------------------- | ----------- | ---------------- | ---------- | ---------------- | ---------- | - | ---------- | ----------- | ----------- | -
|                                                                                                   |                                                                             |                                                     |            | FOR THE FISCAL YEAR ENDED
|                                                                                                   |                                                                             |                                                     |            |                          
|                                                                                                   |                                                                             |                                                     |            | February 2, 2002          |             | February 3, 2001 |            | January 29, 2000
|                                                                                                   |                                                                             |                                                     |            |                           |             |                  |            |                 
|Cash flows from operating activities:                                                              |                                                                             |                                                     |            |                           |             |                  |            |                  |            |   |            |            
|Net (loss) income                                                                                  |                                                                             | $                                                   | (3,191,657 | )                         |             | $                | (6,120,291 | )                |            | $ | 1,044,182  |            
|Adjustments to reconcile net (loss) income to net cash
provided by (used in) operating activities: |                                                                             |                                                     |            |                           |             |                  |            |                  |            |   |            |            
|                                                                                                   | Provision for doubtful accounts                                             |                                                     |            | 55,000                    |             |                  |            | 55,000           |            |   |            | 60,000      |            
|                                                                                                   | Provision for inventory losses                                              |                                                     |            |                          |             |                  |            |                 |            |   |            | 859,368     |            
|                                                                                                   | Gain on sale of affiliates common stock                                    |                                                     |            |                          |             |                  |            | (9,998,454       | )          |   |            | (14,973,868 | )          
|                                                                                                   | Provision (recovery) for impairment of assets and store closings            |                                                     |            | 727,001                   |             |                  |            | (505,587         | )          |   |            | 3,427,151   |            
|                                                                                                   | Depreciation and amortization                                               |                                                     |            | 6,824,861                 |             |                  |            | 5,818,964        |            |   |            | 4,725,691   |            
|                                                                                                   | Share of loss of partially-owned affiliate                                  |                                                     |            |                          |             |                  |            | 1,388,248        |            |   |            | 3,164,439   |            
|                                                                                                   | Loss on extinguishment of debt                                              |                                                     |            |                          |             |                  |            | 313,824          |            |   |            |             |            
|                                                                                                   | Provision for loss on investment                                            |                                                     |            |                          |             |                  |            | 3,727,022        |            |   |            |            |            
|                                                                                                   | Beneficial conversion feature of convertible notes payable                  |                                                     |            |                          |             |                  |            | 2,636,764        |            |   |            | 1,365,384   |            
|                                                                                                   | Change in operating assets and liabilities:                                 |                                                     |            |                           |             |                  |            |                  |            |   |            |             |            
|                                                                                                   |                                                                             | Trade receivables                                   |            |                           | 1,216,166   |                  |            |                  | (731,026   | ) |            |             | 2,898,812   |  
|                                                                                                   |                                                                             | Advances to suppliers                               |            |                           | 2,510,581   |                  |            |                  | (3,381,647 | ) |            |             | 3,239,122   |  
|                                                                                                   |                                                                             | Inventories                                         |            |                           | (5,885,858  | )                |            |                  | 8,656,891  |   |            |             | (15,916,419 | )
|                                                                                                   |                                                                             | Prepaid expenses and other current assets           |            |                           | 855,969     |                  |            |                  | (1,981,881 | ) |            |             | (394,357    | )
|                                                                                                   |                                                                             | Other assets                                        |            |                           | 278,757     |                  |            |                  | 507,663    |   |            |             | (1,357,208  | )
|                                                                                                   |                                                                             | Accounts payable, non-affiliate                     |            |                           | 8,471,392   |                  |            |                  | (3,728,334 | ) |            |             | 1,337,768   |  
|                                                                                                   |                                                                             | Accounts payable, affiliate                         |            |                           | 3,438,808   |                  |            |                  | 7,062,496  |   |            |             | 6,045,045   |  
|                                                                                                   |                                                                             | Accrued expenses and other liabilities              |            |                           | (933,988    | )                |            |                  | (687,614   | ) |            |             | (1,251,023  | )
|                                                                                                   |                                                                             | Income taxes payable                                |            |                           | (72,707     | )                |            |                  | (150,391   | ) |            |             | (262,000    | )
|                                                                                                   |                                                                             |                                                     |            |                           |             |                  |            |                  |            |   |            |            
|Net cash provided by (used in) operating activities                                                |                                                                             |                                                     | 14,294,325 |                           |             |                  | 2,567,823  |                  |            |   | (5,674,089 | )          
|                                                                                                   |                                                                             |                                                     |            |                           |             |                  |            |                  |            |   |            |            
|Cash flows from investing activities:                                                              |                                                                             |                                                     |            |                           |             |                  |            |                  |            |   |            |            
|                                                                                                   | Additions to property and equipment                                         |                                                     |            | (1,614,636                | )           |                  |            | (4,298,081       | )          |   |            | (3,971,356  | )          
|                                                                                                   | Acquisition, net of cash acquired                                           |                                                     |            |                          |             |                  |            | (1,534,769       | )          |   |            |            |            
|                                                                                                   | Dividend from partially-owned equity affiliate                              |                                                     |            |                          |             |                  |            |                 |            |   |            | 450,000     |            
|                                                                                                   | (Purchases) proceeds of investments available for sale                      |                                                     |            |                          |             |                  |            | (1,497,027       | )          |   |            | 176,125     |            
|                                                                                                   |                                                                             |                                                     |            |                           |             |                  |            |                  |            |   |            |            
|Net cash used in investing activities                                                              |                                                                             |                                                     | (1,614,636 | )                         |             |                  | (7,329,877 | )                |            |   | (3,345,231 | )          
|                                                                                                   |                                                                             |                                                     |            |                           |             |                  |            |                  |            |   |            |            
|Cash flows from financing activities:                                                              |                                                                             |                                                     |            |                           |             |                  |            |                  |            |   |            |            
|                                                                                                   | Net (repayments) and borrowings under bank line
of credit and notes payable |                                                     |            | (3,954,816                | )           |                  |            | 691,439          |            |   |            | (2,578,830  | )          
|                                                                                                   | Principal payments under capital lease obligations                          |                                                     |            | (1,479,795                | )           |                  |            | (853,735         | )          |   |            | (402,369    | )          
|                                                                                                   | Net advances to shareholders and officers                                   |                                                     |            |                          |             |                  |            | (2,311,629       | )          |   |            | (1,770,100  | )          
|                                                                                                   | Proceeds from note and interest receivable, related party                   |                                                     |            | 521,702                   |             |                  |            | 779,594          |            |   |            |            |            
|                                                                                                   | Payment of redeemable common equity (stock subscription)                    |                                                     |            |                          |             |                  |            |                 |            |   |            | (470,588    | )          
|                                                                                                   | Repayments under subordinated debt                                          |                                                     |            | (2,900,000                | )           |                  |            | (6,500,000       | )          |   |            | (4,500,000  | )          
|                                                                                                   | Issuance of convertible notes payable                                       |                                                     |            |                          |             |                  |            | 9,000,000        |            |   |            | 4,000,000   |            
|                                                                                                   | Repayments of convertible notes payable                                     |                                                     |            | (4,100,000                | )           |                  |            | (245,000         | )          |   |            |            |            
|                                                                                                   | Proceeds from sale of affiliates common stock                              |                                                     |            |                          |             |                  |            | 6,500,000        |            |   |            | 18,241,419  |            
|                                                                                                   | Proceeds from exercise of stock options                                     |                                                     |            | 9,500                     |             |                  |            | 148,963          |            |   |            | 169,752     |            
|                                                                                                   | Purchases of treasury stock                                                 |                                                     |            | (1,395,261                | )           |                  |            | (2,223,420       | )          |   |            | (3,419,957  | )          
|                                                                                                   |                                                                             |                                                     |            |                           |             |                  |            |                  |            |   |            |            
|                                                                                                   |                                                                             | Net cash (used in) provided by financing activities |            |                           | (13,298,670 | )                |            |                  | 4,986,212  |   |            |             | 9,269,327   |  
|                                                                                                   |                                                                             |                                                     |            |                           |             |                  |            |                  |            |   |            |            
|(Decrease) increase in cash and cash equivalents                                                   |                                                                             |                                                     | (618,981   | )                         |             |                  | 224,158    |                  |            |   | 250,007    |            
|Cash and cash equivalents at beginning of period                                                   |                                                                             |                                                     | 2,219,768  |                           |             |                  | 1,995,610  |                  |            |   | 1,745,603  |            
|                                                                                                   |                                                                             |                                                     |            |                           |             |                  |            |                  |            |   |            |            
|Cash and cash equivalents at end of period                                                         |                                                                             | $                                                   | 1,600,787  |                           |             | $                | 2,219,768  |                  |            | $ | 1,995,610  |            
|                                                                                                   |                                                                             |                                                     |            |                           |             |                  |            |                  |            |   |            |            

See accompanying notes to consolidated financial statements.

28



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##### Table of Contents



E COM VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FISCAL YEARS ENDED FEBRUARY 2, 2002, FEBRUARY 3, 2001 AND JANUARY 29, 2000

NOTE 1  NATURE OF BUSINESS

E Com Ventures, Inc., a Florida Corporation (the Company) is structured
as a holding company that owns and operates Perfumania Inc. (Perfumania), a
Florida Corporation which is a specialty retailer and wholesaler of fragrances
and related products, and perfumania.com, inc., an Internet retailer of
fragrance and other specialty items.

Perfumania is incorporated in Florida and operates under the name
Perfumania. Perfumanias retail stores are located in regional malls,
manufacturers outlet malls, airports and on a stand-alone basis in suburban
strip shopping centers. The number of retail stores in operation at February 2,
2002, February 3, 2001, and January 29, 2000 were 247, 257 and 276,
respectively.

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 2001, 2000 and
1999 refers to the years ended February 2, 2002, February 3, 2001 and January
29, 2000, respectively. The fiscal year ended February 3, 2001 included 53
weeks as compared to 52 weeks for the fiscal years ended February 2, 2002 and
January 29, 2000.

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 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.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation. The Companys accumulated
deficit as of February 2, 2002 of approximately $39.2 million includes the
Companys share of the cumulative net loss of perfumania.com, inc. of
approximately $1.4 million prior to May 2000 when perfumania.com became a
wholly owned subsidiary of the Company (see Note 11).

REVENUE RECOGNITION

Revenue from wholesale transactions is recorded upon shipment of
inventory. Revenue from retail sales is recorded, net of discounts, upon
customer purchase.

29



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##### Table of Contents



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. Provision for potentially
slow moving or damaged inventory is recorded based on managements analysis of
inventory levels, turnover ratios, future sales forecasts and through specific
identification of obsolete or damaged merchandise.

PROPERTY AND EQUIPMENT

Property and equipment is carried at cost, less accumulated depreciation.
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 AND OTHER INTANGIBLE ASSETS

Goodwill and other intangible assets represents the excess purchase price
paid over net assets of businesses acquired (see Note 3 and Note 11) under the
purchase method of accounting. As a result of a new accounting rule effective
in fiscal year 2002, goodwill will no longer be amortized but will be tested
annually for impairment (see Recent Accounting Pronouncements). For each year
through fiscal year 2001, goodwill was amortized on a straight-line basis over
five years. Accumulated amortization for goodwill and other intangible assets
as of February 2, 2002 and February 3, 2001 was approximately $1.3 million and
$0.5 million, respectively.

INCOME TAXES

Income tax expense is based principally on pre-tax financial income.
Deferred tax assets and liabilities are recognized for the difference 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 might not be realized.

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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,
and the dilutive effect of those convertible notes which are convertible into
common stock.

Basic and diluted income (loss) per share are computed as follows:

|                                                                                           |                                                        |  |             |               |      |  |      |               |   |  |   |                | 
|------------------------------------------------------------------------------------------ | ------------------------------------------------------ |  | ----------- | ------------- | ---- |  | ---- | ------------- | - |  | - | -------------- | 
|                                                                                           |                                                        |  | FISCAL YEAR
|                                                                                           |                                                        |  |            
|                                                                                           |                                                        |  | 2001        |               | 2000 |  | 1999
|                                                                                           |                                                        |  |             |               |      |  |     
|Numerator:                                                                                 |                                                        |  |             |               |      |  |      |               |   |  |   |               
|                                                                                           | Net income (loss):                                     |  | $           | (3,191,657    | )    |  | $    | (6,120,291    | ) |  | $ | 1,044,182      | 
|                                                                                           |                                                        |  |             |               |      |  |      |               |   |  |   |                | 
|Denominator:                                                                               |                                                        |  |             |               |      |  |      |               |   |  |   |               
|                                                                                           | Denominator for basic income
(loss) per share          |  |             | 2,420,467     |      |  |      | 2,360,456     |   |  |   | 2,054,660      | 
|Effect of dilutive securities:                                                             |                                                        |  |             |               |      |  |      |               |   |  |   |               
|                                                                                           | Options to purchase common
stock and convertible notes |  |             |              |      |  |      |              |   |  |   | 512,245        | 
|                                                                                           |                                                        |  |             |               |      |  |      |               |   |  |   |                | 
|                                                                                           | Denominator for dilutive income
(loss) per share       |  |             | 2,420,467     |      |  |      | 2,360,456     |   |  |   | 2,566,905      | 
|                                                                                           |                                                        |  |             |               |      |  |      |               |   |  |   |                | 
|Antidilutive securities not included
in the diluted earnings (loss) per
share computation: |                                                        |  |             |               |      |  |      |               |   |  |   |               
|                                                                                           | Options to purchase common
stock                       |  |             | 606,594       |      |  |      | 570,115       |   |  |   | 17,063         | 
|                                                                                           | Exercise price                                         |  | $           | 1.64 - $21.52 |      |  | $    | 1.64 - $21.52 |   |  | $ | 15.00 - $21.52 | 

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;                                                                                                                                          
| 
| |  | 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, and;
| 
| |  | Long-term severances payable approximate fair value because discounted
cash flows using current interest rates for debt with similar
characteristics and maturity are used to estimate carrying values.                 

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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 on a store by store basis. The impairment loss
is determined based on the difference between the net book value and the fair
value of the assets, at a particular store location. 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 (SFAS
123) had been applied in measuring compensation expense for options granted to
employees and directors in fiscal years 2001, 2000 and 1999. 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 (See Note 11
for proforma disclosure).

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 permanent adjustment 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.

ADVERTISING COSTS

Advertising costs are charged to expense when incurred.

RECLASSIFICATION

Certain fiscal 2000 and 1999 amounts have been reclassified to conform
with the fiscal 2001 presentation.

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RECENT ACCOUNTING PRONOUNCEMENTS

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

In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 141 (SFAS 141), Accounting
for Business Combinations, and Statement of Financial Accounting Standards No.
142 (SFAS 142), Goodwill and Other Intangible Assets. These Statements
modify accounting for business combinations after June 30, 2001 and will affect
the Companys treatment of goodwill and other intangible assets at the start of
fiscal year 2002. The Statements require that goodwill existing at the date of
adoption be reviewed for possible impairment and that impairment tests be
periodically repeated, with impaired assets written down to fair value.
Additionally, existing goodwill and intangible assets must be assessed and
classified consistent with the Statements criteria. Amortization of goodwill
and other intangible assets with indefinite useful lives will cease.
Intangible assets with estimated useful lives will continue to be amortized
over those periods. At this time, the Company has not determined the complete
impact of these Statements. However, goodwill amortization, which totaled $0.6
million in fiscal year 2001, will no longer be recorded.

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

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

NOTE 3  ACQUISITION

In August 2000, Perfumania purchased six fragrance retail locations for
approximately $2.2 million. The purchase price was offset against advances
previously paid to the seller to source merchandise for Perfumania. The
acquisition was accounted for as an asset purchase and accordingly, the results
of operations are included in the Companys consolidated statements of
operations from the date of acquisition. The cost of the acquisition has been
allocated to the assets acquired based on their relative fair values at the
date of acquisition as determined by management with the assistance of an
independent valuation consultant. The excess of the purchase price over the
fair value of net assets acquired of approximately $1.1 million has been
recorded as an intangible asset and is currently being amortized over 5 years.
The retail locations acquired were not material to the Companys results of
operations for fiscal year 2000; therefore no proforma results are presented.

In addition, in May 2000, the Company acquired 100% of the outstanding
common stock of perfumania.com which resulted in goodwill of approximately $2.9
million. See Note 11 for further discussion.

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NOTE 4  STATEMENTS OF CASH FLOWS

Supplemental disclosures of non-cash investing and financing activities:

|                                                                                               |              |                  |                   |                  |  |                  |           |           |  |   |           |           | 
|---------------------------------------------------------------------------------------------- | ------------ | ---------------- | ----------------- | ---------------- |  | ---------------- | --------- | --------- |  | - | --------- | --------- | 
|                                                                                               |              |                  | FISCAL YEAR ENDED
|                                                                                               |              |                  |                  
|NON-CASH TRANSACTIONS                                                                          |              | February 2, 2002 |                   | February 3, 2001 |  | January 29, 2000
|                                                                                               |              |                  |                   |                  |  |                 
|Equipment under capital leases                                                                 |              | $                | 68,201            |                  |  | $                | 3,980,471 |           |  | $ | 446,121   |          
|Unrealized gain (loss) on investments                                                          |              |                  | 391,429           |                  |  |                  | (150,095  | )         |  |   |          |          
|Change in equity investment in affiliate
as part of an initial public offering                 |              |                  |                  |                  |  |                  |          |           |  |   | 9,746,256 |          
|Subordinated debt issued to affiliate                                                          |              |                  | 3,000,000         |                  |  |                  | 3,000,000 |           |  |   | 8,000,000 |          
|Reduction in accounts payable associated
with the exchange of treasury stock
with an affiliate |              |                  |                  |                  |  |                  |          |           |  |   | 4,506,970 |          
|Treasury stock issued in exchange for a
reduction of debt owed to an affiliate                 |              |                  |                  |                  |  |                  |          |           |  |   | 4,820,794 |          
|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                   |              |                  | 115,458           |                  |  |                  | 3,724,892 |           |  |   | 317,622   |          
|Cash paid during the period for:                                                               |              |                  |                   |                  |  |                  |           |           |  |   |           |          
|                                                                                               | Interest     |                  | $                 | 3,466,420        |  |                  | $         | 6,116,313 |  |   | $         | 4,801,069 | 
|                                                                                               | Income taxes |                  | $                 | 150,000          |  |                  | $         | 150,391   |  |   | $         |          | 

NOTE 5  PROPERTY AND EQUIPMENT

Property and equipment includes the following:

|                                  |                                           |   |                  |             |                  |   |            |             |   |  |                        |  | 
|--------------------------------- | ----------------------------------------- | - | ---------------- | ----------- | ---------------- | - | ---------- | ----------- | - |  | ---------------------- |  | 
|                                  |                                           |   |                  |             |                  |   |            |             |   |  | Estimated Useful Lives
|                                  |                                           |   | February 2, 2002 |             | February 3, 2001 |   | (In Years)
|                                  |                                           |   |                  |             |                  |   |           
|Furniture, fixtures and equipment |                                           | $ | 21,274,751       |             |                  | $ | 21,492,091 |             |   |  | 5-7                    | 
|Leasehold improvements            |                                           |   | 21,591,254       |             |                  |   | 21,513,831 |             |   |  | 10                     | 
|Equipment under capital leases    |                                           |   | 6,374,908        |             |                  |   | 6,238,959  |             |   |  | 5                      | 
|                                  |                                           |   |                  |             |                  |   |            |             |   |  |                        | 
|                                  |                                           |   | 49,240,913       |             |                  |   | 49,244,881 |             |   |  |                        | 
|Less:                             |                                           |   |                  |             |                  |   |            |             |   |  |                        | 
|                                  | Accumulated depreciation and amortization |   |                  | (27,891,946 | )                |   |            | (22,832,030 | ) |  |                        |  | 
|                                  |                                           |   |                  |             |                  |   |            |             |   |  |                        | 
|                                  |                                           | $ | 21,348,967       |             |                  | $ | 26,412,851 |             |   |  |                        | 
|                                  |                                           |   |                  |             |                  |   |            |             |   |  |                        | 

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Depreciation and amortization expense for fiscal years 2001, 2000, and
1999 was $6,019,720, $5,229,185 and $4,725,691, respectively. Accumulated
depreciation for equipment under capital leases was $2,901,101 and $1,842,650
as of February 2, 2002 and February 3, 2001, respectively.

NOTE 6  RELATED PARTY TRANSACTIONS

Notes receivable from a shareholder and officers were $2,881,624 and
$3,844,278 as of February 2, 2002 and February 3, 2001, respectively. The notes
are unsecured, mature February 1, 2003 and bear interest at prime plus 1% per
annum. Principal and interest are payable in full at maturity. Total interest
income recognized during fiscal years 2001, 2000, and 1999 was approximately
$273,000, $247,000 and $70,000, respectively. There was no accrued interest
receivable at February 2, 2002 and approximately $12,000 at February 3, 2001.

During fiscal year 2000, the Company purchased 314,000 shares of Take to
Auction.Com, Inc. (TTA), an Internet auction site, for approximately $2.5
million. In June 2000, the Company acquired approximately 139,000 shares of
TTAs common stock upon conversion of a $1.0 million convertible promissory
note receivable.

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

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

In September 2001, TTA effected a corporate reorganization
(Reorganization) as a result of which TTA became a wholly owned subsidiary of
Nimbus Group, Inc. (Nimbus). As a result of the Reorganization; the
Companys shares of TTA common stock were exchanged for an equal number of
shares of Nimbus common stock.

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

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

Ilia Lekach, the Companys Chairman of the Board and Chief Executive
Officer was Chairman of the Board of TTA from October 1999 until the
Reorganization and has been Chairman of the Board of Nimbus since the
Reorganization and Interim Chief Executive Officer since January 2002. Horacio
Groisman, M.D., one of our Directors, served as Vice Chairman of the Board of
TTA from October 1999 until the Reorganization and was Vice Chairman of the
Board of Nimbus since the Reorganization until his resignation in October 2001.

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 $19,598,000, $22,149,000, and $30,100,000, in fiscal
years 2001, 2000 and 1999, representing approximately 17%, 20% and 22%,
respectively, of the Companys total purchases. The amount due to Parlux on
February 2, 2002 and February 3, 2001 was approximately $14,673,000 including a
$100,000 subordinated interest bearing secured note payable and
$13,413,000 of accounts payable, respectively. Accounts payable due to
Parlux are non-interest bearing.

During fiscal year 2001, the Company purchased approximately $4,491,000 of
merchandise from a company owned by one of our directors who is also the
brother of the Companys Chairman of the Board and Chief Executive Officer and
approximately

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$170,000 from a different company owned by another brother of the
Companys Chairman of the Board and Chief Executive Officer. The amounts due
to these companies at February 2, 2002 was approximately $2,025,000 and
$170,000, respectively, and are included in accounts payable affiliate in the
accompanying consolidated balance sheet as of February 2, 2002.

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

In August 1999, the Company transferred 378,102 shares of the Companys
treasury stock to Parlux in consideration for a partial reduction of the
Companys outstanding trade indebtedness balance of approximately $4.5 million.
The transfer price was based on a per share price of $11.92, which approximated
90% of the average daily closing price on the Companys common stock for the
previous 20 business days. As a result of the transaction, the Company incurred
a charge of approximately $314,000 which was recorded to cost of goods sold in
the third quarter of fiscal year 1999.

In December 1999, the Company loaned $1,000,000 to TTA. Due to the
uncertainty of collectability of the note, the Company wrote off the note and
the related interest receivable which together totaled approximately $1.0
million as of January 29, 2000. The related expense is included in the
provision for impairment of assets and store closings in the accompanying
consolidated statements of operations in fiscal year 1999. The Company
converted the loan into 138,889 shares of the TTA common stock and, as a result
of TTAs successful initial public offering, the $1.0 million principal balance
and related interest previously expensed was reversed in the first quarter of
fiscal 2000.

In March 2000, the Company loaned an additional $1,000,000 to TTA. The
note was repaid in full in June 2000. In connection with both the December 1999
and March 2000 loans to TTA, the Company was granted warrants (the Warrants)
to purchase a total of 200,000 shares of the common stock of TTA at $8 per
share. The Warrants were exercisable in whole or in part at any time commencing
on the business day immediately following the effective date of the
Registration Statement and expiring on the first anniversary of the effective
date of the Registration Statement. The Company did not exercise the Warrants.

In October 2000, the Company entered into a six month service agreement
with TTA to provide them with distribution and logistics functions. This
agreement, unless otherwise terminated, will automatically renew for successive
one year terms. This service agreement provides for order processing, inventory
management, warehousing, fulfillment and shipping of product. The service fee
is variable based on the volume of TTA sales. Monthly minimum fees apply if
specified volume levels are not obtained. Total fees earned during fiscal
years 2001 and 2000 were approximately $177,000 and $72,000, respectively. The
service agreement was terminated effective September 1, 2001.

In September 2001, the Company entered into a licensing agreement with TTA
to license the Companys retail fragrance Internet Web site. Under the terms
of the agreement, TTA pays the Company a royalty of 5% of defined product sales
for sales up to $8 million per annum, decreasing to 3% on sales exceeding $11
million per annum. Royalty income under this agreement for the year ended
February 2, 2002 was approximately $88,000. Additionally, TTA rents
approximately 20,000 square feet of warehouse facilities from us for
approximately
$15,000 per month. As of February 2, 2002, the amount due from TTA was
approximately $811,000, and is included in prepaid expenses and other current
assets in the accompanying consolidated balance sheet as of February 2, 2002.

In October 2000, TTA loaned the Company $500,000. The loan was unsecured
with interest at the rate charged by the Companys major lender. The loan,
including interest, was repaid in December 2000.

In January 2001, the Company entered into a severance agreement with an
executive officer and incurred a charge of approximately $371,000.
Additionally, in May 2000 and July 2000, the Company entered into severance
agreements with two executive officers. Based upon the borrowing interest rate
on the Companys line of credit, the Company discounted the future
payments
required by these agreements resulting in a charge of approximately $724,000.
The resulting expense is reflected in selling, general and administrative
expenses in the accompanying consolidated statements of operations for fiscal
year 2000.

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NOTE 7  BANK LINE OF CREDIT AND NOTES PAYABLE

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

|                                                                                                                                                                                          |  |                  |            |                  |  |   |            |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ---------- | ---------------- |  | - | ---------- | -
|                                                                                                                                                                                          |  | February 2, 2002 |            | February 3, 2001
|                                                                                                                                                                                          |  |                  |            |                 
|Bank
line of credit, which is classified as a current liability, interest payable monthly, expiring May 2003, secured by
a pledge of substantially all of Perfumanias assets (see below) |  | $                | 30,734,662 |                  |  | $ | 33,526,504 |  
|                                                                                                                                                                                          |  |                  |            |                  |  |   |            |  
|Note payable bearing interest at 9.7% payable in a monthly
installment of $11,050 including interest, through March 2003,
secured by fixtures                                             |  | $                | 154,836    |                  |  | $ | 693,166    |  
|Severances payable bearing interest at 9.5% payable in monthly installments
ranging from $4,000-$22,000 including interest, through December 2002                                         |  |                  | 331,243    |                  |  |   | 955,887    |  
|                                                                                                                                                                                          |  |                  |            |                  |  |   |            |  
|                                                                                                                                                                                          |  |                  | 486,079    |                  |  |   | 1,649,053  |  
|Less: current portion                                                                                                                                                                     |  |                  | (454,219   | )                |  |   | (1,210,554 | )
|                                                                                                                                                                                          |  |                  |            |                  |  |   |            |  
|Long-term portion                                                                                                                                                                         |  | $                | 31,860     |                  |  | $ | 438,499    |  
|                                                                                                                                                                                          |  |                  |            |                  |  |   |            |  

The aggregate maturities of notes payable at
February 2, 2002 are as follows:

|            |  |   |         | 
|----------- |  | - | ------- | 
|FISCAL YEAR |  |   |         | 
|            |  |   |         | 
|2002        |  | $ | 454,219 | 
|2003        |  |   | 31,860  | 
|2004        |  |   |        | 
|2005        |  |   |        | 
|2006        |  |   |        | 
|            |  |   |         | 
|            |  | $ | 486,079 | 
|            |  |   |         | 

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

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

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NOTE 8  CONVERTIBLE NOTES PAYABLE

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

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

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

In February 2001, the Company entered into a Convertible Note Option
Repurchase Agreement (the Agreement) with the holders of the Companys
outstanding Series A, B, C, and D Convertible Notes. The Agreement provided
that the Company had the monthly option to repurchase the outstanding $8.8
million convertible notes over an eleven month period beginning February 2001,
at a price equal to the unpaid principal balance plus a 20% premium. The
portion of the notes redeemable in each of the eleven months varied as per a
specified redemption schedule. In the event that the Company exercised its
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 the Companys common stock. During fiscal year 2001, the Company repaid
$4.1 million to the note holders. The premium paid of approximately $0.7
million upon the repurchase of the convertible notes has been reflected in
additional paid in capital.

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

In accordance with accounting literature, when debt is convertible at a
discount from the then current common stock market price, the discounted amount
represents an incremental yield, or a beneficial conversion feature, which
should be recognized as a return to the debt holders. Based on the market
price of the Companys common stock at the date of issuance, our Series C and
Series D Notes had beneficial conversion features of approximately $1.2 million
and $1.4 million, respectively, at such point in time which represented a
non-cash charge that is included in interest expense on the accompanying
consolidated statements of operations in fiscal year 2000.

NOTE 9  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 segment of approximately $0.7 million, $0.5 million and $1.6 million
during the fiscal years ended 2001, 2000 and 1999, 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 (recovery) for impairment of assets
and store closings in the accompanying consolidated statements of operations.

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NOTE 10  INCOME TAXES

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

|                              |         |   |                   |         |                  |   |                  |   |  |   |          |          |  
|----------------------------- | ------- | - | ----------------- | ------- | ---------------- | - | ---------------- | - |  | - | -------- | -------- | -
|                              |         |   | FISCAL YEAR ENDED
|                              |         |   |                  
|                              |         |   | February 2, 2002  |         | February 3, 2001 |   | January 29, 2000
|                              |         |   |                   |         |                  |   |                 
|Current:                      |         |   |                   |         |                  |   |                  |   |  |   |          |         
|                              | Federal |   | $                 | 211,298 |                  |   | $                |  |  |   | $        | (124,000 | )
|                              | State   |   |                   |        |                  |   |                  |  |  |   |          |         |  
|                              |         |   |                   |         |                  |   |                  |   |  |   |          |         
|                              |         |   | 211,298           |         |                  |   |                 |   |  |   | (124,000 | )       
|                              |         |   |                   |         |                  |   |                  |   |  |   |          |         
|Deferred:                     |         |   |                   |         |                  |   |                  |   |  |   |          |         
|                              | Federal |   |                   |        |                  |   |                  |  |  |   |          |         |  
|                              | State   |   |                   |        |                  |   |                  |  |  |   |          |         |  
|                              |         |   |                   |         |                  |   |                  |   |  |   |          |         
|                              |         |   |                   |         |                  |   |                  |   |  |   |          |         
|                              |         |   |                   |         |                  |   |                  |   |  |   |          |         
|Total tax
benefit (provision) |         | $ | 211,298           |         |                  | $ |                 |   |  | $ | (124,000 | )       
|                              |         |   |                   |         |                  |   |                  |   |  |   |          |         

The fiscal year 2001
tax benefit is primarily due to a change in the Federal tax law.

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

|                                                |  |                   |            |                  |  |                  |            |   |  |   |           |  
|----------------------------------------------- |  | ----------------- | ---------- | ---------------- |  | ---------------- | ---------- | - |  | - | --------- | -
|                                                |  | FISCAL YEAR ENDED
|                                                |  |                  
|                                                |  | February 2, 2002  |            | February 3, 2001 |  | January 29, 2000
|                                                |  |                   |            |                  |  |                 
|Benefit (provision) at federal statutory rates  |  | $                 | 1,208,005  |                  |  | $                | 2,080,899  |   |  | $ | (492,514  | )
|Non-deductible expenses                         |  |                   | (1,326,569 | )                |  |                  | (2,221,453 | ) |  |   | (709,450  | )
|Reduction (increase) in the valuation allowance |  |                   | 372,561    |                  |  |                  | (44,370    | ) |  |   | 1,072,545 |  
|Other                                           |  |                   | (42,699    | )                |  |                  | 184,924    |   |  |   | 5,419     |  
|                                                |  |                   |            |                  |  |                  |            |   |  |   |           |  
|Benefit (provision) for income taxes            |  | $                 | 211,298    |                  |  | $                |           |   |  | $ | (124,000  | )
|                                                |  |                   |            |                  |  |                  |            |   |  |   |           |  

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

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|                          |                                               |   |                   |           |                  |   |             |           | 
|------------------------- | --------------------------------------------- | - | ----------------- | --------- | ---------------- | - | ----------- | --------- | 
|                          |                                               |   | FISCAL YEAR ENDED
|                          |                                               |   |                  
|                          |                                               |   | February 2, 2002  |           | February 3, 2001
|                          |                                               |   |                   |           |                 
|Assets:                   |                                               |   |                   |           |                  |   |             |          
|                          | Net operating loss & tax credit carryforwards |   | $                 | 5,121,307 |                  |   | $           | 5,728,264 | 
|                          | Inventories                                   |   |                   | 942,835   |                  |   |             | 1,207,816 | 
|                          | Property and equipment                        |   |                   | 3,389,797 |                  |   |             | 2,803,943 | 
|                          | Allowance for doubtful accounts & other       |   |                   | 120,444   |                  |   |             | 116,286   | 
|                          | Reserves                                      |   |                   | 188,837   |                  |   |             | 502,056   | 
|                          | Goodwill                                      |   |                   | 340,030   |                  |   |             | 137,823   | 
|                          | Unrealized loss on securities                 |   |                   | 1,076,905 |                  |   |             | 1,129,767 | 
|                          | Other                                         |   |                   | 159,251   |                  |   |             | 86,012    | 
|                          |                                               |   |                   |           |                  |   |             |          
|Total deferred tax assets |                                               |   | 11,339,406        |           |                  |   | 11,711,967  |          
|Valuation allowance       |                                               |   | (11,339,406       | )         |                  |   | (11,711,967 | )        
|                          |                                               |   |                   |           |                  |   |             |          
|Net deferred tax assets   |                                               | $ |                  |           |                  | $ |            |          
|                          |                                               |   |                   |           |                  |   |             |          

A valuation allowance is provided
for deferred tax assets as management believes that the benefit of the deferred
tax asset may 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 February 2,
2002, the Company has net operating loss carryforwards of approximately $13.5
million, which begin to expire in the year 2017.

NOTE 11  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 has been retroactively adjusted to
reflect this change.

STOCK SUBSCRIPTION

In March 1999, the Company entered into Subscription Agreements for the
sale of 235,293 shares of the Companys common stock to a group of private
investors at the agreed upon price of $8.50 per share. The proceeds of $2
million were received in January 1999. The Subscription Agreements required
that the Company file the appropriate registration statement with the
Securities and Exchange Commission within six months from the date of the
Subscription Agreements to permit the registered resale of the shares by the
investors in open market transactions. If on the effective date of the
registration statement, the market price was less than $8.50 per share, the
Company was obligated to reimburse the investor group the lesser of 1) the
product of the difference between $8.50 and the closing bid price of the
Companys common stock on the effective date of the registration statement
multiplied by the number of shares issued under the Subscription Agreements or
2) the product of $2.00 multiplied by the number of shares issued under the
Subscription Agreements. As of January 30, 1999, the potential redeemable
amount of $470,588 was recorded as redeemable common equity and the remaining
$1,529,412 was recorded as capital in excess of par value in the accompanying
consolidated balance sheets. The Company filed a registration statement in
September 1999. Since the market price was less than $8.50 per share on the
effective date of the registration statement, the Company reimbursed the
investor group $470,588 in October 1999.

INVESTMENT IN AFFILIATE

During September 1999, perfumania.com, inc., the Companys then
wholly-owned subsidiary, completed an initial public offering (the Offering)
of its common stock representing approximately 47% of the common stock
outstanding following the Offering. perfumania.com, inc. offered 3,500,000
shares of its common stock, which included 1,000,000 shares held by the
Company.

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The Company recorded a gain on its sale of the 1,000,000 shares of
perfumania.com, inc. common stock in the Offering totaling approximately $5.9
million. The gain recorded was net of issuance costs of approximately $1.1
million which included the Companys portion of the fair value of common stock
warrants issued by perfumania.com, inc. (approximately $0.4 million) and is
included in gain on sale of affiliates common stock in the accompanying
consolidated statement of operations for fiscal year 2000.

In connection with the public offering, the Company recorded a $9.7
million increase in additional paid-in capital representing its then 53% (four
million shares) interest in perfumania.com, inc.s net proceeds in the initial
public offering under the equity method of accounting.

On October 4, 1999, Perfumania sold certain assets to perfumania.com, inc.
consisting primarily of an e-commerce greeting card website for $500,000, of
which $450,000 was reflected as a dividend, since the Companys cost basis in
such assets amounted to $50,000.

During December 1999, Perfumania signed an Option Agreement (the
Agreement) with an investment firm granting the investment firm two options
to acquire up to 2,500,000 shares of perfumania.com, inc. from the Company for
consideration in the amount of $12,500. The first option provided that the
investment firm could purchase 2,000,000 shares for $6.00 per share on or prior
to January 15, 2000 and provided that this option was exercised, a second
option to purchase 500,000 shares for $8.00 per share on or prior to the
earlier to occur of December 31, 2000 or various other events, as defined in
the Agreement. The investment firm exercised the first option for the
2,000,000 shares on January 11, 2000 and the Company realized proceeds of
$12,000,000. As a result, the Company recognized a gain of approximately $9.1
million which is included in the accompanying consolidated statement of
operations for fiscal year 1999 as a gain on sale of affiliates common stock.
The Agreement provided that when the first option was exercised, nominees of
the investment firm would be appointed to constitute the majority of the
members of the Board of Directors of perfumania.com, inc. subject to
satisfaction of applicable SEC regulations. Subject to the exercise of the
first option, the Agreement limited the amount of shares of perfumania.com,
inc. that could be sold by the Company, as well as the timing of these sales.

On February 10, 2000, Envision Development Corporation (EDC) entered
into a plan of merger with perfumania.com, inc. The plan of merger provided
for among other things, the merger of EDC with perfumania.com, inc. As a
result, perfumania.com, inc. became a direct wholly owned subsidiary of EDC and
each share of common stock, par value $0.01 per share, of perfumania.com, inc.
issued and outstanding before the plan of merger was converted into and
exchanged for one share of common stock, (par value $0.01 per share), of EDC.

In May 2000, the Company acquired 100% of the outstanding common stock of
perfumania.com, inc. from EDC in exchange for 400,000 shares of EDC common
stock. As a result, perfumania.com, inc. became a wholly owned subsidiary of
the Company. The acquisition of perfumania.com, inc. has been accounted for
using the purchase method of accounting, and accordingly, the purchase price
was allocated to the assets acquired and liabilities assumed based on their
estimated relative fair values at the acquisition date. Tangible assets
acquired consisted primarily of merchandise inventories. Based on an
independent appraisal, the transaction was valued at approximately $4.7
million. As a result, the Company recognized a gain of approximately $4.5
million, which is included in the accompanying consolidated statement of
operations for fiscal year 2000 as a gain on sale of affiliates common stock.
The excess of the purchase price over the fair value of tangible net assets
acquired of approximately $2.9 million is included in goodwill in the
accompanying consolidated balance sheets and is being amortized over 5 years.
The results of operations for perfumania.com, inc. are included with the
Companys results from the date of acquisition. Prior to May 2000, the
Companys ownership in EDC was accounted for under the equity method of
accounting. The acquisition of perfumania.com, inc. was not material to the
Companys results of operation, and therefore no proforma results are
presented.

Additionally, in May 2000, the Company sold 100,000 shares of EDC common
stock for $2.5 million to a majority shareholder of EDC, and in a related
transaction, the second option of the Agreement was exercised and an investment
firm acquired from the Company 500,000 shares of EDC common stock at $8.00 per
share. As a result of these transactions, the Company received total cash
proceeds of $6.5 million and realized a gain of approximately $5.5 million. As
of January 29, 2000, Perfumanias investment in and advances to partially-owned
equity affiliates consisted of a 26.67% (two million shares) interest in
perfumania.com, inc. which totaled approximately $2.6 million and advances in
the amount of approximately $0.2 million. Effective May 2000, perfumania.com
became a wholly-owned subsidiary of the Company.

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In December 2000, the Company wrote off the remaining investment in EDC of
approximately $0.6 million, representing 1,000,000 shares of EDCs common
stock, due to EDC ceasing operations. This loss is included in realized loss on
investments on the accompanying consolidated statement of operations for fiscal
year 2000.

INVESTMENTS AVAILABLE FOR SALE

During fiscal year 2000, the Company purchased 314,000 shares of TTA for
approximately $2.5 million. In June 2000, the Company acquired approximately
139,000 shares of TTAs common stock upon conversion of a $1 million
convertible promissory note receivable from them. In January 2002 and 2001, the
Company received 300,000 and 250,000, respectively, shares of TTAs common
stock as partial payment on a loan receivable from an officer of the Company.
As of February 2, 2002, the Company owns approximately 1,003,000 shares of
TTAs common stock representing approximately 13% of their total outstanding
shares.

See also TTA
Reorganization in Note 6 to these consolidated financial
statements.

As of February 3, 2001, the market price for TTAs common stock was below
the Companys average cost per share of $5.38. Management believes the TTA
concept has merit and it expects that their results of operations and market
value will improve in the future. However, in consideration of accounting
guidance that considers a six to nine month decline in stock price to be other
than temporary, the Company has recorded a non-cash charge of approximately
$3.1 million in realized loss on investments on the consolidated statements of
operations for fiscal year 2000.

During fiscal year 2000, the Company purchased for cash totaling
approximately $1.6 million approximately 343,000 shares of common stock of The
Sportmans Guide, Inc. (SGI), representing approximately 7.0% of SGIs
outstanding shares of common stock. SGI is a marketer of value priced outdoor
gear and general merchandise. During fiscal year 2000, the Company sold
approximately 340,000 shares of SGI and realized a loss on the sale of these
securities of approximately $1.1 million, which is included in realized loss on
investments on the accompanying consolidated statements of operations.

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 is included in shareholders equity as accumulated other
comprehensive income in the amount of $241,334 on the accompanying consolidated
balance sheet as of February 2, 2002.

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
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 February 2, 2002, no preferred stock had
been issued.

TREASURY STOCK

In December 1999, the Companys Board of Directors approved the repurchase
by the Company of up to 375,000 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 January 2001, the Board
approved an increase in the stock repurchase program by an additional 250,000
shares and in February 2002, the Board approved an increase in the stock
repurchase program by an additional 250,000 shares. Pursuant to these
authorizations, the Company has repurchased approximately 767,000 shares of
common stock for approximately $7,039,000 during fiscal 1999, 2000 and 2001,
including approximately 358,000 shares for $1.4 million in fiscal year 2001.

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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, are 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.

The Company has elected to follow the compensation measurement
requirements prescribed by APB 25. Had compensation costs for the Companys
Plans been determined based on the fair market value at the grant dates of
options granted consistent with the method of SFAS 123, the Companys net
income (loss) and diluted net income (loss) per share would have been reduced
to the pro-forma amounts indicated below:

|                                     |             |  |              |            |      |  |      |            |   |  |   |           |  
|------------------------------------ | ----------- |  | ------------ | ---------- | ---- |  | ---- | ---------- | - |  | - | --------- | -
|                                     |             |  | FISCAL YEARS
|                                     |             |  |             
|                                     |             |  | 2001         |            | 2000 |  | 1999
|                                     |             |  |              |            |      |  |     
|Net income (loss):                   |             |  |              |            |      |  |      |            |   |  |   |          
|                                     | As reported |  | $            | (3,191,657 | )    |  | $    | (6,120,291 | ) |  | $ | 1,044,182 |  
|                                     | Proforma    |  | $            | (3,588,361 | )    |  | $    | (6,685,352 | ) |  | $ | (341,025  | )
|Diluted net income (loss) per share: |             |  |              |            |      |  |      |            |   |  |   |          
|                                     | As reported |  | $            | (1.32      | )    |  | $    | (2.59      | ) |  | $ | 0.41      |  
|                                     | Proforma    |  | $            | (1.47      | )    |  | $    | (2.84      | ) |  | $ | (0.12     | )

In calculating the proforma net income (loss) per share for 2001, 2000 and
1999, 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 2001, 2000 and 1999:

|                      |  |         |  |         |  |          
|--------------------- |  | ------- |  | ------- |  | ---------
|                      |  | 2001    |  | 2000    |  | 1999     
|                      |  |         |  |         |  |          
|Expected life (years) |  | 7 years |  | 7 years |  | 3-7 years
|Interest rate         |  | 4.80%   |  | 6.07%   |  | 4.72%    
|Volatility            |  | 158%    |  | 101%    |  | 126%     
|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.

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A summary of the Companys option activity, and related information for
each of the three fiscal years ended February 2, 2002 is as follows:

|                                                               |  |        |         |       |  |             |       |       |  |        |         |             |  |   |       |  |  |             |         |   |  |   |       | 
|-------------------------------------------------------------- |  | ------ | ------- | ----- |  | ----------- | ----- | ----- |  | ------ | ------- | ----------- |  | - | ----- |  |  | ----------- | ------- | - |  | - | ----- | 
|                                                               |  | 2001   |         | 2000  |  | 1999       
|                                                               |  |        |         |       |  |            
|                                                               |  |        |         |       |  | Weighted    |       |       |  |        |         | Weighted    |  |   |       |  |  | Weighted   
|                                                               |  |        |         |       |  | Average     |       |       |  |        |         | Average     |  |   |       |  |  | Average    
|                                                               |  |        |         |       |  | Exercisable |       |       |  |        |         | Exercisable |  |   |       |  |  | Exercisable
|                                                               |  | Shares |         | Price |  | Shares      |       | Price |  | Shares |         | Price      
|                                                               |  |        |         |       |  |             |       |       |  |        |         |            
|Outstanding at beginning of year                               |  |        | 570,115 |       |  | $           | 6.44  |       |  |        | 496,713 |             |  | $ | 5.24  |  |  |             | 439,650 |   |  | $ | 1.84  | 
|Granted                                                        |  |        | 78,625  |       |  |             | 3.40  |       |  |        | 147,625 |             |  |   | 11.20 |  |  |             | 156,063 |   |  |   | 13.20 | 
|Exercised                                                      |  |        | (4,750  | )     |  |             | 2.00  |       |  |        | (46,056 | )           |  |   | 2.72  |  |  |             | (86,346 | ) |  |   | 2.00  | 
|Cancelled                                                      |  |        | (37,396 | )     |  |             | 14.12 |       |  |        | (28,167 | )           |  |   | 16.32 |  |  |             | (12,654 | ) |  |   | 2.00  | 
|                                                               |  |        |         |       |  |             |       |       |  |        |         |             |  |   |       |  |  |             |         |   |  |   |       | 
|Outstanding at end of year                                     |  |        | 606,594 |       |  | $           | 5.60  |       |  |        | 570,115 |             |  | $ | 6.44  |  |  |             | 496,713 |   |  | $ | 5.24  | 
|                                                               |  |        |         |       |  |             |       |       |  |        |         |             |  |   |       |  |  |             |         |   |  |   |       | 
|Options exercisable at end of year                             |  |        | 480,304 |       |  | $           | 5.24  |       |  |        | 460,824 |             |  | $ | 5.36  |  |  |             | 470,088 |   |  | $ | 4.72  | 
|Weighted-average fair value of options
granted during the year |  |        | 78,625  |       |  | $           | 3.31  |       |  |        | 147,625 |             |  | $ | 9.36  |  |  |             | 156,063 |   |  | $ | 11.48 | 

The following table summarizes information about stock options outstanding
at February 2, 2002:

|                |                |             |         |          |  |             |                     |             |                     |          |          |   |  |  |           |         |          |   |       |      | 
|--------------- | -------------- | ----------- | ------- | -------- |  | ----------- | ------------------- | ----------- | ------------------- | -------- | -------- | - |  |  | --------- | ------- | -------- | - | ----- | ---- | 
|                |                |             |         |          |  |             | 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   
|                |                |             |         |          |  |             |                     |             |                     |         
|                | $1.64 - $2.00  |             |         | 312,906  |  |             | $                   | 1.83        |                     |          |          | 6 |  |  |           | 312,906 |          |   | $     | 1.83 | 
|                | $2.48 - $12.00 |             |         | 175,813  |  |             |                     | 6.88        |                     |          |          | 9 |  |  |           | 63,480  |          |   |       | 9.29 | 
|$12.52 - $21.52 |                |             | 117,875 |          |  |             | 13.77               |             |                     |          | 8        |   |  |  | 103,918   |         |          |   | 13.12 |     
|                |                |             |         |          |  |             |                     |             |                     |          |          |   |  |  |           |         |          |   |       |     
|                |                |             | 606,594 |          |  | $           | 5.60                |             |                     |          | 7        |   |  |  | 480,304   |         |          | $ | 5.24  |     
|                |                |             |         |          |  |             |                     |             |                     |          |          |   |  |  |           |         |          |   |       |     

NOTE 12- 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 $10,500, 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
2001, 2000 and 1999 were not significant.

NOTE 13  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

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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 February 2, 2002 and February 3, 2001 was
approximately $166,000 and $450,000, respectively, which is included in accrued
expenses and other liabilities in the accompanying consolidated balance sheets.

The Company leases space for its office, warehouse and retail stores. The
lease terms vary from one to ten years, 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.

Rent expense for fiscal years 2001, 2000, and 1999 was approximately
$15,482,000, $16,156,000, and $16,473,000, respectively. Future minimum lease
commitments under non-cancelable operating leases at February 2, 2002 are as
follows:

|                                    |  |   |            | 
|----------------------------------- |  | - | ---------- | 
|FISCAL YEAR                         |  |   |            | 
|                                    |  |   |            | 
|2002                                |  | $ | 12,216,388 | 
|2003                                |  |   | 8,831,125  | 
|2004                                |  |   | 6,917,641  | 
|2005                                |  |   | 5,507,461  | 
|2006                                |  |   | 3,967,964  | 
|Thereafter                          |  |   | 3,929,848  | 
|                                    |  |   |            | 
|Total future minimum lease payments |  | $ | 41,370,427 | 
|                                    |  |   |            | 

The Companys capitalized leases consist primarily of computer hardware
and software. The lease terms vary from one to five 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 February 2, 2002:

|                                        |  |   |            |  
|--------------------------------------- |  | - | ---------- | -
|FISCAL YEAR                             |  |   |            |  
|                                        |  |   |            |  
|2002                                    |  | $ | 1,859,358  |  
|2003                                    |  |   | 1,060,976  |  
|2004                                    |  |   | 36,791     |  
|2005                                    |  |   | 14,967     |  
|2006                                    |  |   | 11,305     |  
|                                        |  |   |            |  
|Total future minimum lease payments     |  |   | 2,983,397  |  
|Less: Amount representing interest      |  |   | (242,464   | )
|                                        |  |   |            |  
|Present value of minimum lease payments |  |   | 2,740,933  |  
|Less: Current portion                   |  |   | (1,664,827 | )
|                                        |  |   |            |  
|                                        |  | $ | 1,076,106  |  
|                                        |  |   |            |  

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 $1.2 million as of February 2, 2002 which serves as security for
performance of an equipment lease with a vendor for point-of-sale registers.
Management believes that the carrying value approximates fair value and does
not expect any material losses from its 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.

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NOTE 14  SEGMENT INFORMATION

Perfumania 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:

|                                          |           |                                       |   |                   |             |                  |   |                  |             |  |   |             |             | 
|----------------------------------------- | --------- | ------------------------------------- | - | ----------------- | ----------- | ---------------- | - | ---------------- | ----------- |  | - | ----------- | ----------- | 
|                                          |           |                                       |   | FISCAL YEAR ENDED
|                                          |           |                                       |   |                  
|                                          |           |                                       |   | February 2, 2002  |             | February 3, 2001 |   | January 29, 2000
|                                          |           |                                       |   |                   |             |                  |   |                 
|Net sales to external customers:          |           |                                       |   |                   |             |                  |   |                  |             |  |   |            
|                                          | Retail    |                                       | $ | 184,141,191       |             |                  | $ | 185,371,092      |             |  | $ | 155,952,646 |            
|                                          | Wholesale |                                       |   | 9,210,420         |             |                  |   | 21,198,489       |             |  |   | 36,975,463  |            
|                                          |           |                                       |   |                   |             |                  |   |                  |             |  |   |            
|                                          |           | Total net sales to external customers |   | $                 | 193,351,611 |                  |   | $                | 206,569,581 |  |   | $           | 192,928,109 | 
|                                          |           |                                       |   |                   |             |                  |   |                  |             |  |   |            
|Intersegment sales (excluded from above): |           |                                       |   |                   |             |                  |   |                  |             |  |   |            
|                                          | Retail    |                                       | $ | 700,370           |             |                  | $ |                 |             |  | $ |            |            
|                                          | Wholesale |                                       |   | 865,993           |             |                  |   | 150,592          |             |  |   | 18,556,182  |            
|                                          |           |                                       |   |                   |             |                  |   |                  |             |  |   |            
|                                          |           | Total intersegment sales              |   | $                 | 1,566,363   |                  |   | $                | 150,592     |  |   | $           | 18,556,182  | 
|                                          |           |                                       |   |                   |             |                  |   |                  |             |  |   |            
|Cost of goods sold:                       |           |                                       |   |                   |             |                  |   |                  |             |  |   |            
|                                          | Retail    |                                       | $ | 105,673,248       |             |                  | $ | 106,153,003      |             |  | $ | 87,339,377  |            
|                                          | Wholesale |                                       |   | 7,443,613         |             |                  |   | 16,982,114       |             |  |   | 29,956,394  |            
|                                          |           |                                       |   |                   |             |                  |   |                  |             |  |   |            
|                                          |           | Total cost of goods sold              |   | $                 | 113,116,861 |                  |   | $                | 123,135,117 |  |   | $           | 117,295,771 | 
|                                          |           |                                       |   |                   |             |                  |   |                  |             |  |   |            
|Gross profit:                             |           |                                       |   |                   |             |                  |   |                  |             |  |   |            
|                                          | Retail    |                                       | $ | 78,467,943        |             |                  | $ | 79,218,089       |             |  | $ | 68,613,269  |            
|                                          | Wholesale |                                       |   | 1,766,807         |             |                  |   | 4,216,375        |             |  |   | 7,019,069   |            
|                                          |           |                                       |   |                   |             |                  |   |                  |             |  |   |            
|                                          |           | Total gross profit                    |   | $                 | 80,234,750  |                  |   | $                | 83,434,464  |  |   | $           | 75,632,338  | 
|                                          |           |                                       |   |                   |             |                  |   |                  |             |  |   |            
|Total assets:                             |           |                                       |   |                   |             |                  |   |                  |             |  |   |            
|                                          | Retail    |                                       | $ | 94,917,924        |             |                  | $ | 94,483,606       |             |  | $ | 86,474,006  |            
|                                          | Wholesale |                                       |   | 270,859           |             |                  |   | 8,075,536        |             |  |   | 11,821,552  |            
|                                          | Corporate |                                       |   | 7,369,843         |             |                  |   | 4,769,675        |             |  |   | 7,360,840   |            
|                                          |           |                                       |   |                   |             |                  |   |                  |             |  |   |            
|                                          |           | Total assets                          |   | $                 | 102,558,626 |                  |   | $                | 107,328,817 |  |   | $           | 105,656,398 | 
|                                          |           |                                       |   |                   |             |                  |   |                  |             |  |   |            
|Inventories:                              |           |                                       |   |                   |             |                  |   |                  |             |  |   |            
|                                          | Retail    |                                       | $ | 68,378,652        |             |                  | $ | 61,288,712       |             |  | $ | 62,981,145  |            
|                                          | Wholesale |                                       |   | 8,918             |             |                  |   | 1,213,000        |             |  |   | 5,746,383   |            
|                                          |           |                                       |   |                   |             |                  |   |                  |             |  |   |            
|                                          |           | Total inventories                     |   | $                 | 68,387,570  |                  |   | $                | 62,501,712  |  |   | $           | 68,727,528  | 
|                                          |           |                                       |   |                   |             |                  |   |                  |             |  |   |            
|Depreciation and amortization:            |           |                                       |   |                   |             |                  |   |                  |             |  |   |            
|                                          | Retail    |                                       | $ | 4,546,196         |             |                  | $ | 3,969,565        |             |  | $ | 3,862,940   |            
|                                          | Corporate |                                       |   | 2,278,665         |             |                  |   | 1,849,399        |             |  |   | 862,751     |            
|                                          |           |                                       |   |                   |             |                  |   |                  |             |  |   |            
|                                          |           | Total depreciation and amortization   |   | $                 | 6,824,861   |                  |   | $                | 5,818,964   |  |   | $           | 4,725,691   | 
|                                          |           |                                       |   |                   |             |                  |   |                  |             |  |   |            
|Capital expenditures:                     |           |                                       |   |                   |             |                  |   |                  |             |  |   |            
|                                          | Retail    |                                       | $ | 1,437,265         |             |                  | $ | 3,418,955        |             |  | $ | 2,820,321   |            
|                                          | Corporate |                                       |   | 177,371           |             |                  |   | 879,126          |             |  |   | 1,151,035   |            
|                                          |           |                                       |   |                   |             |                  |   |                  |             |  |   |            
|                                          |           | Total capital expenditures            |   | $                 | 1,614,636   |                  |   | $                | 4,298,081   |  |   | $           | 3,971,356   | 
|                                          |           |                                       |   |                   |             |                  |   |                  |             |  |   |            

The wholesale segment did not have any foreign sales in fiscal year 2001,
compared with $1.1 million and $2.0 million in fiscal year 2000 and 1999,
respectively.

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NOTE 15- QUARTERLY FINANCIAL DATA (UNAUDITED)

Unaudited summarized financial results for fiscal years 2001 and 2000
follows (in thousands, except for per share data):

|                                    |  |       |        |        |  |       |        |        |  |   |        |   |  |   |        | 
|----------------------------------- |  | ----- | ------ | ------ |  | ----- | ------ | ------ |  | - | ------ | - |  | - | ------ | 
|2001 QUARTER                        |  | FIRST |        | SECOND |  | THIRD |        | FOURTH
|                                    |  |       |        |        |  |       |        |       
|Net sales                           |  | $     | 40,583 |        |  | $     | 44,202 |        |  | $ | 41,865 |   |  | $ | 66,702 | 
|Gross profit                        |  |       | 16,662 |        |  |       | 18,667 |        |  |   | 17,319 |   |  |   | 27,587 | 
|Net income (loss)                   |  |       | (3,402 | )      |  | $     | (1,715 | )      |  |   | (2,945 | ) |  |   | 4,870  | 
|Net income (loss) per basic share   |  |       | (1.35  | )      |  |       | (0.70  | )      |  |   | (1.24  | ) |  |   | 1.97   | 
|Net income (loss) per diluted share |  |       | (1.35  | )      |  |       | (0.70  | )      |  |   | (1.24  | ) |  |   | 1.97   | 

|                                    |  |       |        |        |  |       |        |        |  |   |        |   |  |   |        |  
|----------------------------------- |  | ----- | ------ | ------ |  | ----- | ------ | ------ |  | - | ------ | - |  | - | ------ | -
|2000 QUARTER                        |  | FIRST |        | SECOND |  | THIRD |        | FOURTH
|                                    |  |       |        |        |  |       |        |       
|Net sales                           |  | $     | 39,615 |        |  | $     | 48,638 |        |  | $ | 47,214 |   |  | $ | 71,103 |  
|Gross profit                        |  |       | 16,423 |        |  |       | 19,384 |        |  |   | 17,928 |   |  |   | 29,699 |  
|Net income (loss)                   |  |       | (6,623 | )      |  |       | 5,261  |        |  |   | (4,003 | ) |  |   | (755   | )
|Net income (loss) per basic share   |  |       | (3.12  | )      |  |       | 2.28   |        |  |   | (1.64  | ) |  |   | (0.28  | )
|Net income (loss) per diluted share |  |       | (3.12  | )      |  |       | 1.64   |        |  |   | (1.64  | ) |  |   | (0.28  | )

47



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E COM VENTURES, INC. AND SUBSIDIARIES
SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

|                                    |  |            |           |            |  |            |           |            |  |           |         |         |  |   |            |      |  |   |           | 
|----------------------------------- |  | ---------- | --------- | ---------- |  | ---------- | --------- | ---------- |  | --------- | ------- | ------- |  | - | ---------- | ---- |  | - | --------- | 
|                                    |  |            |           |            |  | ADDITIONS  |           |            |  |           |         |         |  |  
|                                    |  |            |           |            |  |            |           |            |  |           |         |         |  |  
|                                    |  | BALANCE AT |           | CHARGED TO |  | CHARGED TO |           |            |  |           |         | BALANCE
|                                    |  | BEGINNING  |           | COSTS &    |  | OTHER      |           |            |  |           |         | AT END 
|                                    |  | OF PERIOD  |           | EXPENSE    |  | ACCOUNTS   |           | DEDUCTIONS |  | OF PERIOD
|                                    |  |            |           |            |  |            |           |            |  |          
|FOR THE YEAR ENDED
JANUARY 29, 2000 |  |            |           |            |  |            |           |            |  |           |         |         |  |   |            |      |  |   |           | 
|Accounts receivable                 |  | $          | 704,954   |            |  | $          | 60,000    |            |  | $         |        |         |  | $ | (704,954   | )(1) |  | $ | 60,000    | 
|Inventories                         |  |            | 4,163,251 |            |  |            | 859,368   |            |  |           |        |         |  |   | (2,652,666 | )(4) |  |   | 2,369,953 | 
|Self-insurance                      |  |            | 520,652   |            |  |            | 986,501   |            |  |           | 370,875 | (2)     |  |   | (1,514,449 | )(3) |  |   | 363,552   | 
|FOR THE YEAR ENDED
FEBRUARY 3, 2001 |  |            |           |            |  |            |           |            |  |           |         |         |  |   |            |      |  |   |           | 
|Accounts receivable                 |  |            | 60,000    |            |  |            | 55,000    |            |  |           |        |         |  |   | (58,663    | )(1) |  |   | 56,337    | 
|Inventories                         |  |            | 2,369,953 |            |  |            |          |            |  |           |        |         |  |   | (167,110   | )(4) |  |   | 2,202,843 | 
|Self-insurance                      |  |            | 363,552   |            |  |            | 1,054,170 |            |  |           | 713,137 | (2)     |  |   | (1,681,056 | )(3) |  |   | 449,803   | 
|FOR THE YEAR ENDED
FEBRUARY 2, 2002 |  |            |           |            |  |            |           |            |  |           |         |         |  |   |            |      |  |   |           | 
|Accounts receivable                 |  |            | 56,337    |            |  |            | 55,000    |            |  |           |        |         |  |   | (44,044    | )(1) |  |   | 67,293    | 
|Inventories                         |  |            | 2,202,843 |            |  |            |          |            |  |           |        |         |  |   | (509,674   | )(4) |  |   | 1,693,169 | 
|Self-insurance                      |  |            | 449,803   |            |  |            | 1,257,446 |            |  |           | 864,731 | (2)     |  |   | (2,405,759 | )(3) |  |   | 166,221   | 



---

|(1) |  | Represents amounts written off against accounts receivable.
|--- |  | -----------------------------------------------------------
|   
|(2) |  | Represents employee contributions.                         
|   
|(3) |  | Represents benefit/premium payments.                       
|   
|(4) |  | Represents amounts written off against inventory.          




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

As disclosed in a form 8-K filed with the Securities and Exchange
Commission on April 11, 2000, on April 4, 2000, PricewaterhouseCoopers LLP
(PwC), notified us that upon completion of their audit of our consolidated
financial statements for the fiscal year ended January 29, 2000, they would
resign as our independent certified public accountants.

PwC has previously audited our consolidated financial statements for the
fiscal years ended January 30, 1999 and January 31, 1998 (Prior Fiscal
Years). Their reports on such consolidated financial statements did not
contain an adverse opinion or a disclaimer of opinion and were not qualified or
modified as to uncertainty, audit scope or accounting principles, except for a
modified opinion for the fiscal year ended January 30, 1999 relating to our
ability to continue as a going concern. Further, in connection with its
audits of our financial statements for the Prior Fiscal Years and through May
15, 2000, we had no disagreements with PwC on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of PwC,
would have caused them to make a reference to the subject matter of the
disagreements in connection with its reports on our consolidated financial
statements for each of the Prior Fiscal Years.

48



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##### Table of Contents






PART III.




ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS AND EXECUTIVE OFFICERS

The information called for by this item is incorporated by reference from
E Com Ventures, Inc. Annual Meeting of Shareholders  Notice and Proxy
Statement  2002 (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 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  2002 (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

The information called for by this item is incorporated by reference from
E Com Ventures, Inc. Annual Meeting of Shareholders  Notice and Proxy
Statement  2002 (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 called for by this item is incorporated by reference from
E Com Ventures, Inc. Annual Meeting of Shareholders  Notice and Proxy
Statement  2002 (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.

49



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##### Table of Contents






PART IV.




ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS 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 February 2,
2002, February 3, 2001 and January 29, 2000 appears on page 21.

(2)    Financial Statement Schedule

The following statement schedule for the fiscal years ended February 2,
2002, February 3, 2001 and January 29, 2000 are submitted herewith:

|                                                             |  |           |    | 
|------------------------------------------------------------ |  | --------- | -- | 
|                                                             |  | ITEM     
|                                                             |  | FORM 10-K
|                                                             |  | NUMBER   
|                                                             |  | PAGE     
|                                                             |  |          
|Schedule II  Valuation and Qualifying Accounts and
Reserves |  |           | 48 | 

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

(3) Exhibits

|        |  |                                                                                                |  |                 |     |  
|------- |  | ---------------------------------------------------------------------------------------------- |  | --------------- | --- | -
|        |  |                                                                                                |  | PAGE NUMBER    
|        |  |                                                                                                |  | OR INCORPORATED
|        |  |                                                                                                |  | BY REFERENCE   
|EXHIBIT |  | DESCRIPTION                                                                                    |  | FROM           
|        |  |                                                                                                |  |                
|3.1     |  | Amended and Restated Articles of Incorporation                                                 |  |                 | (12 | )
|        |  |                                                                                                |  |                 |     |  
|3.2     |  | Bylaws                                                                                         |  |                 | (2  | )
|        |  |                                                                                                |  |                 |     |  
|10.1    |  | Executive Compensation Plans and Arrangements                                                  |  |                 |     |  
|        |  |                                                                                                |  |                 |     |  
|        |  | (a) Employment Agreement, dated as of December 24, 1999, between
the Company and Marc Finer    |  |                 | (8  | )
|        |  |                                                                                                |  |                 |     |  
|        |  | (b) Employment Agreement, dated as of December 24, 1999, between
the Company and Donovan Chin  |  |                 | (8  | )
|        |  |                                                                                                |  |                 |     |  
|        |  | (c) Employment Agreement, dated as of February 16, 2001, between
the Company and A. Mark Young |  |                 | (11 | )
|        |  |                                                                                                |  |                 |     |  
|        |  | (d) Employment Agreement, dated as of February 1, 2002, between
the Company and Ilia Lekach    |  |                 | (12 | )
|        |  |                                                                                                |  |                 |     |  
|        |  | (e) Employment Agreement, dated as of March 27, 2000, between
the Company and Jeffrey Geller   |  |                 | (11 | )
|        |  |                                                                                                |  |                 |     |  
|10.5    |  | 1991 Stock Option Plan, as amended                                                             |  |                 | (6  | )
|        |  |                                                                                                |  |                 |     |  
|10.6    |  | 1992 Directors Stock Option Plan, as amended                                                   |  |                 | (6  | )
|        |  |                                                                                                |  |                 |     |  
|10.7    |  | Series A Securities Purchase Agreement                                                         |  |                 | (3  | )
|        |  |                                                                                                |  |                 |     |  
|10.8    |  | Series B Securities Purchase Agreement                                                         |  |                 | (4  | )
|        |  |                                                                                                |  |                 |     |  
|10.9    |  | Series C Securities Purchase Agreement                                                         |  |                 | (5  | )
|        |  |                                                                                                |  |                 |     |  
|10.10   |  | Series D Securities Purchase Agreement                                                         |  |                 | (5  | )
|        |  |                                                                                                |  |                 |     |  
|10.11   |  | 2000 Stock Option Plan                                                                         |  |                 | (10 | )

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|        |  |                                                                                                                             |  |                 |     |  
|------- |  | --------------------------------------------------------------------------------------------------------------------------- |  | --------------- | --- | -
|        |  |                                                                                                                             |  | PAGE NUMBER    
|        |  |                                                                                                                             |  | OR INCORPORATED
|        |  |                                                                                                                             |  | BY REFERENCE   
|EXHIBIT |  | DESCRIPTION                                                                                                                 |  | FROM           
|        |  |                                                                                                                             |  |                
|10.12   |  | 2000 Directors Stock Option Plan                                                                                            |  |                 | (10 | )
|        |  |                                                                                                                             |  |                 |     |  
|11.1    |  | Revolving Credit and Security Agreement with GMAC Commercial Credit LLC,
dated May 12, 2000                                 |  |                 | (9  | )
|        |  |                                                                                                                             |  |                 |     |  
|11.2    |  | Waiver and Amendment to the Revolving Credit and Security Agreement with
GMAC Commercial Credit LLC, dated November 8, 2000 |  |                 | (11 | )
|        |  |                                                                                                                             |  |                 |     |  
|11.3    |  | Waiver and Amendment to the Revolving Credit and Security Agreement with
GMAC Commercial Credit LLC, dated April 26, 2001   |  |                 | (11 | )
|        |  |                                                                                                                             |  |                 |     |  
|21.1    |  | Subsidiaries of the Registrant                                                                                              |  |                 | (12 | )
|        |  |                                                                                                                             |  |                 |     |  
|23.1    |  | Consent of PricewaterhouseCoopers LLP                                                                                       |  |                 | (12 | )
|        |  |                                                                                                                             |  |                 |     |  
|23.2    |  | Consent of Deloitte & Touche LLP                                                                                            |  |                 | (12 | )



---

|(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 Registration Statement on Form S-1 filed June 11, 1999
(No. 333-     ).     
|    
|(4)  |  | 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).
|    
|(5)  |  | 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).    
|    
|(6)  |  | Incorporated by reference to the exhibit of the same description filed
with the Companys 1995 Form 10-K (filed April 26, 1996).                                      
|    
|(7)  |  | Not used.                                                                                                                                                             
|    
|(8)  |  | Incorporated by reference to the exhibit of the same description filed
with the Companys 1999 Form 10-K/A (filed May 30, 2000).                                      
|    
|(9)  |  | Incorporated by reference to the exhibit of the same description filed
with the Companys 1999 Form 10-Q (filed June 13, 2000).                                       
|    
|(10) |  | Incorporated by reference to the exhibit of the same description filed
with the Companys Proxy Statement (filed October 6, 2000).                                    
|    
|(11) |  | Incorporated by reference to the exhibit of the same description filed
with the Companys 2000 Form 10-K (filed May 4, 2001).                                         
|    
|(12) |  | Filed herewith.                                                                                                                                                       
|    
|(b)  |  | Reports on Form 8-K                                                                                                                                                   

On February 2, 2002, the Company filed a Current Report on Form 8-K
reporting that the company had signed an option agreement to repurchase its
outstanding convertible debentures.

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##### Table of Contents






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 1, 2002.

|                  |  |                                                                                                       
|----------------- |  | ------------------------------------------------------------------------------------------------------
|                  |  | E Com Ventures, Inc.
By: /s/ ILIA LEKACHIlia Lekach, Chairman of the Board
and Chief Executive Officer
|                 
|                  |  |                                                                                                       
|                 
|POWER OF ATTORNEY |  |                                                                                                       

We, the undersigned, hereby constitute Ilia Lekach and A. Mark Young, or
either of them, our true and lawful attorneys-in-fact with full power to sign
for us in our name and in the capacity indicated below any and all amendments
and supplements to this report, and to file the same, with exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said attorneys-in-fact or
their substitutes, each acting alone, may lawfully do or cause to be done by
virtue hereof.

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.

|                                                      |  |                                                                                |  |            
|----------------------------------------------------- |  | ------------------------------------------------------------------------------ |  | -----------
|SIGNATURE                                             |  | TITLE                                                                          |  | DATE       
|                                                      |  |                                                                                |  |            
|/s/ ILIA LEKACH
Ilia Lekach                           |  | Chairman of the Board and
Chief Executive Officer,
Principal Executive Officer |  | May 1, 2002
|                                                      |  |                                                                                |  |            
|/s/ JEFFREY GELLER
Jeffrey Geller                     |  | President and Chief Operating Officer
of Perfumania, Inc., and Director        |  | May 1, 2002
|                                                      |  |                                                                                |  |            
|/s/ A. MARK YOUNG
A. Mark Young                       |  | Chief Financial Officer
and Director,
Principal Financial Officer              |  | May 1, 2002
|                                                      |  |                                                                                |  |            
|/s/ DONOVAN CHIN
Donovan Chin                         |  | Chief Financial Officer
Perfumania, Inc.,
Secretary and Director               |  | May 1, 2002
|                                                      |  |                                                                                |  |            
|/s/ CAROLE ANN TAYLOR
Carole Ann Taylor               |  | Director                                                                       |  | May 1, 2002
|                                                      |  |                                                                                |  |            
|/s/ HORACIO GROISMAN, M.D.
Horacio Groisman, M.D.     |  | Director                                                                       |  | May 1, 2002
|                                                      |  |                                                                                |  |            
|/s/ ZALMAN LEKACH
Zalman Lekach                       |  | Director                                                                       |  | May 1, 2002
|                                                      |  |                                                                                |  |            
|/s/ ANA MARIA FERNANDEZ HAAR
Ana Maria Fernandez Haar |  | Director                                                                       |  | May 1, 2002
|                                                      |  |                                                                                |  |            
|/s/ JAMES FELLUS
James Fellus                         |  | Director                                                                       |  | May 1, 2002

52