-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NkFJZ35uoAWelFVuFqukmAVjhQr9/5gfX+J2VVp2XfvThm/SWRPNvZ9lQ6NQETiG bMch0tbKy46fG0kw54ftww== 0000950144-99-011779.txt : 19991018 0000950144-99-011779.hdr.sgml : 19991018 ACCESSION NUMBER: 0000950144-99-011779 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990731 FILED AS OF DATE: 19991012 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PERFUMANIA INC CENTRAL INDEX KEY: 0000880460 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DRUG STORES AND PROPRIETARY STORES [5912] IRS NUMBER: 650026340 STATE OF INCORPORATION: FL FISCAL YEAR END: 0130 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 000-19714 FILM NUMBER: 99726047 BUSINESS ADDRESS: STREET 1: 11701 N W 101 RD CITY: MIAMI STATE: FL ZIP: 33178 BUSINESS PHONE: 3058891600 MAIL ADDRESS: STREET 1: 11701 N W 101 RD CITY: MIAMI STATE: FL ZIP: 33178 10-Q/A 1 PERFUMANIA INC 10-Q/A 7/31/99 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JULY 31, 1999 COMMISSION FILE NUMBER 0-19714 PERFUMANIA, INC. STATE OF FLORIDA I.R.S. NO. 65-0026340 11701 N.W. 101ST ROAD MIAMI, FLORIDA 33178 TELEPHONE NUMBER: (305) 889-1600 INDICATE BY CHECK MARK WHETHER THE REGISTRANT, (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING TWELVE (12) MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS) AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST NINETY (90) DAYS. YES [X] NO [ ] COMMON STOCK $.01 PAR VALUE OUTSTANDING SHARES AT JULY 31, 1999 - 7,638,978 2 TABLE OF CONTENTS PERFUMANIA, INC. PART I FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS Consolidated Balance Sheets...................................................... 3 Condensed Consolidated Statements of Operations................................. 4 Consolidated Statements of Cash Flows............................................ 5 Notes to Condensed Consolidated Financial Statements............................. 6 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................................................... 12 ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.................................................................. 17 PART II OTHER INFORMATION ITEM 1 LEGAL PROCEEDINGS................................................................... 17 ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS........................................... 17 ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K.................................................... 18 SIGNATURES.......................................................................... 19
2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS PERFUMANIA, INC. CONSOLIDATED BALANCE SHEETS
July 31, 1999 January 30, 1999 ---------------- ---------------- ASSETS (unaudited) Current assets: Cash and cash equivalents $ 1,344,882 $ 1,745,603 Trade receivables, less allowance for doubtful accounts of $734,954 and $704,954 as of July 31, 1999 and January 30, 1999, respectively 6,066,682 4,108,847 Advances to suppliers 8,316,332 8,065,301 Inventories, net of reserve of $2,858,284 and $4,163,251 as of July 31, 1999 and January 30, 1999, respectively 62,974,342 53,880,132 Prepaid expenses and other current assets 1,996,456 1,417,187 ------------- ------------ Total current assets 80,698,694 69,217,070 Property and equipment, net 23,073,219 23,180,462 Leased equipment under capital leases, net 1,058,998 1,373,878 Other assets 1,632,707 1,357,966 ------------- ------------ Total assets $ 106,463,618 $ 95,129,376 ============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Bank line of credit and current portion of notes payable $ 37,783,279 $ 32,800,627 Accounts payable - non affiliates 15,844,533 14,329,013 Accounts payable - affiliates 22,333,533 15,812,240 Accrued expenses and other liabilities 8,181,933 9,205,316 Income taxes payable 368,263 485,098 Current portion of obligations under capital leases 284,982 419,487 ------------- ------------ Total current liabilities 84,796,523 73,051,781 Long-term portion of notes payable 1,397,439 2,370,684 Long-term portion of obligations under capital leases 508,542 562,552 Convertible notes payable 4,000,000 -- Long-term severance payable 561,131 1,037,859 ------------- ------------ Total liabilities 91,263,635 77,022,876 ------------- ------------ Commitments and contingencies -- -- Redeemable common equity 470,588 470,588 Stockholders' equity: Preferred stock, $.01 par value, 1,000,000 shares authorized, none issued -- -- Common stock, $.01 par value, 25,000,000 shares authorized, 9,151,384 and 8,614,491 shares issued, at July 31, 1999 and January 30, 1999, respectively 91,514 86,145 Capital in excess of par 55,952,849 54,440,009 Treasury stock, at cost, 1,512,406 shares at July 31, 1999 and January 30, 1999 (5,413,002) (5,413,002) Accumulated deficit (35,338,103) (30,935,097) Notes and interest receivable from shareholder and officers (563,863) (542,143) ------------- ------------ Total stockholders' equity 14,729,395 17,635,912 ------------ ------------ Total liabilities and stockholders' equity $ 106,463,618 $ 95,129,376 ============= ============
See accompanying notes to condensed consolidated financial statements 3 4 PERFUMANIA, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Thirteen Thirteen Twenty-six Twenty-six Weeks Ended Weeks Ended Weeks Ended Weeks Ended July 31, 1999 August 1, 1998 July 31, 1999 August 1, 1998 ------------- -------------- -------------- --------------- Net sales $ 45,952,514 $ 39,684,364 $ 85,353,478 $ 78,152,339 Cost of goods sold 26,798,751 23,173,689 50,946,546 46,836,147 ------------ ------------ ------------ ------------ Gross profit 19,153,763 16,510,675 34,406,932 31,316,192 ------------ ------------ ------------ ------------ Operating expenses: Selling, general and administrative 16,296,549 15,522,774 32,927,454 30,860,322 Depreciation and amortization 1,149,275 1,094,215 2,314,427 2,176,473 ------------ ------------ ------------ ------------ Total operating expenses 17,445,824 16,616,989 35,241,881 33,036,795 ------------ ------------ ------------ ------------ Income (loss) from operations before other expense 1,707,939 (106,314) (834,949) (1,720,603) Other expenses, net (2,019,079) (1,166,344) (3,568,057) (2,323,667) ------------ ------------ ------------ ------------ Income (loss) before income taxes (311,140) (1,272,658) (4,403,006) (4,044,270) Benefit for income taxes -- -- -- -- ------------ ------------ ------------ ------------ Net income (loss) $ (311,140) $ (1,272,658) $ (4,403,006) $ (4,044,270) ------------ ------------ ------------ ------------ Net income (loss) per common share: Basic $ (0.04) $(0.20) $(0.58) $(0.62) ------------ ------------ ------------ ------------ Diluted $ (0.04) $(0.20) $(0.58) $(0.62) ------------ ------------ ------------ ------------ Weighted average number of common shares outstanding: Basic 7,629,043 6,519,440 7,614,410 6,519,440 Diluted 7,629,043 6,519,440 7,614,410 6,519,440
See accompanying notes to condensed consolidated financial statements. 4 5 PERFUMANIA, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Twenty-six Twenty-six Weeks Ended Weeks Ended July 31, 1999 August 1, 1998 ------------- -------------- Cash flows from operating activities: Net loss $(4,403,006) $(4,044,270) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Provision for doubtful accounts 30,000 60,000 Depreciation and amortization 2,314,427 2,176,473 Beneficial conversion feature of convertible notes payable 1,365,384 -- Change in operating assets and liabilities, (Increase) decrease in: Trade receivables (1,987,835) (880,842) Advance to suppliers (251,031) (1,127,424) Inventories (9,094,210) 3,092,194 Prepaid and other current assets (579,269) 443,280 Tax refund receivable -- 807,489 Other assets (275,080) 169,825 Increase (decrease) in: Accounts payable 8,036,813 4,630,219 Other current liabilities (1,023,383) (663,013) Income taxes payable (116,835) (137,556) Long term severance payable (476,728) -- ----------- ----------- Total adjustments (2,401,018) 8,570,645 ----------- ----------- Net cash (used in) provided by operating (6,460,753) 4,526,375 activities ----------- ----------- Cash flows from investing activities: Additions to property and equipment (1,812,939) (5,204,301) ----------- ----------- Net cash used in investing activities (1,812,939) (5,204,301) ----------- ----------- Cash flows from financing activities: Borrowings and repayments under loan payable 4,009,407 2,060,792 Repayments and loans to related parties -- 40,954 Principal payments under capital lease obligations (267,541) (578,755) Net advances to shareholder and officers (21,720) (150,000) Issuance of convertible notes payable 4,000,000 -- Exercise of stock options 152,825 -- Purchase of treasury stock -- (564,367) ----------- ----------- Net cash provided by financing activities 7,872,971 808,624 ----------- ----------- (Decrease) increase in cash and cash equivalents (400,721) 130,698 Cash and cash equivalents at beginning of period 1,745,603 1,554,117 ----------- ----------- Cash and cash equivalents at end of period $ 1,344,882 $ 1,684,815 =========== ===========
See accompanying notes to condensed consolidated financial statements. 5 6 PERFUMANIA, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (1). OPERATIONS AND BASIS OF PRESENTATION The condensed consolidated financial statements include the accounts of Perfumania and subsidiaries (the "Company"). All material intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information presented not misleading. The financial information presented herein, which is not necessarily indicative of results to be expected for the current fiscal year, reflect all normal and recurring adjustments which, in the opinion of management, are necessary for a fair presentation of the interim unaudited condensed consolidated financial statements. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended January 30, 1999 filed with the SEC on April 30, 1999. Basis of Presentation The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the condensed consolidated financial statements, the Company incurred a net loss during the twenty-six week period ended July 31, 1999 of approximately $4.4 million and has a working capital deficit of approximately $4.1 million as of July 31, 1999. In addition, the Company was in violation of certain debt covenants contained in its bank line of credit at January 30, 1999. On July 14, 1999, the Company obtained a waiver of default from the bank through September 30, 1999 as of and for the year ended January 30, 1999. Management's plan to improve the results of operations include decreasing the number of store openings in 1999, closing a number of its non-profitable stores, improving the effectiveness of its sales promotions practices, continuing to improve the existing merchandise mix and to promote the private label bath, body and cosmetic line, continuing to liquidate slow moving inventories and reducing selling, general and administrative expenses. In order to obtain additional funding, the Company made an initial public offering of the common stock of perfumania.com, inc., a wholly-owned subsidiary of the Company. The offering raised approximately $24.5 million. The net proceeds of the offering will be used for working capital and other general corporate purposes and also repayment of any outstanding indebtedness to the Company as well as reduction of the outstanding balance in the Company's line of credit (See Note 8). Additionally, in April 1999 and July 1999, the Company issued a total of $4 million of convertible notes to a group of private investors (See Note 7) and in July 1999 the Company obtained a $2.5 million short-term unsecured loan from a wholesale customer. Although management believes that its borrowing capacity under the current line of credit facility, or from an alternative line of credit facility, projected cash flows from operations, anticipated proceeds from the initial public offering of perfumania.com, inc. and other short term borrowings will be sufficient to support working capital needs, capital expenditures and debt service for the next twelve months, there is no assurance, however, that the Company will be able to improve its results of operations based on management's plan or obtain such funding on a timely basis. These factors among others may indicate that the Company will be unable to continue as a going concern for a reasonable period of time. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. 6 7 2) STOCKHOLDERS' EQUITY
NOTES AND INTEREST RECEIVABLE FROM COMMON STOCK CAPITAL IN TREASURY STOCK SHAREHOLDER ---------------------- EXCESS ------------------ ACCUMULATED AND SHARES AMOUNT OF PAR SHARES AMOUNT DEFICIT OFFICERS TOTAL ------- ------ ---------- ------ ------ ----------- ----------- ----- Balance at January 30, 1999 8,614,491 $ 86,145 $ 54,440,009 1,512,406 $(5,413,002) $(30,935,097) $(542,143) $ 17,635,912 Exercise of stock options 301,600 3,016 149,809 -- -- -- -- 152,825 Beneficial conversion feature of notes payable -- -- 1,365,384 -- -- -- 1,365,384 Net change in notes and interest receivable from shareholder and officer -- -- -- -- -- -- (21,720) (21,720) Issuance of common stock in private placement 235,293 2,353 (2,353) -- -- -- -- -- Net loss for the twenty -six weeks ended July 31, 1999 -- -- -- -- -- (4,403,006) -- (4,403,006) ---------- -------- ------------ --------- ----------- ------------ ---------- ------------ Balance at July 31, 1999 9,151,384 $ 91,514 $ 55,952,849 1,512,406 $(5,413,002) $(35,338,103) $(563,863) $ 14,729,395 ========== ======== ============ ========= =========== ============ ========== ============
3) BANK LINE OF CREDIT As of January 30, 1999, the Company was in violation of certain financial and operating covenants and as a result of these violations, the Company was in default under the line of credit agreement. As a result, the bank could demand payment of the amounts outstanding under the line of credit agreement. Due to these violations, the Company incurred the default rate of interest, prime plus 4% (12% at July 31, 1999) since December 1998. On July 14, 1999, the Company obtained a waiver of default from the bank through September 30, 1999 as of and for the year ended January 30, 1999. Future outstanding borrowings will bear interest at the prime rate plus four percent. The bank agreed to less restrictive covenants provided that certain events commence prior to September 30, 1999. One such event includes that perfumania.com, inc. (a wholly-owned subsidiary) is to receive at least $10 million from a contemplated initial public offering of its shares, of which at least $2 million is to be repaid to the Company. 4) BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE Basic income (loss) per common share is computed by dividing income (loss) available to common stockholders by the weighted average number of common share includes the dilutive effect of those stock options where the average market price of the common shares exceeds the option exercise prices for the respective years, and the dilutive effect of those convertible notes which are convertible into common stock. 7 8 5). SEGMENT INFORMATION The Company operates in two industry segments, specialty retail sale and wholesale distribution of fragrances and related products. Financial information for these segments is summarized in the following table.
Thirteen Weeks Thirteen Weeks Twenty-six Twenty-six Ended Ended Weeks Ended Weeks Ended July 31, 1999 August 1, 1998 July 31, 1999 August 1, 1998 ------------- -------------- ------------- -------------- Net sales to external customers Wholesale $10,948,201 $ 10,234,862 $22,214,955 $23,702,792 Retail 35,004,313 29,449,502 63,138,523 54,449,547 ----------- ------------ ----------- ----------- Total net sales to external customers $45,952,514 $ 39,684,364 $85,353,478 $78,152,339 ----------- ------------ ----------- ----------- Intersegment sales Wholesale $ 4,771,477 $ (617,816) $ 7,532,244 $13,866,670 ----------- ------------ ----------- ----------- Total intersegment sales $ 4,771,477 $ (617,816) $ 7,532,244 $13,866,670 ----------- ------------ ----------- ----------- Cost of goods sold Wholesale $ 8,474,806 $ 8,322,179 $17,547,550 $18,602,370 Retail 18,323,945 14,851,510 33,398,996 28,233,777 ----------- ------------ ----------- ----------- Total cost of goods sold $26,798,751 $ 23,173,689 $50,946,546 $46,836,147 ----------- ------------ ----------- ----------- Gross profit Wholesale $ 2,473,395 $ 1,912,683 $ 4,667,405 $ 5,100,422 Retail 16,680,368 14,597,992 29,739,527 26,215,770 ----------- ------------ ----------- ----------- Total gross profit $19,153,763 $ 16,510,675 $34,406,932 $31,316,192 ----------- ------------ ----------- ----------- Depreciation and amortization Retail $ 1,149,275 $ 1,094,215 $ 2,314,427 $ 2,176,473 ----------- ------------ ----------- ----------- Total depreciation and amortization $ 1,149,275 $ 1,094,215 $ 2,314,427 $ 2,176,473 ----------- ------------ ----------- ----------- Capital expenditures Retail $ 882,376 $ 2,225,830 $ 1,812,939 $ 5,204,301 ----------- ------------ ----------- ----------- Total capital expenditures $ 882,376 $ 2,225,830 $ 1,812,939 $ 5,204,301 ----------- ------------ ----------- -----------
July 31, August 1, 1999 1998 ----------- ----------- Inventory Wholesale $ 9,075,491 $13,348,871 Retail 53,898,851 56,696,777 ----------- ----------- $62,974,342 $70,045,648 ----------- ----------- Number of Stores 281 286
An unaffiliated customer of the wholesale segment accounted for approximately 14% and 12% of the consolidated net sales for the twenty-six weeks ended July 31, 1999 and August 1, 1998, respectively, and 20% and 15% of the consolidated net trade accounts receivable balance at July 31, 1999 and August 1, 1998, respectively. 8 9 In the twenty-six week periods ending July 31, 1999 and August 1, 1998, the wholesale segment included foreign sales of approximately $1.9 million and $1.8 million, respectively. 6) 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 a price of $8.50 per share. The proceeds of $2 million were received in January 1999 and the shares were issued in June 1999. The subscription agreements require that the Company file the appropriate registration statements with the Securities and Exchange Commission within six months from the date of the agreement 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 is less than $8.50 per share, the Company is 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 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 balance sheet. 7) CONVERTIBLE NOTES In April 1999, the Company entered into a Securities Purchase Agreement and issued an aggregate of $2 million worth of its Series A Convertible Notes, which are convertible into common stock. The Notes contain a beneficial conversion feature of approximately $385,000 which represents a non-cash interest charge and is included in other expense for the twenty-six week period ending July 31, 1999. The agreement requires us to file a registration statement with the Securities and Exchange Commission within forty-five days after the date of issuance of the convertible notes. The conversion price is the lower of (A) $4.35 per share, subject to adjustment and (B) the 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. If the conversion price decreases, the Company is obligated to issue additional shares of common stock. In July 1999, the Company entered into a Securities Purchase Agreement and issued an aggregate $2 million worth of its Series B Convertible Notes, which are convertible into common stock. The Notes contain a beneficial conversion feature of approximately $981,000 which represents a non-cash interest charge and is included in other expense for the thirteen week period ending July 31, 1999. The agreement requires the Company to file a registration statement with the Securities and Exchange Commission within forty-five days after the date of issuance of the convertible notes. The Conversion Price is the lower of (A) $3.40626 per share, subject to adjustment and (B) the 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. 9 10 8) PERFUMANIA.COM In February 1999, the Company, through its wholly-owned subsidiary, perfumania.com, inc. began operation of an Internet commerce site, perfumania.com. The Company intends to capitalize on its name recognition and cross marketing opportunities with its stores to become a top discount retailer of fragrance and related products on the Internet. All orders placed with the Internet site are shipped from the Company's existing distribution center in Miami, Florida. On September 28, 1999 perfumania.com, inc., a wholly-owned subsidiary of the Company, made an initial public 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. The offering raised approximately $24.5 million. The net proceeds of the offering will be used for working capital and other general corporate purposes and also repayment of any outstanding indebtedness to the Company. 9) CONTINGENCIES In December of 1993, the patent holder and exclusive licensee in the U.S. of Boucheron filed a complaint against the Company in the Southern District of New York for infringing upon their exclusive right to sell the Boucheron bottle. The plaintiff's theory is based on the fact that they have a valid patent for the bottles and that Perfumania's sales of such bottles cannot in any way control by resort to an infringement suit the resale of a patented article which he has sold. The Company filed a motion to dismiss during February 1994. On March 20, 1995 the Court denied the Company's motion to dismiss and on April 14, 1995, the Company filed its answer to the compliant. Discovery is in progress. In the opinion of management and counsel, the ultimate outcome of the aforementioned litigation will not have a material effect on the accompanying financial statements. During 1996 and 1997, the Company made sales to L. Luria & Son, Inc. ("Luria's") in the amounts of $2,473,623 and $1,999,823, respectively. The Company wrote off in 1997 receivables from Luria's in the approximate amount of $1,200,000. The Company has been characterized as an insider, as defined by the United States Bankruptcy Code, in the liquidating plan of reorganization filed on April 6, 1998 by Luria's in the United States Bankruptcy Court, Southern District of Florida. In October 1998, the committee of unsecured creditors in Luria's bankruptcy proceedings filed a complaint with the United States Bankruptcy Court, Southern District of Florida to recover substantial funds from the Company. The complaint alleged that Luria's made preference payments, as defined by the Bankruptcy Court, to the Company and seeks recovery of said preference payments, as well as disallowing any and all claims of the Company against Luria's until full payment of the preference payments have been made. In July 1999, the Company agreed with the unsecured creditors to settle all claims held by Luria's against the Company for the sum of $1.2 million, payable over the next nine months according to a repayment schedule. This settlement is subject to the approval of the Bankruptcy Court. The full amount of the settlement was accrued for in the Company's financial statements as of July 31, 1999 and for the year ending January 30, 1999. The Company is also involved in various other legal proceedings in the ordinary course of business. Management cannot presently predict the outcome of these matters, although management believes, upon the advice of legal counsel, 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. 10 11 10. RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"). Among other provisions, SFAS No. 133 establishes accounting the reporting standards for derivative instruments and for hedging activities. It also requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. SFAS No. 133 is effective for financial statements for fiscal years beginning after June 15, 2000. Management has not determined the effect, if any, of adopting SFAS No. 133. 11. SUBSEQUENT EVENTS On August 31, 1999, the Company entered into a stock purchase agreement with an affiliated Company through common ownership. The agreement calls for the transfer of 1,512,406 shares of the Company's treasury stock to this affiliated company 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 $2.98, which approximates 90% of the closing price on the Company's common stock for the previous 20 business days. Pursuant to this agreement the parties entered into a registration rights agreement dated August 31, 1999, which grants the affiliated company demand registration rights. The Company recorded an extraordinary loss of approximately $314,000 which will be taken to income in the third quarter of fiscal year 1999. 11 12 PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS RISK FACTORS THAT MAY AFFECT FUTURE RESULTS Perfumania does not provide forecasts of future financial performance. Forward-looking statements in this Form 10-Q and other Company reports and press releases are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and, in connection therewith, the Company wishes to caution readers that the following important factors, among others, in some cases have affected and in the future could affect the Company's actual results and could cause such results to differ materially from those expressed in forward-looking statements made by or on behalf of the Company. Seasonality. The Company has historically experienced higher sales in the third and fourth fiscal quarters than in the first and second fiscal quarters. Significantly higher fourth fiscal quarter retail sales result from increased purchases of fragrances as gift items during the Christmas holiday season. The Company's quarterly results may also vary due to the timing of new store openings, net sales contributed by new stores and fluctuations in comparable sales of existing stores. A variety of factors affect the sales levels of new and existing stores, including the retail sales environment and the level of competition, the effect of marketing and promotional programs, acceptance of new product introductions, adverse weather conditions and general economic conditions. Lack of Long-Term Agreements With Suppliers. The Company's success depends to a large degree on its ability to provide an extensive assortment of brand name and designer fragrances. The Company has no long-term purchase contracts or other contractual assurance of continued supply, pricing or access to new products. While the Company believes it has good relationships with its vendors, the inability to obtain merchandise from one or more key vendors on a timely basis, or a material change in the Company's ability to obtain necessary merchandise could have a material adverse effect on its results of operations. Dependence on Line of Credit. As discussed above, the Company experiences significant seasonal fluctuations in its sales and operating results, as is common with many specialty retailers. The Company utilizes its line of credit to fund inventory purchases and to support new retail store openings. Any future limitation on the Company's borrowing ability and access to financing could limit the Company's ability to open new stores and to obtain merchandise on satisfactory terms. The Company has violated certain debt covenants contained in its bank line of credit agreement. On July 14, 1999, the Company obtained a waiver of default from the bank through September 30, 1999 as of and for the year ending January 30, 1999. Dependence on Key Personnel. Jerome Falic, the Company's President, is primarily responsible for the Company's merchandise purchases, and has developed strong, reliable relationships with suppliers, as well as customers of the Wholesale division in the United States, Europe, Asia and South America. The loss of service of either of his, or any of the Company's other current executive officers could have a material adverse effect on the Company. Qualified Accountants' Report. In reporting on the Company's audited consolidated financial statements as of January 30, 1999 and January 31, 1998 and for each of the three years in the period ended January 30, 1999, the report of the Company's independent accountants contained an explanatory paragraph indicating factors which create substantial doubt about the Company's ability to continue as a going concern. Such factors include recurring net losses in fiscal 1998 and 1997 and the Company's default on its bank line of credit agreement as a result of its violation of certain debt covenants, which has been waived by the bank on July 14, 1999, through September 30, 1999 as of and for the year ending January 30, 1999. Ability to Manage Growth. While the Company has grown significantly in the past several years, there is no assurance that the Company will sustain the growth in the number of retail stores and revenues that it has achieved historically. The Company's growth is dependent, in large part, upon the Company's ability to open and operate new retail stores on a profitable basis, which in turn is subject to, among other 12 13 things, the Company's ability to secure suitable stores sites on satisfactory terms, the Company's ability to hire, train and retain qualified management and other personnel, the availability of adequate capital resources and the successful integration of new stores into existing operations. There can be no assurance that the Company's new stores will achieve sales and profitability comparable to existing stores, or that the opening of new locations will not cannibalize sales at existing locations. Litigation. As is often the case in the fragrance and cosmetics business, some of the merchandise purchased by suppliers such as the Company may have been manufactured by entities who are not the owners of the trademarks or copyrights for the merchandise. If the Company were called upon or challenged by the owner of a particular trademark or copyright to demonstrate that the specific merchandise was produced and sold with the proper authority and the Company were unable to do so, the Company could, among other things, be restricted from reselling the particular merchandise or be subjected to other liabilities, which could have an adverse effect on the Company's business and results of operations. Year 2000 Readiness. The Year 2000 issue is the result of computer and other business systems being written using two digits rather than four to represent the year. Many of the time sensitive applications and business systems of the Company and its business partners may recognize a date using "00" as the year 1900 rather than the year 2000, which could result in system failure or disruption of operations. Although the Year 2000 problem will impact the Company and its business partners, a preliminary assessment of the Year 2000 exposure has been made by the Company and, primarily because the Company's major management information systems are in the process of being upgraded, the Company believes it will be able to achieve Year 2000 readiness for its internal systems by the fourth quarter of 1999. The Company believes that it will satisfactorily resolve all significant Year 2000 problems and that the related costs will not be material. However, estimates of Year 2000 related costs are based on numerous assumptions, including the continued availability of certain resources, the ability to acquire accurate information regarding third party suppliers, and the ability to correct all relevant applications and the third party modification plans. There is no guarantee that the estimates will be achieved and actual costs could differ materially from those anticipated. Moreover, the failure of a major vendor's systems to operate properly with respect to the Year 2000 problem on a timely basis or a Year 2000 conversion that is incompatible with the Company's systems could have a material adverse effect on the Company's business, financial condition and results of operations. The Company is preparing contingency plans which will include the identification of the most reasonably likely worst case scenarios. Currently, the most reasonably likely sources of risk to the Company include (a) the disruption of the Company's internal inventory management system, (b) the inability of principal suppliers or logistics providers to be Year 2000-ready, which could result in delays in product deliveries from such suppliers or logistics providers and (c) failure of systems and necessary infrastructure such as electricity supply. The Company is preparing plans to flow inventory around an assumed period of disruption to the Company's stores, which could include accelerating distribution of high volume merchandise, and critical products to reduce the impact of significant failure. Other. The Company has been characterized as an insider in the liquidating plan of reorganization filed on April 6, 1998 by L. Luria & Son, Inc. ("Luria's") in the United States Bankruptcy Court, Southern District of Florida. In October 1998, the committee of unsecured creditors in Luria's bankruptcy proceedings filed a complaint with the United States Bankruptcy Court, Southern District of Florida, to recover substantial funds from the Company. The complaint alleges that Luria's made preference payments, as defined by the Bankruptcy Court, to the Company and seeks recovery of said preference payments, as well as disallowing any and all claims of the Company against Luria's until full payment of the preference payments have been made. In July 1999, the Company agreed with the unsecured creditors to settle all claims held by Luria's against the Company for the sum of $1.2 million, payable over the next nine months according to a repayment schedule. This settlement is subject to the approval of the Bankruptcy Court. The full amount of the settlement was accrued for in the Company's financial statements as of July 31, 1999 and for the year ending January 30, 1999. In December 1993, the patent holder and exclusive licensee in the U.S. of Boucheron filed a complaint against us in the United States District Court for the Southern District of New York alleging that the Company infringed upon their exclusive right to sell the Boucheron bottle and is seeking $1.5 million in damages. Their theory is that they have a valid patent for the bottles and that our sales of such bottles infringes upon their patent rights. The Company believes that a patentee cannot control by resort to an infringement suit the resale of a patented article which it has sold. The Company filed a motion to dismiss during February 1994. On March 20, 1995, the court denied our motion to dismiss, and on April 14, 1995, the Company filed an answer to the complaint. Discovery is in progress. LIQUIDITY AND CAPITAL RESOURCES The Company's principal capital requirements are to fund working capital needs, new store additions and renovation of existing stores. For the first twenty-six weeks of fiscal 1999, these capital requirements have generally been satisfied by short term borrowings and issuance of convertible notes payable. 13 14 Net cash used in operating activities during the twenty-six weeks ended July 31, 1999 was approximately $6.5 million, principally as a result of the net change in the Company's inventory, trade receivables and accounts payable, as well as the net loss for the twenty-six week period. At July 31, 1999, approximately $1.4 million of the Company's trade receivables were considered past due compared to $1.1 million at January 30, 1999. Of the $6.1 million in trade receivables due from unaffiliated customers, $1.2 million was due from one customer which also accounted for 65% of the Company's wholesale sales during the thirteen weeks ended July 31, 1999. The Company has not experienced any write-offs of accounts receivable from this customer due to collectibility. Net cash used in investing activities during the twenty-six weeks ended July 31, 1999 was $1.8 million compared to $5.2 million for the same period last year. This primarily represents purchases of furniture, fixtures and equipment for new store openings and the renovation of existing stores during the first three quarters. The decrease in capital expenditures is due to less store openings in fiscal 1999 compared with fiscal 1998. Net cash provided by financing activities during the twenty-six weeks ended July 31, 1999 was approximately $7.9 million compared with approximately $0.8 million for the same time period in the prior year. The increase was primarily the result of the issuance of an aggregate of $4 million convertible notes (see Note 7), the issuance of a $2.5 million short-term note payable to a wholesale customer as well as an increased use of the Company's line of credit during the first twenty-six weeks of 1999. The Company's $35 million line of credit contains covenants requiring the maintenance of minimum tangible net worth and book value and the achievement of specified levels of quarterly results of operations. The line of credit also contains limitations on additional borrowings, capital expenditures, number of new store openings and purchases of treasury stock and prohibits distribution of dividends. As of January 30, 1999, the Company was in violation of some of the above covenants and, as a result of these violations, was in default under the line of credit agreement. As a result, the Company incurred the default rate of interest, prime plus 4% (12.00% at July 31, 1999) beginning December 1998 and the bank could demand repayment of the amounts outstanding under the line of credit agreement. On July 14, 1999, the Company obtained a waiver of default from the bank through September 30, 1999 and as of and for the year ended January 30, 1999. Future outstanding borrowings will bear interest at the prime rate plus four percent. The bank agreed to less restrictive covenants provided that certain events commence prior to September 30, 1999. One such event includes that perfumania.com, inc. (a wholly-owned subsidiary) is to receive at least $10 million from a contemplated initial public offering of its shares, of which at least $2 million is to be repaid to the Company. Management believes that the conditions included in the waiver will be met by September 30, 1999, however, there can be no assurance of this. Should the Company be unable to meet these conditions, the Company may be required to repay outstanding amounts (totaling approximately $33.1 million as of July 31, 1999) and obtain alternative sources of financing. The Company could also be required to take other actions to reduce the Company's reliance on working capital financing and generate additional working capital, which could include delaying the opening of new stores, reducing inventory purchases and/or reducing our wholesale and retail selling prices to generate more cash. Any such actions, or the Company's failure to obtain additional financing in an amount sufficient to support current and planned levels of operation, could adversely affect the Company's business and operating results. In July 1999, we obtained a $2.5 million unsecured loan from a wholesale customer bearing an interest rate of 2.4%. The loan is payable in full December 1999. On August 31, 1999 the Company entered into a stock purchase agreement with an affiliated Company through common ownership. The agreement calls for the transfer of 1,512,406 shares of the Company's treasury stock to this affiliated company 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 $2.98, which approximates 90% of the closing price on the Company's common stock for the previous 20 business days. Pursuant to this agreement the parties entered into a registration rights agreement dated August 31, 1999, which grants the affiliated company demand registration rights. The Company recorded an extraordinary loss of approximately $314,000 which will be taken to income in the third quarter of fiscal year 1999. During the thirteen weeks ended July 31, 1999, the Company opened 2 stores and closed 9 stores. At July 31, 1999, the Company operated 281 stores. The Company currently plans to open 3 additional stores during the third and fourth quarters of fiscal 1999. RESULTS OF OPERATIONS COMPARISON OF THE THIRTEEN WEEKS ENDED JULY 31, 1999 WITH THE THIRTEEN WEEKS ENDED AUGUST 1, 1998. Net sales increased from $39.7 million in the thirteen weeks ended August 1, 1998, to $46.0 million in the thirteen weeks ended July 31, 1999. Wholesale sales increased 7.0% (from $10.2 million to $10.9 million) and retail sales increased by 18.9% (from $29.4 million to $35.0 million). The increase in retail sales was principally due to the increase in comparable retail stores sales. Comparable store sales during the current period increased 12% when compared to last year. 14 15 Gross profit increased 16.0% from $16.5 million in the thirteen weeks ended August 1, 1998 (41.6% of net sales) to $19.2 million in the thirteen weeks ended July 31, 1999 (41.7% of net sales) due to increases in gross profit for both the wholesale and retail divisions. Gross profit for the wholesale division increased from $1.9 million in the thirteen weeks ended August 1, 1998 to $2.5 million in the thirteen weeks ended July 31, 1999. As a percentage of net sales, gross profit for the wholesale division increased from 18.7% in the thirteen weeks ended August 1, 1998 to 22.6% in the thirteen weeks ended July 31, 1999, primarily as a result of higher margin sales. Gross profit for the retail division increased to $16.7 million in the thirteen weeks ended July 31, 1999 from $14.6 million in the thirteen weeks ended August 1, 1998 as a result of higher retail sales. As a percentage of net sales, gross profit for the retail division decreased from 49.6% in the thirteen weeks ended August 1, 1998 to 47.7% in the thirteen weeks ended July 31, 1999 primarily as a result of increases of promotional sales of merchandise at lower margins during the month of July 1999 as well as increases in the accrual for inventory shrinkage compared with the same period last year. Operating expenses, which include selling, general and administrative expenses as well as depreciation, increased 4.9% from $16.6 million in the thirteen weeks ended August 1, 1998 to $17.4 million in the thirteen weeks ended July 31, 1999. As a percentage of net sales, operating expenses decreased from 41.9% during the thirteen weeks ended August 1, 1998 to 37.9% during the thirteen weeks ended July 31, 1999. Operating expenses as a percentage of net sales decreased due to the impact of higher comparable retail store sales, the closure of underperforming locations in 1998 and 1999 and the reversal of $700,000 of accrued expenses for the Luria's litigation which was settled in July 1999. Other expenses, which include interest expense, increased by 66.7% from $1.2 million for the thirteen weeks ended August 1, 1998 to $2.0 million for the thirteen weeks ended July 31, 1999. The increase is principally due to the beneficial conversion cost of approximately $981,000 associated with the issuance of the convertible notes in July 1999 (See Note 7). As a result of the foregoing, the Company had a net loss of $311,140, or $(0.04) per diluted share, in the thirteen weeks ended July 31, 1999 compared to a net loss of $1,272,658, or ($0.20) per diluted share, in the thirteen weeks ended August 1, 1998. COMPARISON OF THE TWENTY-SIX WEEKS ENDED JULY 31, 1999 WITH THE TWENTY-SIX WEEKS ENDED AUGUST 1, 1998 Net sales increased 9.2% from $78.2 million in the twenty-six weeks ended August 1, 1998 to $85.4 million in the twenty-six weeks ended July 31, 1999. The increase in net sales was due to a 16.0% increase in retail sales (from $54.4 million to $63.1 million), offset by a 6.3% decrease in wholesale sales (from $23.7 million to $22.2 million). The decrease in wholesale sales was primarily attributable to unusually large wholesale sales which occurred in the first quarter of 1998. The increase in retail sales was principally due to the increase in comparable retail store sales. Comparable store sales during the twenty-six weeks ended July 31, 1999 increased 8% when compared to last year. Gross profit increased 9.9% from $31.3 million in the twenty-six weeks ended August 1, 1998 (40.1% of net sales) to $34.4 million in the twenty-six weeks ended July 31, 1999 (40.3% of net sales) as a result of increases in both retail and wholesale sales. Gross profit for the wholesale division decreased 8.5% from $5.1 million in the twenty-six weeks ended August 1, 1998 to $4.7 million in the twenty-six weeks ended July 31, 1999. As a percentage of net sales, gross profit for the wholesale division decreased from 21.5% in the twenty-six weeks ended August 1, 1998 to 21.0% in the twenty-six weeks ended July 31, 1999. Gross profit for the retail division increased 13.4% from $26.2 million in the twenty-six weeks ended August 1, 1998 to $29.7 million in the twenty-six weeks ended July 31, 1999. The retail division's gross 15 16 margin decreased from 48.1% in the twenty-six weeks ended August 1, 1998 to 47.1% in the twenty-six weeks ended July 31, 1999 as a result of increases of promotional sales of merchandise at lower margins during the month of July 1999 as well as increases in the accrual for inventory shrinkage compared with the same period last year. Operating expenses increased $2.2 million in the twenty-six weeks ended July 31, 1999 compared to the twenty-six weeks ended August 1, 1998. As a percentage of net sales, operating expenses decreased from 42.3% during the twenty-six weeks ended August 1, 1998 to 41.3% during the twenty-six weeks ended July 31, 1999. Operating expenses as a percentage of net sales decreased due to the impact of higher comparable retail store sales, the closure of underperforming locations in 1998 and 1999 and the reversal of $700,000 of accrued expenses for the Luria's litigation which was settled in July 1999. Other expenses, which include interest expense, increased by 56.5% from $2.3 million for the twenty-six weeks ended August 1, 1998 to $3.6 million for the twenty-six weeks ended July 31, 1999. The increase is principally due to the beneficial conversion cost of approximately $1.1 million associated with the issuance of the convertible notes in April 1999 and July 1999 (See Note 7). During the twenty-six weeks ended July 31, 1999 the Company had a net loss of $4,403,006 or $(0.58) per diluted share, compared to a net loss of $4,044,270 or ($0.62) per diluted share during the twenty-six weeks ended August 1, 1998. RECENT ACCOUNTING PRONOUNCEMENT In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"). Among other provisions, SFAS No. 133 establishes accounting the reporting standards for derivative instruments and for hedging activities. It also requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. SFAS No. 133 is effective for financial statements for fiscal years beginning after June 15, 2000. Management has not determined the effect, if any, of adopting SFAS No. 133. YEAR 2000 The following critical application systems areas are the focus of the Company's Y2K compliance efforts; (1) Merchandising, (2) Inventory Management and Distribution, (3) Point-of-sales systems, (4) Human Resources and (5) Finance and Accounting. The Merchandising and Finance and Accounting systems are currently being upgraded utilizing vendor software certified as Y2K compliant. The Inventory Management and Distribution systems as well as the Point-of-sales and Human Resources systems will be upgraded in the third quarter of 1999. The Company's hardware and communications network is currently being inventoried, assessed, and where instances of non-compliance are noted, upgraded and tested. The Company has established a budget totaling approximately $1.5 million for the acquisition of computer hardware and software that will assist in the Year 2000 assessment and remediation activities. The Company expects to complete substantially all of the Year 2000 assessment and remediation activities no later than the fourth quarter of 1999. The Company's current systems may contain undetected errors or defects with Year 2000 date functions that may result in material costs. In addition, the Company utilizes third-party equipment, software, including non-information technology systems, such as facilities and distribution equipment that may not be Year 2000 compliant. Failure of third-party equipment, software or content to operate properly with regard to the Year 2000 issue could require the Company to incur unanticipated expenses to remedy problems, which could have a material adverse effect on its business, operating results and financial condition. The Company is currently assessing whether third parties in its supply and distribution chain are adequately addressing their Year 2000 compliance issues. The Company has initiated formal communications with its significant suppliers and service providers to determine the extent to which its systems may be vulnerable if such suppliers and providers fail to address and correct their own Year 2000 issues. The Company cannot guarantee that the systems of suppliers or other companies on which the Company relies will be Year 2000 compliant. The Company will track the Year 2000 compliance status of its material vendors and suppliers via the Company's own internal vendor compliance effort. Year 2000 correspondence will be sent to critical vendors and suppliers during the second and third quarters of 1999, with continued follow up for those who fail to respond. All vendor responses will be evaluated to assess any possible risk to or effect on the Company's operations. During the third quarter of 1999, the Company expects to implement additional procedures for assessing the Year 2000 compliance status of its most critical vendors and will modify its contingency plans accordingly. The Company is in the process of preparing its contingency plans which will include the identification of its most reasonably likely worst case scenarios. Currently, the most reasonably likely sources of risk to the 16 17 Company include (1) the disruption of the Company's internal inventory management system, (2) the inability of principal suppliers or logistics providers to be Year 2000-ready, which could result in delays in product deliveries from such suppliers or logistics providers and (3) failure of hardware and software utilized by transportation vendors as a result of a general failure of systems and necessary infrastructure such as electricity supply. The Company is preparing plans to flow inventory around an assumed period of disruption to the Company's stores, which could include accelerating distribution of high volume merchandise and critical products to reduce the impact of significant failure. Based on its current assessment efforts, the Company does not believe that Year 2000 issues will have a material adverse effect on its financial condition or results of operations. However, the Company's Year 2000 issues and any potential business interruptions, costs, damages or losses related thereto, are dependent, to a significant degree, upon the Year 2000 compliance of third parties, such as government agencies, vendors and suppliers. Consequently, the Company is unable to determine at this time whether Year 2000 failures will materially affect the Company. The Company believes that its compliance efforts have and will reduce the impact on the Company of any such failures. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS During the quarter ended July 31, 1999, there have been no material changes in the information about the Company's market risks as of January 30, 1999 as set forth in Item 7A of the 1999 Form 10-K. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS For a discussion of the legal contingencies associated with the Luria's and Boucheron cases, see Note 9 of the Notes to Condensed Consolidated Financial Statements in Item 1 of Part I of this report. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS In July 1999, the Company entered into a Securities Purchase Agreement and issued an aggregate of $2 million worth of our Series B Convertible Notes, which are convertible into common stock. The agreement requires the Company to file a registration statement with the Securities and Exchange Commission within forty-five days after the date of issuance of the convertible notes. The Conversion Price is the lower of (A) $3.40625 per share, subject to adjustment and (B) the floating conversion price determined by multiplying (1) the average closing bid price of the common stock for three trading days immediately preceding the date of determination, by (2) 80% subject to adjustment. The conversion price may be adjusted pursuant to an antidilution provision in the agreement. The Company has used the proceeds from the aforementioned issuance of convertible notes payable, net of expenses incurred in the registration of such shares as prescribed in the respective agreements, for working capital and operating expenditures. 17 18 The following table provides information regarding the assumed conversion of the Notes as of August 31, 1999.
NO. OF SHARES TO BE PROCEEDS NAME REGISTERED RECEIVED ---- ------------- -------- S. Robert Productions, LLC 78,688 $ 200,000 Cranshire Capital, L.P. 275,408 700,000 EP Opportunity Fund, L.L.C. 250,621 637,000 The Dotcom Fund, L.L.C. 118,032 300,000 EP.com Fund, L.L.C. 11,016 28,000 EP Opportunity Fund International, LTD. 13,770 35,000 JJP Partnership 39,344 100,000 ------- ---------- Total $2,000,000 ==========
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Index to Exhibits
Exhibit Number Description of Exhibit - ------- ---------------------- 27.1 Financial Data Schedule (1)
- ------------------ (1) Filed herewith. (b) The Company did not file any reports on Form 8-K during the quarter ended July 31, 1999. 18 19 PERFUMANIA, INC. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused the report to be signed on its behalf by the undersigned, thereunto duly authorized. Perfumania, Inc. --------------------------------- (Registrant) Date: October 7, 1999 By: /s/ ILIA LEKACH --------------------------------- Ilia Lekach Chairman of the Board and Chief Executive Officer (Principal Executive Officer) By: /s/ DONOVAN CHIN --------------------------------- Donovan Chin Chief Financial Officer, Treasurer, and Secretary (Principal Financial and Accounting Officer) 19 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF PERFUMANIA, INC FOR THE 6 MONTHS ENDED JULY 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS JAN-29-2000 MAY-30-1999 JUL-31-1999 1,334,882 0 6,066,682 0 62,974,342 80,698,694 23,073,219 0 106,463,618 84,796,523 0 0 0 91,514 14,637,881 106,463,618 85,353,478 85,353,478 50,946,546 35,241,881 3,568,057 0 0 (4,403,006) 0 (4,403,006) 0 0 0 (4,403,006) (0.58) (0.58)
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