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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 30, 1999
COMMISSION FILE NUMBER 001-15311
perfumania.com, inc.
(Exact name of registrant as specified in its charter)
FLORIDA 65-0884688
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
11701 N.W. 101ST ROAD MIAMI, FLORIDA 33178
(Address of principal executive office)
(305) 889-1600
(Registrant's telephone number, including area code)
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 [ ]
As of December 14, 1999, perfumania.com had 7,500,000 shares of
common stock, $0.01 par value, outstanding.
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perfumania.com, inc.
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Balance Sheets........................................................ 3
Statements of Operations.............................................. 4
Statement of Cash Flows............................................... 5
Notes to Financial Statements......................................... 6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation........................ 9
PART II. OTHER INFORMATION
ITEM 2. Changes in Securities and Uses of Proceeds............................ 13
ITEM 5. Other Information..................................................... 13
ITEM 6. Exhibits and Reports on Form 8-K...................................... 13
Signatures............................................................ 14
</TABLE>
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perfumania.com, inc.
BALANCE SHEETS
<TABLE>
<CAPTION>
OCTOBER 30, JANUARY 30,
1999 1999
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 11,166,297 $ 100,000
Accounts receivable 235,695 --
Due from Parent 632,900 --
Inventories 599,069 --
Prepaid expenses and other current assets 94,630 209,655
------------ ------------
Total current assets 12,728,591 309,655
Property and equipment, net 117,330 14,213
Other assets 50,000 --
------------ ------------
Total assets $ 12,895,921 $ 323,868
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses $ 270,561 $ 66,037
Due to parent -- 531,326
------------ ------------
Total liabilities 270,561 597,363
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Commitments and contingencies -- --
------------ ------------
Stockholders' equity (deficit):
Common stock, $0.01 par value, 20,000,000
shares authorized, 7,500,000 shares issued
and outstanding 75,000 50,000
Additional paid in capital 14,277,271 --
Accumulated deficit (2,589,286) (323,495)
Common stock warrants 917,500 --
Unearned service compensation (55,125) --
------------ ------------
Total stockholders' equity (deficit) 12,625,360 (273,495)
------------ ------------
Total liabilities and stockholders' equity
(deficit) $ 12,895,921 $ 323,868
============ ============
</TABLE>
The accompanying financial statements are integral part
of these financial statements.
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perfumania.com, inc.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 30, 1999 October 30, 1999
------------------ ----------------
<S> <C> <C>
Net sales $ 537,165 $ 927,008
Cost of sales 441,622 736,069
----------- -----------
Gross profit 95,543 190,939
----------- -----------
Operating expenses:
General and administrative expenses 308,511 798,113
Marketing and advertising expenses 259,157 911,203
Web site development expenses 61,551 196,673
Consulting fees 19,200 137,704
Management fees to Parent 97,936 266,792
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Total operating expenses 746,355 2,310,485
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Loss from operations (650,812) (2,119,546)
Interest expense to Parent (76,301) (176,218)
Interest income 29,973 29,973
----------- -----------
Net loss $ (697,140) $(2,265,791)
=========== ===========
Basic loss per common share $ (0.12) $ (0.43)
=========== ===========
Diluted loss per common share $ (0.12) $ (0.43)
=========== ===========
Weighted average number of common shares
outstanding used in basic and diluted calculation 5,879,121 5,269,360
=========== ===========
</TABLE>
The accompanying financial statements are integral part
of these financial statements.
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perfumania.com, inc.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months
Ended
October 30, 1999
---------------
<S> <C>
Cash flows from operating activities:
Net loss $ (2,265,791)
Adjustments to reconcile net loss to net cash
used in operating activities:
Provision for inventory 35,000
Depreciation and amortization 7,920
Amortization service compensation 11,025
Changes in operating assets and liabilities, net of acquisitions:
Increase in accounts receivable (235,695)
Increase in prepaid expenses and other current assets (94,630)
Increase in inventories (424,414)
Increase in accounts payables and accrued
expenses 204,524
------------
Net cash used in operating activities (2,762,061)
------------
Cash flows from investing activities:
Purchases of property and equipment (111,037)
Acquisition from Parent (500,000)
------------
Net cash used in investing activities (611,037)
------------
Cash flows from financing activities:
Issuance of common stock, net of transaction costs
of $1,911,928 charged to paid in capital 15,603,621
Net (payments to) borrowings from parent (1,164,226)
------------
Net cash provided by financing activities 14,439,395
------------
Increase in cash and cash equivalents 11,066,297
Cash and cash equivalents, beginning of period 100,000
------------
Cash and cash equivalents, end of period $ 11,166,297
============
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
During the three months ended October 30, 1999, perfumania.com issued
stock options in consideration for services. The value of the unamortized stock
options has been included as unearned service compensation in the stockholders'
equity (deficit) section of the accompanying balance sheet.
In connection with perfumania.com's initial public offering, the
company granted common stock warrants to the underwriters valued at $917,500.
The $917,500 was accounted for as common stock warrants and as reduction of
additional paid-in capital in the stockholders' equity.
</TABLE>
The accompanying financial statements are integral part
of these financial statements.
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perfumania.com, inc.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BASIS FOR PRESENTATION OF FINANCIAL STATEMENTS
perfumania.com, inc. is an online retailer of fragrances, fragrance
related products and bath and body products on a retail and wholesale basis.
perfumania.com utilizes Perfumania, Inc.'s (the "Parent") business relationships
and infrastructure and relied on the Parent to provide financing for its
operations from its inception through its initial public offering.
The accompanying unaudited consolidated financial statements of
perfumania.com, inc. ("perfumania.com" or the "Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions for Form 10-Q and Rule 10-01 of Regulation
S-X. They do not include all information and notes required by generally
accepted accounting principles for complete financial statements and should be
read together with the audited financial statements and notes thereto included
in perfumania.com Registration Statement on Form S-1, as amended, filed with the
Securities and Exchange Commission. The balance sheet data as of January 31,
1999 was derived from audited financial statements but does not include all
disclosures required by generally accepted accounting principles. The financial
information furnished reflects all adjustments, consisting only of normal
recurring accruals, which are, in the opinion of management, necessary for a
fair presentation of the financial position, results of operations and cash
flows for the quarterly periods presented. The results of operations for the
periods presented are not necessarily indicative of our future results of
operations for the entire year.
NOTE 2 - INITIAL PUBLIC OFFERING
In September 1999, perfumania.com completed its initial public offering
and received proceeds of approximately $16,100,000, net of $1,400,000
underwriting discounts and commissions, from the sale of 2,500,000 shares of its
common stock. perfumania.com used $3,343,900 of the proceeds to repay advances
from the Parent. Additionally, perfumania.com incurred approximately $512,000 in
other costs in connection with the offering.
In connection with the offering, perfumania.com granted common stocks
warrant to the underwriters to purchase 350,000 shares of common stock at an
exercise price of $9.80 per share. The common stock warrants can be exercised at
any time for a period of five years. The market value of the warrants was
established using the Black-Scholes model at $1,284,500, of which $917,500 was
allocated to the Company. In addition, perfumania.com granted an option to the
underwriters to purchase up to 525,000 shares of common stock at $7.00 per
share. The option agreement was subsequently canceled.
NOTE 3 - ACQUISITION
In October 1999, perfumania.com acquired from the Parent certain assets
of PostAcard.com, consisting primarily of an e-commerce greeting card website,
for $500,000 in cash. The acquisition has been recorded at the Parent's
historical cost of $50,000, and the excess of $450,000 was charged to additional
paid in capital.
NOTE 4 - RELATED PARTY TRANSACTIONS
perfumania.com has purchased inventory since inception from the Parent
at an amount equal to the Parent's cost plus five percent. For the three and
nine months ended October 30, 1999, such purchases totaled approximately
$197,000 and $740,000, respectively.
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perfumania.com is charged for various services provided by the Parent
including administrative, distribution and other services. Such charges were
approximately $98,000 and $266,800 for the three and nine months ended October
30, 1999, respectively, and are classified as management fees in the
accompanying statements of operations. Purchases of inventory and expenses
charged by the Parent are not necessarily indicative of costs and expenses which
might have been incurred had perfumania.com been operating as a separate
stand-alone company.
NOTE 5 - SEGMENT INFORMATION
During the three and nine months ended October 30, 1999, perfumania.com
generated wholesale sales of $134,500 and $176,800, respectively. The cost of
sales associated with those sales amounted to $117,400 and $153,500 for the
three and nine months ended October 30, 1999, respectively. Wholesale gross
profit was $17,100 or 12.7% and $23,300 or 13.2% for the three and nine months
ended October 30, 1999.
NOTE 6 - EARNINGS PER SHARE
Basic loss per common share is computed by dividing income available to
common shareholders by the weighted average number of common shares outstanding.
Diluted loss per common share is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding
including the dilutive effect of stock options and warrants using the treasury
stock method.
Potentially dilutive shares for the three and nine months ended October
30, 1999, which have not been included in the diluted per share calculation
include 5,684 and 2,455 shares, respectively, because their effects would be
anti-dilutive due to the loss incurred by perfumania.com. Accordingly, diluted
net loss per common share is the same as basic net loss per common share for the
periods presented.
NOTE 7 - COMMITMENTS
Effective April 15, 1999, perfumania.com entered into a three years
service agreement with a software and network developer providing web hosting
services. Pursuant to the agreement, perfumania.com must remit 36 equal monthly
installments of $14,200. Under the term of the service agreement, in return for
displaying the network developer's corporate logo on perfumania.com's web page,
perfumania.com shall receive a marketing credit of $1,700 per month, resulting
in a net monthly web hosting service fee of $12,500 per month. Early termination
fee will be applicable if services are discontinued before the service agreement
termination date. The net monthly web hosting service fee is expensed as
incurred and is reflected in web site development expenses in the accompanying
financial statements.
Effective May 1, 1999, perfumania.com entered into an employment
agreement with its president and chief executive officer for a five year initial
term. Among the provisions of the employment agreement, the president and chief
executive officer will receive a base salary of $200,000 and stock options to
buy 225,000 shares of common stock at an exercise price of $7.00 per share.
NOTE 8 - SUBSEQUENT EVENTS
On December 10, 1999, the Parent entered into an option agreement with
an investment firm granting the investment firm two options to acquire up to
2,500,000 shares of common stock of perfumania.com from the Parent. The first
option provides that the investment firms may purchase 2,000,000 shares for
$6.00 per share on or prior to January 15, 2000 and provided that this option
has been exercised, a second option provides that the investment firm may
purchase 500,000 shares of $8.00 on or prior to the earlier to occur of December
31, 2000 or various other events, as defined in the agreement. The
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agreement provides that if the first option is exercised, nominees of the
investment firm will be appointed to constitute the majority of the members of
the board of directors of the Company subject to satisfaction of applicable SEC
regulations. Subject to the exercise of the first option, the agreement also
limits the amount of shares of perfumania.com that may be sold by the Parent as
well as the timing of these sales. Assuming that both options are exercised for
a total of 2,500,000 shares, the Parent will retain 1,500,000 shares of the
total 7,500,000 outstanding shares of perfumania.com.
NOTE 9 - RECENT PRONOUNCEMENTS
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" was issued. SFAS No. 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Pursuant to
SFAS No. 133, changes in the fair value of derivatives are recorded each period
in current earnings or other comprehensive income depending on whether a
derivative is designated as part of a hedge transaction and, if it is, the type
of hedge transaction. SFAS No. 133, as amended, is effective for all fiscal
quarters of fiscal years beginning after June 15, 2000. perfumania.com has not
yet determined the impact that the adoption of SFAS No. 133 will have, but does
not currently expect the adoption to have a material impact on its results of
operations or cash flows.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
financial statements and related notes herein included. This discussion contains
forward-looking statements that reflect our plans, estimates, and beliefs and
that involve risks and uncertainties. Our actual results may differ materially
from those anticipated in these forward-looking statements.
OVERVIEW
perfumania.com operates an online store that specializes in the sale of
fragrances, fragrance related products and bath and body products on a retail
and wholesale basis. We launched our online store in February 1999. Perfumania,
Inc. (the "Parent") has financed our operations since our inception on January
7, 1999. These cash flows are not indicative of the cash flows that would have
resulted had perfumania.com been operating as a separate stand-alone company
during the periods presented. Since our incorporation, we have incurred
significant losses as a result of our start up costs. Cumulative losses since
inception date amounted to $2,589,300.
We intend to enhance the features of our online store. We believe that
our operating expenses will significantly increase as a result of the financial
commitments related to the development of marketing channels, future strategic
relationships and enhancements to our online stores and other capital
expenditures. We expect to incur losses and generate negative cash flow from
operations for the foreseeable future. Our profitability primarily depends upon
our ability to generate traffic and revenues on our online store and
substantially increase net sales. In view of the rapidly changing nature of our
business and our limited operating history, we believe that our historical
operating results are not necessarily meaningful and should not be relied upon
as an indication of future performance.
RESULTS OF OPERATIONS
NET SALES. Net sales include the sale of our fragrances and fragrance
related products, net of returns and outbound shipping charges. Net sales
totaled $537,200 and $927,000 for the three and nine months period ended October
30, 1999, respectively. During the three and nine months period ended October
30, 1999 net sales included $134,500 and $176,800 of wholesale sales.
COST OF SALES. Cost of sales consists primarily of the cost of
merchandise sold and outbound and inbound shipping costs. Cost of sales totaled
$441,600 and $736,100 for the three and nine months ended October 30, 1999,
respectively. During the three and nine months ended October 30, 1999 cost of
sales included $117,400 and $153,500 from wholesale sales, respectively.
GROSS PROFIT. For the three and nine months ended October 30, 1999,
perfumania.com gross profit was $95,600 and $190,900 or 17.8% and 20.6% of net
sales, respectively. Included within gross profit for the three and nine months
ended October 30, 1999 was $17,100 and $23,300 or 12.7% and 13.2%, respectively,
of wholesale sales. In the future, we may expand or increase the discounts
offered to customers as well as expand product offerings to areas that may have
lower gross margins than our existing business.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses consist of payroll and related expenses for executive, accounting and
administrative personnel, recruiting, professional fees and other general
corporate expenses. General and administrative expenses totaled $308,500 and
$798,100 for the three and nine months ended October 30, 1999, respectively.
General and administrative expenses will continue to increase as our staff
expands and incurs additional costs to support the growth of the business.
MANAGEMENT FEES. Management fees consist primarily of expenses, which
have been allocated to perfumania.com by Perfumania, Inc. for costs associated
with resources it shares. These fees consist
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primarily of the pro rata cost of rent, utilities and facilities maintenance.
Management fees totaled $97,900 and $266,800 for the three and nine months ended
October 30, 1999, respectively. Effective May 1, 1999, perfumania.com and
Perfumania, Inc. entered into an intercompany services agreement covering these
services.
MARKETING AND ADVERTISING EXPENSES. Marketing and advertising expenses
consist of expenditures related to advertising and promotion. Marketing and
advertising expenses totaled $259,200 and $911,200 for the three and nine months
ended October 30, 1999, respectively. During February 1999, perfumania.com began
a cross-marketing campaign with Perfumania, Inc. that it intends to continue. We
expect to expand our marketing efforts and, as a result our marketing expenses
will significantly increase.
WEB SITE DEVELOPMENT EXPENSES. Web site development expenses consist
principally of expenses for development of our Web site, network operations and
systems and telecommunications infrastructure. Web site development expenses
totaled $61,600 and $196,700 for the three and nine months ended October 30,
1999, respectively. This amount reflects the staffing and associated costs
related to building and enhancing our online store and transaction-processing
systems, as well as our investment in systems and telecommunications
infrastructure. Web site development expenses are expected to increase as we
continue to enhance our online store and expand our staff.
CONSULTING FEES. Consulting fees consist primarily of amounts paid to
various technical and managerial consultants for services provided in the
development of perfumania.com. Consulting fees totaled $19,200 and $137,700 for
the three and nine months ended October 30, 1999, respectively.
INCOME TAXES. perfumania.com was incorporated in January 1999 and has
not yet filed a federal income tax return or a State of Florida income tax
return. perfumania.com's 1999 fiscal year will end on January 29, 2000.
perfumania.com expects to have operating losses for the foreseeable future and
does not expect to have any federal or state income tax liability until it is
profitable and its net operating loss carry forwards are used or expire.
NET LOSS. As a result of the factors discussed above, primarily
relating to the significant initial investments made in establishing and
developing our Web site, the net loss totaled $697,100 and $2,265,800 for the
three and nine months ended October 30, 1999, respectively. We expect to incur
net losses for the foreseeable future.
LIQUIDITY AND CAPITAL RESOURCES
Our principal capital requirements are to acquire merchandise, maintain
and improve our online store and engage in advertising and promotional
activities. Effective April 15, 1999, we entered into a 36-month service
agreement with a software and network developer providing Web hosting services
and make 36 equal monthly payments of $14,200. Under the term of the service
agreement, in return for displaying the network developer's corporate logo on
our Web page, we shall receive a marketing credit of $1,700 per month, resulting
in a net monthly Web hosting services fee of $12,500 per month. The net monthly
Web hosting service fee is expensed as incurred and is reflected in Web site
development expenses. We are subject to an early termination fee of $201,165 if
cancelled within the first 12 months and $100,583 if cancelled after 24 months
of service.
At October 30, 1999, we had a working capital of approximately
$12,458,000, compared to working capital deficit of $287,700 at January 31,
1999. The increase in working capital was due mainly to the completion of
perfumania.com initial public offering, in which perfumania.com received
approximately $15,603,600.
During the nine months ended October 30, 1999, we used $2,762,100 in
our operating activities. This was mainly the result of losses of $2,265,800,
increases in accounts receivable of $235,700, inventory
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of $424,400 and prepaid expenses and other current assets of $94,600, offset by
an increase in accounts payable and accrued expenses of $289,500 and non-cash
items amounting to $53,900.
We used $611,000 in investing activities for the nine months ended
October 30, 1999. These expenditures are primarily related to the purchase of
computer hardware and software and $500,000 for the acquisition of PostAcard.com
from the Parent.
Net cash provided by financing activities was $14,439,400 for the nine
months ended October 30, 1999. In September 1999, the Company completed its
initial public offering and received proceeds of $16,100,000, net of $1,400,000
underwriting discounts and commissions, from the sale of 2,500,000 shares its
common stock. perfumania.com used $3,343,900 of the proceeds to repay advances
from the Parent. Additionally, perfumania.com incurred approximately $512,000 in
other costs in connection with the offering. Management of the Company expects
to use the remaining proceeds for working capital, general corporate purposes,
and expansion of the perfumania.com operations including potential acquisitions.
Pending completion of such uses, the Company has invested the net proceeds of
the offering in high-quality short-term, interest bearing investment-grade debt
securities, certificates of deposit or direct or guaranteed obligations of the
United States.
Our long-term capital requirements beyond this period will depend on
numerous factors, including, but not limited to, the following:
o The rate of market acceptance of the online store;
o The ability to expand our customer base;
o The cost of upgrades to our online store; and
o The level of expenditures for sales and marketing and other factors.
If the funds from this offering and our revenues are insufficient to
fund the activities in the short or long term, we would need to raise additional
funds by incurring debt or through public or private offerings of our stock. We
may not be able to do either on terms favorable to us, if at all.
YEAR 2000 READINESS The Year 2000 issue results from computer systems
using two digits rather than four to represent the year so that a date using
"00" is recognized as the year 1900 rather than the year 2000. This situation
may disrupt the smooth operation of both our and third party's computer systems.
We have preliminarily assessed our Year 2000 exposure and believe that
we can achieve Year 2000 readiness by the fourth quarter of 1999. We are
developing a plan of communication with significant business partners to obtain
appropriate assurances that their Year 2000 issues are resolved in a timely
manner. Our remediation costs to date have not been material and we do not
anticipate that our future remediation costs will have a material effect on our
business.
In estimating our Year 2000 related costs, we have assumed the
continued availability of certain resources, the ability to acquire accurate
information regarding third parties, and the ability to correct all relevant
applications. Our actual costs could differ materially from our estimates.
Our critical application systems are merchandising, inventory
management and distribution, our computer systems, human resources and finance
and accounting. These areas will be the focus of our remediation efforts. The
merchandising, finance and accounting, and inventory management and distribution
systems are currently being installed utilizing vendor software believed to be
Year 2000 ready. Our human resources systems will be upgraded in the fourth
quarter of 1999. Our hardware and communications network is outsourced to
Perfumania, Inc. and is currently being tested by Perfumania, Inc. and remedied,
where needed. In addition, a significant portions of the purchases from our
online store are made with credit cards. We will continue to take steps to
ensure Year 2000 readiness; however we
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cannot assure that such efforts will be successful and may be harmed if, as a
result of Year 2000 problems, customers cannot use credit cards to make
purchases.
We have engaged US internetworking and Digital Pulp to design, develop
and test our Web site and utilize other third party equipment and software. If
their equipment or software fails, we may incur expenses to remedy problems that
could harm our business. We initiated formal communications with our significant
suppliers and service providers to determine their Year 2000 readiness. We will
track the Year 2000 compliance status of our material vendors and suppliers via
our own internal vendor compliance effort. We cannot guarantee that the systems
of suppliers or other companies on which we rely will be Year 2000 compliant.
We are preparing our contingency plans, which will include the
identification of worst case scenarios. Currently, the likely sources of risk to
us include:
o the disruption of or Perfumania, Inc.'s internal inventory
management system;
o the inability of principal suppliers or third party providers to
be Year 2000 ready;
o failure of hardware and software utilized by our vendors;
o disruption of our Web pages; and
o disruption of communications links affecting our online store.
We cannot conclusively determine at this time whether Year 2000
failures will harm us. We believe that our compliance efforts have and will
reduce the impact on us of any such failures.
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PART II. OTHER INFORMATION
ITEM 2. Changes in Securities and Uses of Proceeds
In September 1999, perfumania.com completed its initial public offering
and received proceeds of approximately $16,100,000, net of $1,400,000
underwriting discounts and commissions, from the sale of 2,500,000 shares of its
common stock. perfumania.com used $3,343,900 of the proceeds to repay advances
from the Parent. Additionally, perfumania.com incurred approximately $512,000 in
other costs in connection with the offering.
In connection with the offering, perfumania.com granted common stocks
warrant to the underwriters to purchase 350,000 shares of common stock at an
exercise price of $9.80 per share. The common stock warrants can be exercised at
any time for a period of five years. The market value of the warrants was
established using the black-scholes model at $1,284,500, of which $917,500 was
allocated to the Company. In addition, perfumania.com granted an option to the
underwriters to purchase up to 525,000 shares of common stock at $7.00 per
share. The option agreement was subsequently canceled.
ITEM 5. Other Information
On October 29, 1999, we acquired, from our parent company, Perfumania,
Inc., all of the assets of PostAcard.com, Inc., a development-stage electronic
greeting card company and a wholly owned subsidiary of Perfumania, Inc., for
cash of $500,000. In connection with the transaction, which was ratified by our
board of directors on December 10, 1999, we agreed to employ two related parties
to one of our directors, as officers at an annual base compensation of $50,000
each. At the time of the acquisition, the assets of PostAcard.com, Inc.
consisted substantially of a registered domain name and other intellectual
property having a book value of approximately $50,000, and therefore not a
"significant amount of assets" within the meaning of Item 2 of Form 8-K.
Although no independent valuation of the assets was performed, we concluded,
based on our knowledge of the software development industry, that the market
value of the assets was as much as ten times their book value. The source of the
consideration paid was general working capital of the Company.
We understand that, on December 10, 1999, Perfumania, Inc. granted to
Alta Limited, an unaffiliated company, an option, 80% of which is immediately
exercisable, to acquire up to 2,500,000 restricted shares of our common stock
held by Perfumania, Inc., at exercise prices ranging from $6.00 to $8.00 per
share, payable to Perfumania, Inc. We have no knowledge of the source of any
funds used or proposed to be used by Alta Limited in connection with the
transaction. We have been advised that the underwriters in our initial public
offering consented to release Perfumania, Inc. and our officers and directors
from a 270-day lock-up agreement with respect to their shareholdings of our
common stock to permit the transaction to occur.
We further understand that, in connection with any exercise of the
option, Perfumania, Inc. will be obligated to vote for the election of two
designees of Alta Limited to sit on our board of directors. Subject to the
initial exercise of the option, if any, on December 10, 1999, all of our
directors except Michael Amideo tendered their resignations as directors, to be
accepted serially, in order to permit the appointment of directors designated by
Alta Limited to serve out the remaining terms of the resigning directors.
Subject also to the initial exercise of the option, on December 10, 1999 the
board of directors terminated the employment of Rachmil Lekach as our preisdent
and chief executive officer. The effect of such termination following a change
in control will be to trigger Mr. Lekach's entitlement, under his written
employment agreement, to severance benefits that include a severance payment to
be paid in cash, within five days after his termination, equal to three times
his average annual base salary, or $600,000. Our board of directors further
acted to clarify our intent in entering into certain employment agreements with
other officers, under which they have become entitled to comparable
change-in-control benefits without being terminated.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Asset Purchase Agreement
10.2 Employment Agreement with Isaac Lekach
10.3 Employment Agreement with David Lekach
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
thirteen weeks ended October 30, 1999.
13
<PAGE> 14
perfumania.com, 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.com, inc.
-----------------------------------
Registrant
December 14, 1999 /s/ Michael Amideo
-----------------------------------
Michael Amideo
Chief Financial Officer,
Chief Operating Officer
(Principal Financial and
Accounting Officer)
December 14, 1999 /s/ Rachmil Lekach
-----------------------------------
Rachmil Lekack
Chairman of the Board of Directors,
President and Chief Executive
Officer
14
<PAGE> 15
EXHIBIT INDEX
10.1 Asset Purchase Agreement
10.2 Employment Agreement with Isaac Lekach
10.3 Employment Agreement with David Lekach
27 Financial Data Schedule
<PAGE> 1
Exhibit 10.1
ASSET PURCHASE AGREEMENT
This agreement is made and entered into this 29th day of October, 1999
(the effective date), by and between Perfumania, Inc., a Florida corporation
(hereinafter "Seller") and perfumania.com, Inc., a Florida corporation
(hereinafter "Purchaser"). Seller and Purchaser are collectively referred to as
"the Parties".
WHEREAS in exchange for the consideration set out in this agreement,
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged by the Parties, the Parties agree as follows:
1. PURCHASE OF POSTACARD.COM. Purchaser shall acquire from Seller all
of the assets of PostAcard.com (hereinafter "the business"), a wholly owned
subsidiary of Seller, including but not limited to, (i) Seller's registered
domain name of the Business; (ii) the Business' website and its content; (iii)
any and all software used by seller to operate the Business; (iv) Seller's
proprietary designs and programs in connection with the Business; (v) Seller's
proprietary trademark's in connection with the Business; and (vi) Seller's
intellectual property rights in connection with the Business.
2. PURCHASE PRICE. Purchaser shall pay Seller the sum of five-hundred
thousand dollars ($500,000) in exchange for the Business.
3. DUE DILIGENCE. Purchaser acknowledges that it has conducted all due
diligence investigations.
4. EMPLOYMENT. Purchaser will retain the employment of Isaac Lekach and
David Lekach, who are currently employed by Seller in the capacity of managing
the Business' website. Such employment will be consistent with the terms of the
employment agreements incorporated to this agreement as attached Exhibit "1" and
Exhibit "2".
5. PRESS RELEASE. A press release will be issued upon the full
execution of this agreement. The contents of the press release shall be
pre-approved by both parties prior to any release.
6. ARBITRATION. Any dispute controversy or claim arising out of or
relating out of or relating to this agreement or the breach, termination or
validity thereof, shall be finally settled in accordance with the commercial
arbitration rules of the American Arbitration Association (the "AAA"), by a
panel of three arbitrators. Each party shall have the right to appoint one
arbitrator from the list of arbitrators supplied to the parties by the AAA, and
the two arbitrators so appointed shall appoint the third.
The place or arbitration shall be Miami, U.S.A. The language of the arbitration
shall be in English. The arbitrators shall determine the matters in dispute in
accordance with the internal law of the State of Florida, without reference to
the Convention on Contracts for the International Sale of Goods. Except as
precluded by the United Nations Convention on the Recognition and Enforcements
of Foreign Arbitral Awards, the internal procedural
<PAGE> 2
and substantive laws of Florida and the United States Federal Arbitration Act
shall govern all questions of arbitral procedure, arbitral review, scope or
arbitral authority, and arbitral enforcement.
The parties agree that the award of the arbitrators shall be the sole and
exclusive remedy between them regarding any claims, counterclaims, issues or
accountings presented or pled to the arbitrators, that the award shall be made
and shall be promptly payable in U.S. dollars, free of any tax, deduction or
offset, and that any costs, fees or taxes instant to enforcing the award shall,
to the maximum extent permitted by law, be charged against the party resisting
such enforcement.
The award shall include interest from the date of damages incurred for breach or
other violation of this agreement, and from the date of the award until paid in
full, at a rate to be fixed by the arbitration.
7. ENTIRE AGREEMENT. This Agreement, including Exhibits 1 and 2, merges
and supersedes any and all prior agreements, understandings, discussions,
assurances, promises, representations or warranties among the parties with
respect to the subject matter hereof, and contains the entire agreement among
the parties with respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties have caused this agreement to be executed by
their duly authorized officers all as of the day and year first written above.
Perfumania, Inc., Seller
By:
-------------------------------
Name: Jerome Falic
Title: President
perfumania.com, Inc., Purchaser
By:
-------------------------------
Name: Rachmil Lekach
Title: President and CEO
<PAGE> 1
Exhibit 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into, and
shall be binding this 30th day of October, 1999, by and between the
perfumania.com, inc.,) a Florida corporation (parent Company of Postacard.com,
inc.) ("Employer") and Isaac Lekach ("Employee").
W I T N E S S E T H:
WHEREAS, Employer, has acquired on October 30, 1999 Postacard.com , a
subsidiary engaged in the business of operating an online greeting card company,
and
WHEREAS, Employee is experienced in the development and operation of
such business and qualified to perform such services for the Employer; and
WHEREAS, Employer desires to retain the services of the Employee; and
WHEREAS, Employee is desirous of obtaining employment with the Employer
on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Employer and Employee agree as follows:
1. Recitals, Representations and Warranties. The foregoing recitals are
true and correct and are incorporated herein by this reference. In addition to
the foregoing recitals, Employee represents that he has not been convicted of
any crime, has not been declared insolvent and has not filed for bankruptcy. In
addition to the foregoing recitals, Employer represents and warrants that the
individual executing this Agreement has authority to do so.
2. Employment. In exchange for the Compensation (as hereinafter
defined) and subject to the other terms and conditions hereinafter set forth,
Employer hereby employs Employee as its V.P. and Director of Internet
Operations, to perform the Employee Duties (as hereinafter defined) and Employee
hereby accepts such employment.
3. Duties. The Employee shall perform such services as is expected from
a V.P. and Director of Internet Operations and as may be assigned by the Chief
Executive Officer of perfumania.com, inc. During the Term (as hereinafter
defined), the Employee shall report directly to the Chief Executive Officer of
perfumania.com, inc. or any person to whom the Chief Executive Officer has
assigned such responsibility.
a. Performance of Executive Duties & Adherence to Policies.
During the Term, Employee shall render their services exclusively for Employer,
shall perform their services to the best of their ability and shall adhere, at
all times, to the policies of the Employer and Perfumania.com, inc.
4. Term. The term of the Agreement shall commence on October 30, 1999
and shall expire on October 30, 2002.
5. Compensation. In consideration of and as compensation in full for
Employee's performance of the Executive Duties hereunder, Employer agrees to
compensate Employee as follows:
a. Salary. Beginning on October 30, 1999 and through the Term
of this agreement, Employer shall pay Employee a gross annual salary of Fifty
Thousand Dollars ($50,000)("Salary"). Such Salary shall be paid by Employer in
accordance with Employer's regular payroll practices. Employer shall be entitled
to deduct or withhold from all Salary payable hereunder all amounts required to
be deducted or withheld from same pursuant to state or federal law.
<PAGE> 2
b. Stock Option Plan:
Employee shall be granted 30,000 options, at a price equal
to the closing price on the date of this agreement. Such options shall vest in
accordance with 1999 Incentive Stock Option Plan.
c. Expense Reimbursement. Employee shall be reimbursed for
business expenses.
d. Vacation. Employee shall be entitled to take up to fifteen
(15) working days of vacation per twelve (12) month period during the Term
e. Cellular Telephone. Employee shall be entitled to the use
of one cellular telephone.
f. Increases In Salary. On October 30, 2000 and 2001,
Employee's salary from the previous year shall be increased by 5% or higher, at
the discretion of the Chief Executive Officer or other duly authorized Executive
of the Corporation.
6. Termination of Contract.
a. Early Termination: To the extent that the Company shall decide
to terminate this agreement prior to October 30, 2002,
Employee shall be entitled to compensation as defined in
paragraph 5 (including salary, stock option plan,) for the
greater of twelve months or the remainder of the Term of the
agreement, and all unvested stock options shall vest
immediately. A termination of this Agreement shall be deemed
to happen upon a significant change in Employee's duties
and/or title and/or to the extent that providing such services
would require a move from either South Florida or New York
City.
b. Change of Control: To the extent that Employer undergoes a
change of control, or is acquired accompanied by a change in
senior management, all items under Section 5, shall be doubled
for the greater of the duration of this Agreement or 24 months
(salary, stock options, and other benefits listed in Sections
5).
7. Miscellaneous.
a. Notices. All notices, demands or other communications given
hereunder shall be in writing and shall be deemed to have been duly given only
upon hand delivery thereof or upon the first business day after mailing by
United States registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
To Employer: Perfumania.com, Inc.
11701 N.W. 101 Road
Miami, Florida 33178
To Employee: Isaac Lekach
296 Ocean Blvd.
Golden Beach, Fl. 33160
or to such other address or such other person as any party shall designate, in
writing, to the other for such purposes and in the manner hereinabove set forth.
b. Accuracy of Statements. No representation or warranty
contained in this Agreement, and no statement delivered or information supplied
to any party pursuant hereto, contains an untrue statement of material fact or
omits to state a material fact necessary in order to make the statements or
information contained herein or therein not misleading. The representations
<PAGE> 3
and warranties made in this Agreement will be continued and will remain true and
complete in all material respects and will survive the execution of the
transactions contemplated hereby.
c. Entire Agreement. This Agreement sets forth all the
promises, covenants, agreements, conditions and understandings between the
parties hereto, and supersedes all prior and contemporaneous agreements,
understandings, inducements or conditions, expressed or implied, oral or
written, except as herein contained.
d. Binding Effect; Survival & No Assignment. This Agreement
shall be binding upon the parties hereto, their heirs, administrators,
successors and assigns. This Agreement shall survive and remain effective during
any bankruptcy of the Employer. Employee may not assign or transfer his interest
herein, or delegate his Employee Duties hereunder, without the written consent
of Employer. Any assignment or delegation of duties in violation of this
provision shall be null and void.
e. Amendment. The parties hereby irrevocably agree that no
attempted amendment, modification, termination, discharge or change
(collectively, "Amendment") of this Agreement shall be valid and effective,
unless the parties shall agree in writing to such Amendment.
f. No Waiver. No waiver of any provision of this Agreement
shall be effective unless it is in writing and signed by the party against whom
it is asserted, and any such written waiver shall only be applicable to the
specific instance to which it relates and shall not be deemed to be a continuing
or future waiver.
g. Gender and Use of Singular and Plural. All pronouns herein
shall be deemed to refer to the masculine, feminine, neuter, singular or plural,
as the identity of the party or parties, or their personal representatives,
successors and assigns may require.
h. Counterparts. This Agreement and any amendments may be
executed in one or more counterparts, each of which shall be deemed an original,
but all of which together will constitute one and the same instrument.
i. Headings. The article and section headings contained in
this Agreement are inserted for convenience only and shall not affect in any way
the meaning or interpretation of the Agreement.
j. Arbitration & Governing Law. Any controversy, claim or
dispute arising out of or relating to this Agreement and/or Employee's
employment with Employer shall be settled by arbitration in accordance with
applicable rules of the American Arbitration Association and judgment upon the
award rendered by the arbitrator may be entered in any court having jurisdiction
thereof. This arbitration clause shall be exactly as the arbitration clause
signed by all Perfumania.com, Inc. employees. This Agreement shall be construed
in accordance with the laws of the State of Florida and any proceeding arising
between the parties in any manner pertaining or related to this Agreement shall,
to the extent permitted by law, be held in Dade County, Florida.
k. Further Assurances. The parties hereto will execute and
deliver such further instruments and do such further acts and things as may be
reasonably required to carry out the intent and purposes of this Agreement.
l. No Third Party Beneficiary. This Agreement is made solely
and specifically among and for the benefit of the parties hereto, and their
respective successors and assigns subject to the express provisions hereof
relating to successors and assigns, and no other person shall have any rights,
interest or claims hereunder or be entitled to any benefits under or on account
of this Agreement as a third-party beneficiary or otherwise.
m. Severability. This Agreement is intended to be performed in
accordance with, and only to the extent permitted by, all applicable laws,
ordinances, rules, and regulations of the jurisdiction in which the parties do
business. If any provision of this Agreement, or the application thereof to any
person or circumstances shall, for any reason or to any extent, be invalid
<PAGE> 4
or unenforceable, the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected thereby, but
rather shall be enforced to the greatest extent permitted by law.
n. Attorneys' Fees. In connection with any proceeding arising
out of this Agreement, the prevailing party shall be entitled to recover costs
and attorneys' fees, through all appeals, from the other party.
o. Change in Control. To the extent that Employer undergoes a
significant change in control or is acquired or merges with another
organization, all items under sections 5. and 6. Above shall apply.
IN WITNESS WHEREOF, Employer and Employee have executed this Agreement
as of the date first above written.
WITNESSES:
EMPLOYER:
perfumania.com, inc.
By:
---------------------------------------
Michael Amideo, Chief Financial Officer
EMPLOYEE:
By:
---------------------------------------
Isaac Lekach
<PAGE> 5
EXHIBIT I
JOB DESCRIPTION AND RESPONSIBILITIES FOR
VP AND DIRECTOR OF INTERNET OPERATIONS
Responsible for the following:
o Overseeing day to day operations of the Postacard employees and
contract labor.
o Overseeing that copies all contracts are provided to the Corporate
controller of perfumania.com, inc. ensuruing compliance and timely
payment for services rendered.
o Prearing all budgets and updating forecasts which are to be submitted
to the controller periodically.
o Reporting to controller periodically and responding to corporate
inquiries.
o Monitoring of legal issues and resposible for communicating such
matters to the controller in a timely manner.
<PAGE> 1
Exhibit 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into, and
shall be binding this 30th day of October, 1999, by and between the
perfumania.com, inc.,) a Florida corporation (parent Company of Postacard.com,
inc.) ("Employer") and David Lekach ("Employee").
W I T N E S S E T H:
WHEREAS, Employer, has acquired on October 30, 1999 Postacard.com , a
subsidiary engaged in the business of operating an online greeting card company,
and
WHEREAS, Employee is experienced in the development and operation of
such business and qualified to perform such services for the Employer; and
WHEREAS, Employer desires to retain the services of the Employee; and
WHEREAS, Employee is desirous of obtaining employment with the Employer
on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Employer and Employee agree as follows:
1. Recitals, Representations and Warranties. The foregoing recitals are
true and correct and are incorporated herein by this reference. In addition to
the foregoing recitals, Employee represents that he has not been convicted of
any crime, has not been declared insolvent and has not filed for bankruptcy. In
addition to the foregoing recitals, Employer represents and warrants that the
individual executing this Agreement has authority to do so.
2. Employment. In exchange for the Compensation (as hereinafter
defined) and subject to the other terms and conditions hereinafter set forth,
Employer hereby employs Employee as its V.P. and Director of Strategic and
Content Development, to perform the Employee Duties (as hereinafter defined) and
Employee hereby accepts such employment.
3. Duties. The Employee shall perform such services as is expected from
a V.P. and Director of Strategic and Content Development and as may be assigned
by the Chief Executive Officer of perfumania.com, inc. During the Term (as
hereinafter defined), the Employee shall report directly to the Chief Executive
Officer of perfumania.com, inc. or any person to whom the Chief Executive
Officer has assigned such responsibility.
a. Performance of Executive Duties & Adherence to Policies.
During the Term, Employee shall render their services exclusively for Employer,
shall perform their services to the best of their ability and shall adhere, at
all times, to the policies of the Employer and Perfumania.com, inc.
4. Term. The term of the Agreement shall commence on October 30, 1999
and shall expire on October 30, 2002.
5. Compensation. In consideration of and as compensation in full for
Employee's performance of the Executive Duties hereunder, Employer agrees to
compensate Employee as follows:
a. Salary. Beginning on October 30, 1999 and through the Term
of this agreement, Employer shall pay Employee a gross annual salary of Fifty
Thousand Dollars ($50,000)("Salary"). Such Salary shall be paid by Employer in
accordance with Employer's regular payroll practices. Employer shall be entitled
to deduct or withhold from all Salary payable hereunder all amounts required to
be deducted or withheld from same pursuant to state or federal law.
<PAGE> 2
b. Stock Option Plan:
Employee shall be granted 30,000 options, at a price equal
to the closing price on the date of this agreement. Such options shall vest in
accordance with 1999 Incentive Stock Option Plan.
c. Expense Reimbursement. Employee shall be reimbursed for
business expenses.
d. Vacation. Employee shall be entitled to take up to fifteen
(15) working days of vacation per twelve (12) month period during the Term.
e. Cellular Telephone. Employee shall be entitled to the use
of one cellular telephone.
f. Increases In Salary. On October 30, 2000 and 2001 ,
Employee's salary from the previous year shall be increased by 5% or higher, at
the discretion of the Chief Executive Officer or other duly authorized Executive
of the Corporation.
6. Termination of Contract.
a. Early Termination: To the extent that the Company shall decide
to terminate this agreement prior to October 30, 2002,
Employee shall be entitled to compensation as defined in
paragraph 5 (including salary, stock option plan,) for the
greater of twelve months or the remainder of the Term of the
agreement, and all unvested stock options shall vest
immediately. A termination of this Agreement shall be deemed
to happen upon a significant change in Employee's duties
and/or title and/or to the extent that providing such services
would require a move from either South Florida or Ann Arbor,
Michigan.
b. Change of Control: To the extent that Employer undergoes a
change of control, or is acquired accompanied by a change in
senior management, all items under Section 5, shall be doubled
for the greater of the duration of this Agreement or 24 months
(salary, stock options, and other benefits listed in Sections
5).
7. Miscellaneous.
a. Notices. All notices, demands or other communications given
hereunder shall be in writing and shall be deemed to have been duly given only
upon hand delivery thereof or upon the first business day after mailing by
United States registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
To Employer: Perfumania.com, Inc.
11701 N.W. 101 Road
Miami, Florida 33178
To Employee: David Lekach
296 Ocean Blvd.
Golden Beach, Fl. 33160
or to such other address or such other person as any party shall designate, in
writing, to the other for such purposes and in the manner hereinabove set forth.
b. Accuracy of Statements. No representation or warranty
contained in this Agreement, and no statement delivered or information supplied
to any party pursuant hereto, contains an untrue statement of material fact or
omits to state a material fact necessary in order to make the statements or
information contained herein or therein not misleading. The representations
<PAGE> 3
and warranties made in this Agreement will be continued and will remain true and
complete in all material respects and will survive the execution of the
transactions contemplated hereby.
c. Entire Agreement. This Agreement sets forth all the
promises, covenants, agreements, conditions and understandings between the
parties hereto, and supersedes all prior and contemporaneous agreements,
understandings, inducements or conditions, expressed or implied, oral or
written, except as herein contained.
d. Binding Effect; Survival & No Assignment. This Agreement
shall be binding upon the parties hereto, their heirs, administrators,
successors and assigns. This Agreement shall survive and remain effective during
any bankruptcy of the Employer. Employee may not assign or transfer his interest
herein, or delegate his Employee Duties hereunder, without the written consent
of Employer. Any assignment or delegation of duties in violation of this
provision shall be null and void.
e. Amendment. The parties hereby irrevocably agree that no
attempted amendment, modification, termination, discharge or change
(collectively, "Amendment") of this Agreement shall be valid and effective,
unless the parties shall agree in writing to such Amendment.
f. No Waiver. No waiver of any provision of this Agreement
shall be effective unless it is in writing and signed by the party against whom
it is asserted, and any such written waiver shall only be applicable to the
specific instance to which it relates and shall not be deemed to be a continuing
or future waiver.
g. Gender and Use of Singular and Plural. All pronouns herein
shall be deemed to refer to the masculine, feminine, neuter, singular or plural,
as the identity of the party or parties, or their personal representatives,
successors and assigns may require.
h. Counterparts. This Agreement and any amendments may be
executed in one or more counterparts, each of which shall be deemed an original,
but all of which together will constitute one and the same instrument.
i. Headings. The article and section headings contained in
this Agreement are inserted for convenience only and shall not affect in any way
the meaning or interpretation of the Agreement.
j. Arbitration & Governing Law. Any controversy, claim or
dispute arising out of or relating to this Agreement and/or Employee's
employment with Employer shall be settled by arbitration in accordance with
applicable rules of the American Arbitration Association and judgment upon the
award rendered by the arbitrator may be entered in any court having jurisdiction
thereof. This arbitration clause shall be exactly as the arbitration clause
signed by all Perfumania.com, Inc. employees. This Agreement shall be construed
in accordance with the laws of the State of Florida and any proceeding arising
between the parties in any manner pertaining or related to this Agreement shall,
to the extent permitted by law, be held in Dade County, Florida.
k. Further Assurances. The parties hereto will execute and
deliver such further instruments and do such further acts and things as may be
reasonably required to carry out the intent and purposes of this Agreement.
l. No Third Party Beneficiary. This Agreement is made solely
and specifically among and for the benefit of the parties hereto, and their
respective successors and assigns subject to the express provisions hereof
relating to successors and assigns, and no other person shall have any rights,
interest or claims hereunder or be entitled to any benefits under or on account
of this Agreement as a third-party beneficiary or otherwise.
m. Severability. This Agreement is intended to be performed in
accordance with, and only to the extent permitted by, all applicable laws,
ordinances, rules, and regulations of the jurisdiction in which the parties do
business. If any provision of this Agreement, or the application thereof to any
person or circumstances shall, for any reason or to any extent, be invalid
<PAGE> 4
or unenforceable, the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected thereby, but
rather shall be enforced to the greatest extent permitted by law.
n. Attorneys' Fees. In connection with any proceeding arising
out of this Agreement, the prevailing party shall be entitled to recover costs
and attorneys' fees, through all appeals, from the other party.
o. Change in Control. To the extent that Employer undergoes a
significant change in control or is acquired or merges with another
organization, all items under sections 5. and 6. Above shall apply.
IN WITNESS WHEREOF, Employer and Employee have executed this Agreement
as of the date first above written.
WITNESSES:
EMPLOYER:
perfumania.com, inc.
By:
---------------------------------------
Michael Amideo, Chief Financial Officer
EMPLOYEE:
By:
---------------------------------------
David Lekach,
<PAGE> 5
EXHIBIT I
JOB DESCRIPTION AND RESPONSIBILITIES FOR
V.P. AND DIRECTOR OF STRATEGIC AND CONTENT DEVELOPMENT
Responsible for the following:
o Overseeing content development.
o Responsible for contracting and directing the various artists, writers
and designers engaged to develop site content.
o Responsible for developing and implementing various promotions and
marketing programs.
o Responsible for maintaining relationship with and monitoring of web
hosting functions.
o Manintaining and developing customer and industry relations.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-30-2000
<PERIOD-START> AUG-01-1999
<PERIOD-END> OCT-30-1999
<CASH> 1,166,297
<SECURITIES> 10,000,000
<RECEIVABLES> 235,695
<ALLOWANCES> 0
<INVENTORY> 599,069
<CURRENT-ASSETS> 12,728,591
<PP&E> 117,330
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,895,921
<CURRENT-LIABILITIES> 270,561
<BONDS> 0
0
0
<COMMON> 75,000
<OTHER-SE> 12,550,360
<TOTAL-LIABILITY-AND-EQUITY> 12,895,921
<SALES> 927,008
<TOTAL-REVENUES> 927,008
<CGS> 736,069
<TOTAL-COSTS> 736,069
<OTHER-EXPENSES> 2,310,485
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 176,218
<INCOME-PRETAX> (2,265,791)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,265,791)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,265,791)
<EPS-BASIC> 0.43
<EPS-DILUTED> 0.43
</TABLE>
