<PAGE> 1
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 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
<PAGE> 2
TABLE OF CONTENTS
PERFUMANIA, INC.
PART I
FINANCIAL INFORMATION
<TABLE>
<S> <C>
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
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PERFUMANIA, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
July 31, 1999 January 30, 1999
---------------- ----------------
ASSETS (unaudited)
<S> <C> <C>
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 55,609,578 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 (34,994,832) (30,935,097)
Notes and interest receivable from shareholders 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
============= ============
</TABLE>
See accompanying notes to condensed consolidated financial statements
3
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PERFUMANIA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
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
------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
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 (1,675,808) (1,166,344) (3,224,786) (2,323,667)
------------ ------------ ------------ ------------
Income (loss) before income taxes 32,131 (1,272,658) (4,059,735) (4,044,270)
Benefit for income taxes -- -- -- --
------------ ------------ ------------ ------------
Net income (loss) $ 32,131 $ (1,272,658) $( 4,059,735) $( 4,044,270)
------------ ------------ ------------ ------------
Net income (loss) per common share:
Basic $ 0.00 $(0.20) $(0.55) $(0.62)
------------ ------------ ------------ ------------
Diluted $ 0.00 $(0.20) $(0.55) $(0.62)
------------ ------------ ------------ ------------
Weighted average number of common
shares outstanding:
Basic 7,530,789 6,519,440 7,447,637 6,519,440
Diluted 9,525,306 6,519,440 7,447,637 6,519,440
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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PERFUMANIA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Twenty-six Twenty-six
Weeks Ended Weeks Ended
July 31, 1999 August 1, 1998
------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(4,059,735) $(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 1,022,113 --
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 shareholders 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
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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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 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 $4.1
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 both 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. In April 1999
and July 1999, the Company issued a total of $4 million of convertible notes
payable to a group of private investors (see Note 7), and in July 1999 the
Company received a $2.5 million loan from a wholesale customer for which payment
is due in December 1999.
Management's plan to improve the results of operations includes decreasing the
number of store openings, closing a number of its non-profitable stores,
improving the effectiveness of its sales merchandise mix, promote the private
label bath, body and cosmetic line, continuing to liquidate slow moving
inventories and reducing selling, general, and administrative expenses. There is
no assurance, however, that the Company will be able to improve its results of
operations based on management's plan.
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 condensed
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
6
<PAGE> 7
2) STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NOTES AND
INTEREST
RECEIVABLE
FROM
COMMON STOCK CAPITAL IN TREASURY STOCK SHAREHOLDER
---------------------- EXCESS ------------------ ACCUMULATED AND
SHARES AMOUNT OF PAR SHARES AMOUNT DEFICIT OFFICERS TOTAL
------- ------ ---------- ------ ------ ----------- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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 -- -- 1,022,113 -- -- -- 1,022,113
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 -- -- -- -- -- (4,059,735) -- (4,059,735)
---------- -------- ------------ --------- ----------- ------------ ---------- ------------
Balance at July 31,
1999 9,151,384 $ 91,514 $ 55,609,578 1,512,406 $(5,413,002) $(34,994,832) $(563,863) $ 14,729,395
========== ======== ============ ========= =========== ============ ========== ============
</TABLE>
3) BANK LINE OF CREDIT
As of May 1, 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 has been computed by dividing net income
(loss) by the weighted average number of common shares outstanding during the
period. Diluted income (loss) per 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 quarters, and the dilutive effect of
those convertible notes which are convertible into common stock. For the
twenty-six weeks ended July 31, 1999, the twenty-six weeks ended August 1, 1998
and the thirteen weeks ended August 1, 1998 presented in the accompanying
7
<PAGE> 8
condensed consolidated statements of operations, incremental shares attributed
to outstanding stock options and convertible notes payable were not included
because the results would be anti-dilutive.
5). SEGMENT INFORMATION
The Company operates in two industry segments, specialty retail sale and
wholesale distribution of fragrances and related products. The basis for
determining the Company's operating segments is the manner in which financial
information is used by the Company in its operations. Financial information for
these segments is summarized in the following table.
<TABLE>
<CAPTION>
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
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
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
----------- ------------ ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
July 31, August 1,
1999 1998
----------- -----------
<S> <C> <C>
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
</TABLE>
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.
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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 agreements. As of July 31, 1999, the potential redeemable amount of
$470,588 was recorded as redeemable common equity.
7) CONVERTIBLE NOTES
During April 1999, the Company issued $2 million of 8% convertible notes (the
"Notes") with a three-year term to a group of private investors. The proceeds
were received in April 1999. Interest is payable each October 28 and April 28
during the term of the Notes, commencing October 29, 1999. At the Company's
option, interest is payable either in cash or shares of the Company's common
stock subject to certain conversion terms. The Company will not be required to
make any accrued or future interest payments if, at any time, the closing bid
price of the Company's common stock is greater than $8.70 for ten consecutive
trading days. The Notes are immediately convertible into shares of the Company's
common stock at any time at the lower of $4.35 per common share or 80% of the
average closing bid price for the three consecutive days preceding the date of
conversion.
In a 1997 announcement, the staff of the SEC indicated that when debt is
convertible at a discount from the then current common stock market price, the
discounted amount represents an incremental yield, e.g. a "beneficial conversion
feature", which should be recognized as a return to the debt holders. Based on
the market price of the Company's common stock at the date of issuance, the
Notes issued by the Company had a beneficial conversion feature of $384,615 at
such point in time which represents a non-cash charge and is included in
interest expense for the thirteen week period ending May 1, 1999.
The Company is required to file the appropriate registration statement with the
SEC to permit the registered resale of the shares by the investors in open
market transactions within forty-five days of April 28, 1999. This registration
statement must be declared effective by the SEC within one hundred fifty days of
April 28, 1999. On June 11, 1999, the Company filed the registration statement
with the SEC and is currently waiting for the registration statement to become
effective pending SEC review.
In July 1999, the Company entered into a Securities Purchase Agreement and
issued an aggregate $2 million worth of Series B Convertible Notes, which are
convertible into common stock. The Notes contain a beneficial conversion feature
of approximately $637,500 which represents a non-cash interest charge and is
included in interest 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
<PAGE> 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.
In April 1999, perfumania.com, inc. announced that it intends to make an initial
public offering of its common stock. perfumania.com, inc., plans to raise
approximately $25 - $32 million representing approximately 53% of the common
stock to be outstanding following the offering. perfumania.com, inc. is offering
3,500,000 shares of its common stock, which includes 1,000,000 shares held by
the Company. A registration statement for the offering was filed on June 4,
1999, and the offering currently is expected to be completed during the
Company's third fiscal quarter of 1999. 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
<PAGE> 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. OTHER
In July 1999, the Company's Board of Directors approved the transfer of
1,512,406 shares of the Company's treasury stock to a company affiliated through
common ownership in consideration for a partial reduction of the Company's
outstanding trade accounts payable 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. In connection with the transfer of the shares, the parties are currently
negotiating a registration rights agreement whereby the affiliate would be able
to demand registration of the shares with the Securities and Exchange Commission
at any time after February 29, 2000.
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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 a violation of certain debt covenants 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
<PAGE> 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.
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
<PAGE> 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 May 1, 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% 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.
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
<PAGE> 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 45.0% from $1.2
million for the thirteen weeks ended August 1, 1998 to $1.7 million for the
thirteen weeks ended July 31, 1999. The increase is principally due to the
beneficial conversion cost of approximately $637,000 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 profit of $32,131, or $0.00
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 8.8% 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
<PAGE> 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 38.8% from $2.3
million for the twenty-six weeks ended August 1, 1998 to $3.2 million for the
twenty-six weeks ended July 31, 1999. The increase is principally due to the
beneficial conversion cost of approximately $1.0 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
$4,059,735 or ($0.55) 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
<PAGE> 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 prior three days, 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
<PAGE> 18
The following table provides information regarding the assumed conversion of the
Notes as of August 31, 1999.
<TABLE>
<CAPTION>
NO. OF SHARES
TO BE PROCEEDS
NAME REGISTERED RECEIVED
---- ------------- --------
<S> <C> <C>
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
==========
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------- ----------------------
<S> <C>
27.1 Financial Data Schedule (1)
</TABLE>
- ------------------
(1) Filed herewith.
(b) The Company did not file any reports on Form 8-K
during the quarter ended July 31, 1999.
18
<PAGE> 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: September 13, 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
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-START> MAY-30-1999
<PERIOD-END> JUL-31-1999
<CASH> 1,334,882
<SECURITIES> 0
<RECEIVABLES> 6,066,682
<ALLOWANCES> 0
<INVENTORY> 62,974,342
<CURRENT-ASSETS> 80,698,694
<PP&E> 23,073,219
<DEPRECIATION> 0
<TOTAL-ASSETS> 106,463,618
<CURRENT-LIABILITIES> 84,796,523
<BONDS> 0
0
0
<COMMON> 91,514
<OTHER-SE> 14,637,881
<TOTAL-LIABILITY-AND-EQUITY> 106,463,618
<SALES> 85,353,478
<TOTAL-REVENUES> 85,353,478
<CGS> 50,946,546
<TOTAL-COSTS> 35,241,881
<OTHER-EXPENSES> 3,224,786
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,059,735)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,059,735)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,059,735)
<EPS-BASIC> (0.55)
<EPS-DILUTED> (0.55)
</TABLE>
