Related Party Transactions

12 Months Ended

Jan. 28, 2012

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

RELATED PARTY TRANSACTIONS

Glenn and Stephen Nussdorf and their sister, Arlene Nussdorf, owned an aggregate 6,649,476 shares or approximately 74% of the total number of shares of the Company’s common stock as of January 28, 2012, excluding shares issuable upon conversion of the Warrants discussed in Note 10 and not assuming the exercise of any outstanding options held by the Company’s officers and directors. Stephen Nussdorf has served as the Chairman of the Company’s Board of Directors since February 2004 and Executive Chairman of the Board since April 2011.

The Nussdorfs are officers and principals of Quality King, which distributes pharmaceuticals and health and beauty care products, and the Company’s President and Chief Executive Officer, Michael W. Katz is an executive of Quality King.

See Note 7 for discussion of notes payable to affiliates.

Effective August 1, 2008, the Company’s subsidiary, Model Reorg Acquisition LLC, issued a $1.9 million promissory note payable to Mr. Katz, with interest at 4%, in equal monthly installments of $53,333 commencing September 1, 2008 and terminating August 1, 2011. Under a related stockholder agreement, Mr. Katz is bound by certain non-compete, non-solicitation and confidentiality covenants. The balance of the note payable was paid in August 2011. As of January 29, 2011, the note payable was included in current note payable - affiliate in the amount of $0.4 million on the accompanying consolidated balance sheets.

TRANSACTIONS WITH AFFILIATED COMPANIES

Glenn Nussdorf beneficially owned approximately 9.9% of the outstanding common stock of Parlux as of January 28, 2012. Perfumania has purchased merchandise from Parlux for about 20 years and is one of Parlux's largest customers. Perfumania primarily purchases certain brands, for which Parlux is the exclusive licensee, for distribution through Perfumania's retail stores. Pricing and terms between Perfumania and Parlux reflect the volume of Perfumania's purchases, a policy of no returns from Perfumania, minimal spending by Parlux for advertising and promotion, the exposure of Parlux's products provided by being in Perfumania's store windows, and minimal distribution costs for Parlux to fulfill orders shipped directly to Perfumania's distribution center. See Note 1 for a discussion of the pending merger with Parlux.

Glenn Nussdorf has an ownership interest in Lighthouse Beauty Marketing, LLC, Lighthouse Beauty, LLC and Lighthouse Beauty KLO, LLC (collectively "Lighthouse Companies") all of which are manufacturers and distributors of prestige fragrances. In fiscal 2010, the Company began purchasing merchandise from the Lighthouse Companies. Glenn Nussdorf also has an ownership interest in Ricky's, a retailer specializing in fashion accessories, cosmetics and beauty supplies. During fiscal 2011, the Company purchased various beauty accessories from Ricky's. Starting in fiscal 2009, the Company also purchased merchandise from Quality King.

The amounts due to the above related companies are non-interest bearing and are included in accounts payable-affiliates in the accompanying consolidated balance sheets. Purchases from related parties are generally payable in 90 days; however, due to the seasonality of the Company’s business, these terms are generally extended. Related party accounts have historically been brought closer to terms at the end of the holiday season. During the rest of the year, the Company has relied upon these extended terms to provide a portion of its liquidity. Transactions for merchandise purchases with these related companies during fiscal 2011 and 2010 were as follows:

	Total Purchases Fiscal Year Ended January 28, 2012		Total Purchases Fiscal Year Ended January 29, 2011		Balance Due January 28, 2012		Balance Due January 29, 2011
	(in thousands)
Parlux	$	44,059	$	45,679	$	10,476	$	14,015
Quality King	—		3,529		—		—
Lighthouse Companies	11,113		9,388		128		724
Ricky's	218		—		11		—
	$	55,390	$	58,596	$	10,615	$	14,739

Glenn, Stephen and Arlene Nussdorf own GSN Trucking, Inc. (“GSN”) which provides general transportation and freight services. The Company periodically utilizes GSN to transport both inbound purchases of merchandise and outbound shipments to wholesale customers. During fiscal 2011 and 2010, total payments to GSN for transportation services provided were approximately $0.1 million and $0.2 million, respectively. There was no balance due to GSN at January 28, 2012. The amount due to GSN at January 29, 2011 was less than $0.1 million and is included in accounts payable-affiliates in the accompanying consolidated balance sheets.

Quality King occupies a leased 560,000 square foot facility in Bellport, NY. The Company began occupying approximately half of this facility in December 2007 under a sublease that terminates on September 30, 2027, and this location serves as the Company’s principal offices. As of January 28, 2012, the monthly current sublease payments are approximately $218,000 and increase by 3% annually. Total payments by the Company to Quality King in fiscal 2011 and 2010 for this sublease were approximately $2.6 million and $2.5 million, respectively.

The Company and Quality King are parties to a Services Agreement providing for the Company’s participation in certain third party arrangements at the Company’s respective share of Quality King’s cost, including allocated overhead, plus a 2% administrative fee, and the provision of legal services. The Company also shares with Quality King the economic benefit of the bulk rate contract that the Company has with UPS to ship Quality King’s merchandise and related items. The Services Agreement will terminate on thirty days’ written notice from either party. During fiscal 2011 and 2010, the expenses charged under these arrangements to the Company were $0.7 million and $0.6 million, respectively. The balance due to Quality King as of January 28, 2012 and January 29, 2011 was $0.3 million and less than $0.1 million, respectively.