10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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Form 10-K

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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)

For Fiscal Year Ended March 31, 2005

OR

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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

For the transition period from                to               

Commission File Number 0-15491

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Parlux Fragrances, Inc.

(Exact name of registrant as specified in its charter)

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Delaware	22-2562955
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

3725 SW 30th Avenue, Ft. Lauderdale, FL 33312

(Address of principal executive offices (zip code)

(Registrant’s telephone number, including area code) (954) 316-9008

Securities registered pursuant to Section 12(b) of the Act:

Title of Class	Name of Exchange on which registered
None	None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock (par value $ .01 per share)

Title of Class

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

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes ¨ No ý

Indicate the number of shares outstanding of each of the registrant’s classes of stock as of the latest practicable date.

Class	Outstanding at July 8, 2005
Common Stock, $ .01 par value	8,943, 318

The aggregate market value of the Registrant’s common stock held by non-affiliates of the Registrant was approximately $73,496,000 based on a closing price of $13.00 for the Common Stock as of September 30, 2004, the last business day of the Registrant’s most recently completed second fiscal quarter, as reported on the National Association of Securities Dealers Automated Quotation System on such date. For purposes of the foregoing calculation, only the Directors and 5% beneficial owners of the registrant are deemed to be affiliates.

Documents incorporated by Reference: The information required by Part III (Items 10, 11, 12 & 13) is incorporated by reference from the registrant’s definitive proxy statement (to be filed pursuant to Regulation 14A).

TABLE OF CONTENTS

ITEM		PAGE
	PART I
1.	Business	3
2.	Properties	12
3.	Legal Proceedings	13
4.	Submission of Matters to a Vote of Security Holders	13
	PART II
5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	15
6.	Selected Financial Data	15
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
7A.	Quantitative and Qualitative Disclosures About Market Risks	22
8.	Financial Statements and Supplementary Data	22
9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	23
9A.	Controls and Procedures	23
9B.	Other Information	23
	PART III
10.	Directors and Executive Officers of the Registrant	23
11.	Executive Compensation	23
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	23
13.	Certain Relationships and Related Transactions	23
14.	Principal Accounting Fees and Services	23
	PART IV
15.	Exhibits, Financial Statement Schedules and Reports on Form 8-K	24

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FORWARD-LOOKING STATEMENTS

Certain statements within this Form 10-K, which are not historical in nature, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All forward-looking statements are based on current expectations regarding important risk factors. Investors are cautioned that forward-looking statements involve such risks and uncertainties, which may affect our business and prospects, including economic, competitive, governmental, technological and other factors discussed in this Annual Report and in our filings with the Securities and Exchange Commission. Accordingly, actual results may differ materially from those expressed in the forward-looking statements, and the making of such statements should not be regarded as a representation by the Company or any other person that the results expressed in the statements will be achieved.

Item 1.  

BUSINESS

Parlux Fragrances, Inc. (the “Company”), was incorporated in Delaware in 1984 and is engaged in the creation, design, manufacture, distribution and sale of prestige fragrances and beauty related products marketed primarily through specialty stores, national department stores and perfumeries on a worldwide basis. The fragrance market is generally divided into a prestige segment (distributed primarily through department and specialty stores) and a mass market segment (primarily chain drug stores, mass merchandisers, smaller perfumeries and pharmacies). Our products are positioned primarily in the prestige segment. Additionally, we distribute certain brands through Perfumania Inc. (“Perfumania”), a wholly-owned subsidiary of E Com Ventures, Inc. (“ECMV”), a company in which our Chairman and Chief Executive Officer (“CEO”) had a significant shareholder interest and held identical management positions until February 2004, when he sold most of his shares in ECMV to the new majority owners. Shortly thereafter, Mr. Lekach resigned from the ECMV board and was terminated as CEO, without cause, as a result of the change in management. We currently maintain an approximate 13% ownership interest in ECMV and accordingly, all transactions with ECMV or Perfumania are treated as “Related Party” transactions. Perfumania is a specialty retailer of fragrances in the United States and Puerto Rico.

During the fiscal year ended March 31, 2005, we engaged in the manufacture (through sub-contractors), distribution and sale of PERRY ELLIS, PARIS HILTON, OCEAN PACIFIC, XOXO, FRED HAYMAN BEVERLY HILLS (“FHBH”) “273 Indigo”, and JOCKEY fragrances and grooming items on an exclusive basis as a licensee. We also have rights to distribute ROYAL COPENHAGEN fragrances in the U.S. department store market. See “LICENSING AGREEMENTS” on pages 6-8 for further discussion. Additionally, we previously manufactured, distributed and sold our own brand, CHALEUR D’ANIMALE (“Animale”) fragrance, on a worldwide basis. See page 7 and 9 respectively, for further discussions of transactions relating to the FHBH and Animale brands.

As further discussed below, we have recently expanded our focus into cosmetics and the luxury goods market, specifically, watches, handbags, purses, and small leather goods. We believe that such products, which have similar distribution channels to our fragrance products, should strengthen our position with our current customers and distributors while providing incremental sales volume.

Recent Developments

During the fiscal year ended March 31, 2005, we entered into exclusive worldwide license agreements to develop, manufacture, and distribute prestige fragrances for Ms. Paris Hilton, Ms. Maria Sharapova, Mr. Andy Roddick, and Gund, Inc. We also acquired an existing license to manufacture and distribute XOXO branded fragrances and recently entered into three other exclusive license agreements with Ms. Hilton for watches, cosmetics and handbags, purses, wallets and other small leather goods. See “LICENSING AGREEMENTS” for further discussion.

Under all of these license agreements, we must pay a royalty and spend minimum amounts for advertising based on sales volume.

No other material changes in our contractual obligations, outside the ordinary course of business, have occurred during the period covered by this report.

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THE PRODUCTS

Our principal products are fragrances, which are distributed in a variety of sizes and packaging. In addition, beauty-related products such as soaps, shower gels, deodorants, body lotions, creams and dusting powders complement the fragrance line. Our basic fragrance products generally retail at prices ranging from $20 to $65 per item.

We design and create fragrances using our own staff and independent contractors. We also supervise the design of our packaging by independent contractors in order to create products appealing to the intended customer base. The creation and marketing of each product line is closely linked with the applicable brand name, its positioning and market trends for the prestige fragrance industry. This development process usually takes twelve to eighteen months to complete. During fiscal 2005, we completed the design process for 360 BLUE, for both men and women, which launched in fall 2004, (new brands under the PERRY ELLIS line), and PARIS HILTON for women, which launched in winter 2004.

During the last three fiscal years, the following brands have accounted for 10% or more of our gross sales in a given year:

	Fiscal 2005	Fiscal 2004	Fiscal 2003
PERRY ELLIS	75%	81%	75%
OCEAN PACIFIC	11%	13%	10%
PARIS HILTON	11%	—	—

Under a separate license agreement, we are also currently developing a line of watches under our Paris Hilton brand for introduction during the upcoming holiday season. We are working closely with several watch manufacturers to establish products at different price levels; with the initial “limited edition” products projected to retail at prices in excess of $50,000. We anticipate a “fashion watch” will be available for sale for spring 2006, and will retail at prices ranging from $100 to $250 per item.

In addition, we are discussing potential joint venture opportunities with unrelated third parties in connection with our other licenses with Ms. Hilton (cosmetics and handbags, purses, wallets, and other small leather goods) in order to determine the most efficient and profitable method to produce and distribute such products.

MARKETING AND SALES

In the United States, we have our own sales and marketing staff, and also utilize independent commission sales representatives for mail order distribution and sales to domestic U.S. military bases. We sell directly to retailers, primarily national and regional department stores, which we believe will maintain the image of our products as prestige fragrances. Our products are sold in over 2,000 retail outlets in the United States. Additionally, we sell some of our products to Perfumania, which is a specialty retailer of fragrances with approximately 230 retail outlets principally located in manufacturers’ outlet malls and regional malls in the U.S. and in Puerto Rico (see “CUSTOMERS” section for further discussion).

Marketing and sales activities outside the United States are conducted through distribution agreements with independent distributors, whose activities are administered by our international sales staff. We presently market our fragrances through distributors in Canada, Europe, the Middle East, the Far East, Latin America, the Caribbean and Russia, covering over 80 countries. Sales to unrelated international customers amounted to 67%, 75% and 76% of our total net sales to unrelated customers during the fiscal years ended March 31, 2005, 2004 and 2003, respectively.

We advertise directly, and through a cooperative advertising program in association with major retailers, in fashion media on a national basis and through retailers’ statement enclosures and catalogues. We are required to spend certain minimum amounts for advertising under certain licensing agreements. See “LICENSING AGREEMENTS” and Note 8 (B) to the Consolidated Financial Statements.

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RAW MATERIALS

Raw materials and components (“raw materials”) for our products are available from sources in the United States, Europe, and the Far East. We source the raw materials, based on our estimates of anticipated needs for finished goods, from independent suppliers, which are delivered directly to third party contract manufacturers who produce and package the finished products. As is customary in our industry, we do not have long-term agreements with our contract manufacturers. We believe we have good relationships with these manufacturers and that there are alternative sources available should one or more of these manufacturers be unable to produce at competitive prices.

To date, we have had little difficulty obtaining raw materials at competitive prices. There is no reason to believe that this situation will change in the near future, but there can be no assurance this will continue.

SEASONALITY

Typical of the fragrance industry, we have our highest sales during the Mother’s and Father’s Day periods and the calendar year end holiday season.  Lower than projected sales during these periods could have a material adverse effect on our operating results.

INDUSTRY PRACTICES

It is an industry practice in the United States for businesses that market fragrances to department stores to provide the department stores with rights to return merchandise.  Our products are subject to such return rights.  It is our practice to establish reserves and provide allowances for product returns at the time of sale. We believe that such reserves and allowances are adequate based on past experience; however, no assurance can be made that reserves and allowances will continue to be adequate. Consequently, if product returns are in excess of the reserves and allowances provided, net sales will be reduced when such fact becomes known.

CUSTOMERS

We concentrate our sales efforts in the United States in a number of regional department store retailers including, among others, Bon Ton, Carson’s, Famous Barr, Filene’s, Foley’s, Hecht’s, J.C. Penney, Lord & Taylor, Macy’s, Parisian, Marshall Fields, Proffitts, Robinsons, and Stage Door. We also sell directly to perfumery and cosmetic retailers, including Perfumania, Sephora and Ulta. Retail distribution has been targeted by brand to maximize potential and minimize overlap between each of these distribution channels.

Our international sales efforts are carried out through distributors in over 80 countries, the main focus of which has been in Latin America, Canada, Asia, the Middle East and the Caribbean. These distributors sell our products to the local department stores as well as to numerous perfumeries in the local markets. The success of our recently introduced PARIS HILTON line of fragrances, as well as the anticipated launch of our GUESS? fragrance, has provided us with additional distribution in Europe and Australia.

During the fiscal years ended March 31, 2005 and 2004, we had net sales of $35,330,772 and $31,964,407, respectively, to Perfumania, which represented 35% and 40%, respectively, of our net sales for the periods. Perfumania, is our largest customer and transactions with them are closely monitored by our Audit Committee and Board of Directors (the “Board”). Perfumania offers us the opportunity to sell our products in approximately 230 retail outlets and our terms with Perfumania take into consideration our over 15 year relationship. Pricing and terms with Perfumania reflect (a) the volume of Perfumania’s purchases, (b) a policy of no returns from Perfumania (c) minimal spending for advertising and promotion, (d) free exposure of our products provided in Perfumania’s store windows and (e) minimal distribution costs to fulfill Perfumania orders shipped directly to their distribution center.

While our invoice terms to Perfumania appear as net ninety (90) days, for over ten years, the Board has granted longer payment terms taking into consideration the factors discussed above. Our Board evaluates the credit risk involved and imposes a specific dollar limit, which is determined based on Perfumania’s reported results and comparable store sales performance. Management monitors the account activity to ensure compliance with the Board limit.

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Net trade accounts receivable owed by Perfumania to us amounted to $8,566,939 and $10,890,338 at March 31, 2005 and 2004, respectively. Trade accounts receivable from Perfumania are non-interest bearing, and are paid in accordance with the terms established by the Board. See “Liquidity and Capital Resources” for further discussion of this receivable.

We continue to evaluate our credit risk and assess the collectibility of the Perfumania receivable. As reported in ECMV’s public filings, during May 2004, Perfumania entered into a three-year amended and restated senior secured revolving credit facility with its then current lender and a new participant, increasing its borrowing capabilities from $40 million to $60 million. In addition, ECMV’s financial statements included in its Annual Report on Form 10-K for the year ended January 29, 2005, reflects net income of approximately $3.1 million. Perfumania’s reported financial information, as well as our payment history with Perfumania, indicates that, historically, their first quarter ending approximately April 30, is Perfumania’s most difficult quarter as is the case with most U.S. based retailers. We have, in the past, received significant payments from Perfumania during the last three months of the calendar year, and have no reason to believe that this will not continue. Based on our evaluation, no allowances have been recorded as of March 31, 2005. We will continue to evaluate Perfumania’s financial condition on an ongoing basis and consider the possible alternatives and effects, if any, on the Company.

On July 1, 1999, the Board approved accepting 1,512,406 shares of Perfumania treasury stock in consideration for a partial reduction of the outstanding trade receivable balance from Perfumania in the amount of $4,506,970. The transfer price was based on a per share price of $2.98 ($11.92 post reverse stock split described below), which approximated 90% of the closing price of Perfumania’s common stock for the previous 20 business days.  The agreement was consummated on August 31, 1999, and the shares were registered in June 2000. Effective February 1, 2000, ECMV was formed as a holding company and the Company’s shares of Perfumania common stock were converted into shares of common stock in ECMV.

On March 21, 2002, ECMV effected a one-for-four reverse stock split, and we now own 378,101 shares, with a cost basis for financial statement purposes of $1,648,523 or $4.36 per share. As of March 31, 2005, the fair market value of the investment in ECMV had increased to $4,764,073 ($12.60 per share after the reverse split).

As of June 24, 2005, the fair market value of the investment in ECMV was $5,539,180 ($14.65 per share after the reverse split).

FOREIGN AND EXPORT SALES

During the three years ended March 31, 2005, gross sales to unrelated international customers were approximately $31,619,000, $28,356,000, and $38,364,000, respectively. During the fiscal year ended March 31, 2004, we increased our attention to the Mexican marketplace and engaged a distributor for Mexico in lieu of a commissioned representative. The Mexican distributor is owned and operated by individuals related to our Chairman and Chief Executive Officer. Sales to this distributor during the fiscal years ended March 31, 2005 and 2004, which are included in related party sales, amounted to approximately $9,000,000 and $3,966,000, respectively, and are in addition to the sales to unrelated international customers noted above.

LICENSING AGREEMENTS

See “THE PRODUCTS” on page 4 for further discussion of the relative importance of our license agreements.

PERRY ELLIS:  We acquired the Perry Ellis license in December 1994. The license renews automatically every two years if average annual net sales in the preceding two-year license period exceed 75% of the average net sales of the previous four years. All minimum sales levels have been met; based on our current sales projections, management believes that this will continue. The license requires the payment of royalties, which decline as a percentage of net sales as net sales volume increases, and the spending of certain minimum amounts for advertising based upon net sales levels achieved in the prior year.

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PARIS HILTON:  On May 4, 2004, we entered into a letter of intent with Ms. Paris Hilton (“PH”), to develop, manufacture and distribute prestige fragrances and related products, on an exclusive basis, under her name. Effective June 1, 2004, we entered into a definitive license agreement with Paris Hilton Entertainment, Inc. (“PHEI”), which expires on June 30, 2009. The agreement is renewable for an additional five-year period. The first PH women’s fragrance was launched during November 2004, which was followed by a launch of a men’s fragrance in April 2005.

On January 26, 2005, we entered into an exclusive worldwide license agreement with PHEI, to develop, manufacture and distribute watches and other time pieces under the Paris Hilton name. The initial term of the agreement expires on June 30, 2010 and is renewable for an additional five-year period. We anticipate that the first watches under this agreement will be launched prior to December 2005.

On May 11, 2005, we entered into an exclusive worldwide license agreement with PHEI, to develop, manufacture and distribute cosmetics under the Paris Hilton name. The initial term of the agreement expires on January 15, 2011 and is renewable for an additional five-year period. We anticipate that the first cosmetics under this agreement will be launched during fall 2006.

On May 13, 2005, we entered into an exclusive worldwide license agreement with PHEI, to develop, manufacture and distribute handbags, purses, wallets and other small leather goods, under the Paris Hilton name. The initial term of the agreement expires on January 15, 2011 and is renewable for an additional five-year period. We anticipate that the first products under this agreement will be launched during fall 2006.

Under all of the PHEI Agreements, we must pay a royalty and spend minimum amounts for advertising based on sales volume.

FRED HAYMAN:  In June 1994, we entered into an Asset Purchase Agreement with Fred Hayman Beverly Hills, Inc. (FHBH), purchasing substantially all of the assets and liabilities of the FHBH fragrance division. In addition, FHBH granted to Parlux an exclusive royalty free 55-year license to use FHBH’s United States Class 3 trademarks Fred Haymanâ, 273â, Touchâ, With Loveâ and Fred Hayman Personal Selectionsâ and the corresponding international registrations. There are no minimum sales or advertising requirements.

On March 28, 2003, we entered into an exclusive agreement to sublicense the FHBH rights to Victory International (USA), LLC, for a royalty of 2% of net sales, with a guaranteed minimum annual royalty of $50,000. The initial term of the agreement is for five years, renewable every five years at the sublicensee’s option. As part of the agreement, we sold the inventory, promotional materials and molds relating to FHBH for their approximate book value. At closing, the purchaser paid $2,000,000 in cash and provided a promissory note in the amount of $2,032,272 which was due in twelve monthly installments of approximately $169,356, plus interest at prime plus 1%, commencing January 2004. The note has been paid in full in accordance with its terms.

The Sublicense Agreement excluded the rights to “273 Indigo” for men and women, the latest fragrance introduction for the FHBH brand. Such rights, as well as the rights to any other new FHBH fragrance addition, were to transfer to the sublicensee after twelve (12) months from the date of launch. The sublicensee would have been required to purchase the inventory and promotional materials relating to new additions for a price equal to our book value, up to $500,000.

On October 17, 2003, the parties amended the Sublicense Agreement, granting new FHBH product development rights to the sublicensee. The guaranteed minimum annual royalty increased to $75,000 and the royalty percentage on sales of new FHBH products was increased to 3% of net sales. The sublicensee is no longer required to purchase inventory and promotional materials relating to “273 Indigo”, and we may continue to manufacture and distribute “273 Indigo” products.

OCEAN PACIFIC:  In August 1999, we entered into an exclusive worldwide licensing agreement with Ocean Pacific Apparel Corp. (“OP”), to manufacture and distribute men’s and women’s fragrances and other related products under the OP label. The initial term of the agreement extended through December 31, 2003, and has automatically renewed for an additional three-year period. We have six (6) additional three-year renewal options, of which the last four require the achievement of certain minimum net sales. The license requires the payment of royalties, which decline as a percentage of net sales as net sales volume increases, and the spending of certain minimum amounts for advertising based upon annual net sales of the products.

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GUESS:  Effective November 1, 2003, we entered into an exclusive license agreement with GUESS? and GUESS? IP HOLDER L.P., to develop, manufacture and distribute prestige fragrances and related products on a worldwide basis. The term of the agreement continues through December 2009, and is renewable for an additional five years if certain sales levels are met.

Under the GUESS? Agreement, we must pay a royalty and spend minimum amounts for advertising based on sales volume. We anticipate that the first GUESS? fragrance will be launched during July 2005.

XOXO:  On January 7, 2005, we entered into a purchase and sale agreement, effective January 6, 2005, (the “Purchase Agreement”) with Victory International (USA), LLC (“Victory”), whereby we acquired the exclusive worldwide licensing rights, along with inventories, molds, designs and other assets, relating to the XOXO fragrance brand. As consideration, we paid Victory approximately $7.46 million, of which $2.55 million was in the form of a 60-day promissory note payable in two equal installments on February 6 and March 6, 2005. The payments were made as scheduled.

On December 1, 2003, Victory had entered into a license agreement with Global Brand Holdings, LLC (the “Fragrance License”) to manufacture and distribute XOXO branded fragrances. The term of the Fragrance License continues through June 30, 2007, and is renewable for an additional three years if certain sales levels are met. The first XOXO fragrances were introduced by Victory during December 2004. Under the Purchase Agreement, Victory assigned its rights, and we assumed the obligations, under the Fragrance License, which requires the payment of a royalty and minimum spending for advertising.

MARIA SHARAPOVA:  On September 15, 2004, we entered into an exclusive worldwide license agreement with Ms. Maria Sharapova, to develop, manufacture and distribute prestige fragrances and related products under her name. The initial term of the agreement expires on June 30, 2008 and is renewable for an additional three-year period. We anticipate that the first fragrance under this agreement will be launched during fall 2005. Under the Sharapova agreement, we must pay a royalty and spend minimum amounts for advertising based on sales volume.

ANDY RODDICK:  As of December 8, 2004, we entered into an exclusive worldwide license agreement with Mr. Andy Roddick, to develop, manufacture and distribute prestige fragrances and related products under his name. The initial term of the agreement expires on June 30, 2009 and is renewable for an additional three-year period. We anticipatee that the first fragrance under this agreement will be launched during spring 2006. Under the Roddick agreement, we must pay a royalty and spend minimum amounts for advertising based on sales volume.

babyGUND:  Effective April 6, 2005, we entered into an exclusive license agreement with GUND, Inc., to develop, manufacture and distribute children’s fragrances and related products on a worldwide basis under the babyGund trademark. The agreement continues through June 2010, and is renewable for an additional two years if certain sales levels are met. We anticipate that the first products under this agreement will be launched during fall 2006. Under the babyGund agreement, we must pay a royalty and spend minimum amounts for advertising based on sales volume.

JOCKEY INTERNATIONAL:  On March 23, 2001, we entered into an exclusive worldwide licensing agreement with Jockey International, Inc. (“Jockey”), to manufacture and distribute men’s and women’s fragrances and other related products under the Jockeyâ label. The initial term of the agreement extended through December 31, 2004, with three (3) three-year renewal options. The license required the payment of royalties, which decline as a percentage of net sales as net sales volume increases, and the spending of certain minimum amounts for advertising based upon annual net sales of the products. We launched Jockey fragrances for women and men during the first calendar quarter of 2002. We did not exercise the renewal option as market penetration of the brand did not meet our expectations.

ROYAL COPENHAGEN:  On September 1, 2003, the Company entered into an agreement with Five Star Fragrances Company, Inc., to market and distribute Royal Copenhagen fragrance products to the U.S. department store market. The term of the agreement is for three years, with an option to renew for one additional year. There are no royalties, sales minimums or advertising commitments under this agreement.

We believe we are in compliance with all material obligations under the above agreements. There can be no assurance that we will be able to continue to comply with the terms of these agreements in the future.

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TRADEMARKS

We have exclusive licenses, as discussed above, to use trademark and tradename rights in connection with the packaging, marketing and distribution of our products, both in the United States and internationally where such products are sold. See “THE PRODUCTS” on page 4 for further discussion of the relative importance of these licenses.

In addition, we own the worldwide trademark and distribution rights to LIMOUSINE fragrances. There are no licensing agreements requiring the payment of royalties to us for this trademark. We have not distributed fragrance products under the LIMOUSINE brand since fiscal 1998, nor do we anticipate distribution in the near future.

On January 16, 2003, we entered into an agreement with the Animale Group, S.A., to sell the inventory, promotional materials, molds, and trademarks relating to the Animale brand (we owned the worldwide trademarks and distribution rights prior to the sale) for $4,000,000, which closely approximated the brand’s net book value at the date of sale. At closing, the purchaser paid $2,000,000 in cash and provided a $2,000,000 note payable in twelve equal monthly installments of $166,667, plus interest at prime plus 1%, through January 31, 2004. The note has been paid in full in accordance with its terms.

As part of the agreement we did not include the inventory of Chaleur d’Animale, the Animale brand’s newest product introduction, and maintained the rights to manufacture and distribute this product line, on a royalty-free basis, until January 2005, at which time we destroyed all remaining inventory (which amount was not significant) and wrote off fully amortized intangibles relating to this brand.

PRODUCT LIABILITY

We have insurance coverage for product liability in the amount of $5 million per incident. We maintain an additional $5 million of coverage under an “umbrella” policy. We believe that the manufacturers of the products sold by us also carry product liability coverage and that we effectively are protected thereunder.

There are no pending and, to the best of our knowledge, no threatened product liability claims of a material nature.  Over the past ten years, we have not been presented with any significant product liability claims. Based on this historical experience, management believes that its insurance coverage is adequate.

GOVERNMENT REGULATIONS

A fragrance is defined as a “cosmetic” under the Federal Food, Drug and Cosmetics Act. A fragrance must comply with the labeling requirements of this FDC Act as well as the Fair Packaging and Labeling Act and its regulations. Under U.S. law, a product may be classified as both a cosmetic and a drug. If we produce such products, there would be additional regulatory requirements for products which are “drugs” including additional labeling requirements, registration of the manufacturer and the semi-annual update of a drug list.

Effective March 11, 2005, we were required to comply with the labeling, durability and non-animal testing guidelines from the European Cosmetic Toiletry and Perfumery Association (“COLIPA”) Amendment No. 7, in order to distribute our products in the European Union (“EU”). We have created “safety assessor approved” dossiers for all our products to be distributed in the EU, and have filed such documentation both domestically and with our agent in France.

COMPETITION

The market for fragrances and beauty related products is highly competitive and sensitive to changing consumer preferences and demands. We believe that the quality of our fragrance products, as well as our ability to develop, distribute and market new products, will enable us to continue to compete effectively in the future and to continue to achieve positive product reception, position and inventory levels in retail outlets. We believe we compete primarily on the basis of product recognition and emphasis on providing in-store customer service. However, there are products, which are better known than the products distributed by us. There are also companies, which are substantially larger and more diversified (the September 2004 issue of “WWD Beauty Biz” lists the 60

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largest companies in the world ranked by total beauty sales. The top 26 companies in the listing have sales levels exceeding $1 billion, with the 60^th largest at $149 million) and which have substantially greater financial and marketing resources than us, as well as greater name recognition, with the ability to develop and market products similar to, and competitive with, those distributed by us.

EMPLOYEES

As of March 31, 2005, we had a total of 134 full-time and part-time employees. Of these, 50 were engaged in worldwide sales activities, 54 in operations, marketing, administrative and finance functions and 30 in warehousing and distribution activities. None of our employees are covered by a collective bargaining agreement and we believe that our relationship with our employees is satisfactory. We also use the services of independent contractors in various capacities, including sales representatives, as well as temporary agency personnel to assist with seasonal distribution requirements.

We have a 401-K Plan covering substantially all of our employees. We match 25% of the first 6% of employee contributions, within annual limitations established by the Internal Revenue Code.

RISK FACTORS

The following is a discussion of some of the risk factors relating to our business:

If we lose our key personnel, or fail to attract and retain additional qualified experienced personnel, we will be unable to continue to develop our prestige fragrance products and attract and obtain new licensing partners.

We believe that our future success depends upon the continued contributions of our highly qualified sales, creative, marketing, and management personnel and on our ability to attract and retain those personnel. These individuals have developed strong reliable relationships with customers and suppliers. There can be no assurance that our current employees will continue to work for us or that we will be able to hire any additional personnel necessary for our growth. Our future success also depends on our continuing ability to identify, hire, train and retain other highly qualified managerial personnel. Competition for these employees can be intense. We may not be able to attract, assimilate or retain qualified managerial personnel in the future, and our failure to do so would limit the growth potential of our business.

If the appeal of one of our celebrities would diminish, it could have a material adverse affect on future sales of that specific celebrity-branded fragrance.

During the past fiscal year, we have entered into various license agreements with celebrities (entertainers or athletes) to develop, manufacture and distribute products under their names (see “LICENSING AGREEMENTS” for further discussion). These agreements require substantial royalty commitments. If the celebrities’ appeal would diminish, it could result in a material reduction in our sales of such products, adversely affecting our profitability and operating cash flows.

Consumers may reduce discretionary purchases of our products as a result of a general economic downturn, terrorism threats, or other external factors.

We believe that consumer spending on fragrance products is influenced by general economic conditions and the availability of discretionary income. Accordingly, we may experience sustained periods of declines in sales during economic downturns, or in the event of terrorism affecting customers’ purchasing patterns. In addition, a general economic downturn may result in reduced traffic in our customers’ stores which may, in turn, result in reduced net sales to our customers. Any resulting material reduction in our sales could have a material adverse effect on our business, its profitability or operating cash flows.

If we are unable to protect our intellectual property rights, specifically trademarks and trade names, our ability to compete could be negatively impacted.

The market for our products depends to a significant extent upon the value associated with our trademarks and trade names. We own, or have licenses or other rights to use, the material trademark and trade name rights used in connection with the packaging, marketing and distribution of our major products both in the United States and in other countries where such products are principally sold; therefore, trademark and trade name protection is

10

important to our business. Although most of our brand names are registered in the United States and in certain foreign countries in which we operate, we may not be successful in asserting trademark or trade name protection. In addition, the laws of certain foreign countries may not protect our intellectual property rights to the same extent as the laws of the United States. The costs required to protect our trademarks and trade names may be substantial.

Other parties may infringe on our intellectual property rights or intellectual property rights which we are licensed to use and may thereby dilute our brands in the marketplace.

Any such infringement of our intellectual property rights would also likely result in a commitment of our time and resources to protect these rights through litigation or otherwise. Under our license agreement with GUESS?, we are responsible for monitoring for infringement of the GUESS? intellectual property rights. We must take action, at our cost, to stop minor infringement, and may be liable to share a significant portion of the total cost, with GUESS?, to stop substantial infringement. We may infringe on others’ intellectual property rights. One or more adverse judgments with respect to these intellectual property rights could negatively impact our ability to compete and continue to sell products in the worldwide marketplace and may require the destruction of inventory produced under the infringed name, both of which would adversely affect profitability, and, ultimately operating cash flow.

We depend on third parties for the manufacture and delivery of our products, and any disruption or interruption in this supply chain can affect production levels.

We do not own or operate any significant manufacturing facilities. We use third-party manufacturers and suppliers to manufacture most of our products. We currently obtain these products from a limited number of manufacturers and other suppliers. If we were to experience delays in the delivery of the finished products or the raw materials or components used to make such products, or if these suppliers were unable to supply product, or if there were transportation problems between the suppliers and our distribution center, our sales, profitability, and operating cash flow could be negatively impacted.

The loss of or disruption in our distribution facility could have a material adverse effect on our sales and our relationships with our customers.

We currently have one distribution facility and two storage warehouses, which are located in south Florida. The loss of, or any damage to these facilities, as well as the inventory stored therein, would require us to find replacement facilities and assets. In addition, weather conditions, such as natural disasters, could disrupt our distribution operations. Certain of our components require purchasing lead times in excess of ninety (90) days. If we cannot replace our distribution capacity and inventory in a timely, cost-efficient manner, it could reduce the inventory we have available for sale, adversely affecting our profitability and operating cash flows, as well as damaging relationships with our customers who are relying on deliveries of our products.

Our quarterly results of operations could fluctuate significantly due to retailing peaks related to gift giving seasons and delays in new product launches, which could adversely affect our stock price.

We may experience variability in net sales and net income on a quarterly basis as a result of a variety of factors, including timing of customer orders and returns, sell-through of our products by the retailer to the ultimate consumer or gift giver, delays in new product launches, as well as additions or losses of brands or distribution rights. Any resulting material reduction in our sales could have an adverse effect on our business, its profitability and operating cash flows. If our operating results for any period are below expectations of stock market analysts, our stock price might decline.

If we are unable to acquire or license additional brands or obtain the required financing for these agreements, the growth of our business could be impaired.

Our business strategy contemplates the continued increase of our portfolio of owned or licensed brands and distributed brands. Our future expansion through acquisitions of licenses for additional brands, if any, will depend upon the capital resources and working capital available to us. We may be unsuccessful in identifying, negotiating, financing and consummating such acquisitions on terms acceptable to us, or at all, which could hinder our ability to increase revenues and build our business.

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If we are unable to secure additional new product distribution, or obtain the required financing for these arrangements, the growth of our business could be impaired.

Our business strategy also includes the increase of our product portfolio through new product distribution. Our future expansion through new products will depend upon the capital resources and working capital available to us. We may be unsuccessful in identifying, marketing, and financing such product introductions and distribution on terms acceptable to us, or at all, which could hinder our ability to increase revenues and build our business.  If we are unable to secure additional new product distribution, or obtain the required financing for these arrangements, the growth of our business could be impaired.

Reductions in worldwide travel could hurt sales volumes in our duty-free related business.

We depend on consumer travel for sales to our “duty free” customers in airports and other locations throughout the world. Any reductions in travel, including as a result of general economic downturns, Severe Acute Respiratory Syndrome, or acts of war or terrorism, etc. would result in a material decline in sales and profitability for this channel of distribution, which could negatively affect our operating cash flow.

Failure to comply with restrictive covenants in our existing credit facility will result in our inability to borrow additional funds under the facility, which would require us to obtain replacement financing, of which there is no assurance.

Our revolving credit facility requires us to maintain compliance with various financial covenants. Our ability to meet those covenants can be affected by events beyond our control, and therefore we may be unable to meet those covenants. If our actual results deviate significantly from our projections, we may not remain in compliance with the covenants and would not be allowed to borrow under the credit facility. If we are not able to borrow under our credit facility, we would be required to develop an alternative source of liquidity, or to sell additional securities which would result in dilution to existing stockholders. We may be unable to obtain replacement credit facilities on favorable terms or at all. Without a source of financing, we could experience cash flow difficulties and disruptions in our supply chain.

Our arrangements with our manufacturers, suppliers and customers are generally informal and if these arrangements were changed, interrupted, or terminated it could limit our supply of inventory and reduce sales, profitability and operating cash flow.

We do not have long-term or exclusive contracts with any of our customers and generally do not maintain long-term or exclusive contracts with our suppliers. Virtually all of our finished products are assembled from multiple components and manufactured by third parties. The loss of key suppliers or customers (particularly Perfumania), or a change in our relationship with them, could result in supply and inventory interruptions and reduced sales, profitability, and operating cash flows.

Item 2.

PROPERTIES

In November 1995, we moved our corporate headquarters and distribution center to a new 100,000 square foot leased facility in Fort Lauderdale, Florida. The current annual lease cost of the facility is approximately $720,000, with the lease covering the approximate ten-year period ending September 2005. We have an option to extend the lease for an additional five-year period with minimal rent escalation, or for two six-month periods at a monthly rental of approximately $69,000.

In May 2004, we leased an additional 38,000 square feet of warehouse space in Fort Lauderdale at a monthly cost of approximately $23,000. In June 2005, we leased an additional 23,000 square feet of warehouse space in the same building at a monthly cost of $21,600.  Both leases expire on December 31, 2005.

In April 2005, we leased an additional 26,400 square feet of warehouse space in Fort Lauderdale at a monthly cost of approximately $17,000. The lease expired in June 2005 and we moved to the 23,000 square feet warehouse space discussed above.

We are searching for a facility of between 150,000 and 200,000 square feet in order to consolidate all of our office and warehouse operations, and are currently analyzing lease versus purchase options.

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Item 3.

LEGAL PROCEEDINGS

On December 8, 2003, we were served with a complaint (the “Complaint”) filed in the Circuit Court for the Eleventh Judicial Circuit in Miami-Dade County, which was amended on January 26, 2004. The Complaint was a derivative action, in which the nominal plaintiffs, the Macatee Family Limited Partnership and Chatham, Partners I, LP, purported to be suing for the benefit of the Company itself and all of its public shareholders. The Complaint named Parlux Fragrances, Inc. as the nominal defendant and all of the current members of the Board as the defendants. It sought  damages allegedly arising out of breaches of fiduciary duties in connection with transactions involving the Company and Mr. Ilia Lekach, its Chief Executive Officer or companies in which he had an ownership interest. The Complaint sought to enjoin the Company from continuing to enter into such transactions, sought payment of costs and fees to Plaintiffs’ counsel and other unstated relief.

The Company and the Board members engaged experienced Florida securities counsel to vigorously defend the action. A Motion to Dismiss the action was filed on February 27, 2004. A hearing on the Motion was held on April 14, 2004, and the Complaint was dismissed, without prejudice. The Court suggested that the Plaintiffs serve a demand  upon the Company to examine the issues alleged in the Complaint rather than file an Amended Complaint, and gave the Plaintiffs thirty (30) days to file an Amended Complaint if they chose to do so. Following the order granting dismissal, the Company voluntarily furnished detailed information to Plaintiff’s counsel supporting the Company’s view that there was no legitimate basis for the claims previously asserted. Based on that submission, Plaintiffs requested additional time to consider their amendment. Additional exchanges of correspondence followed and additional exten sions of time were granted. On June 25, 2004, the Plaintiffs filed an Amended Complaint, which was received by the Company’s counsel on June 29, 2004. The Amended Complaint, for the most part, contained similar allegations and requests for relief as included in the original Complaint. On August 12, 2004, the Company responded to the Amended Complaint denying the allegations and requesting dismissal as well as reimbursement of legal fees and costs. The Plaintiffs’ initial deposition occurred on October 21, 2004.

On December 8, 2004, Plaintiff’s filed a Motion for an Interim Award of $168,824 in attorneys’ fees and reimbursement of expenses. Plaintiffs also noticed the depositions of three of our Board members, who agreed and provided dates for their appearances. Plaintiff’s counsel was informed of our rejection of their claim, which we believe was without merit.

On December 22, 2004, Plaintiffs filed for voluntary dismissal of the action against us, without prejudice. No payment was made to the Plaintiffs or Plaintiffs’ counsel by us or our insurance carrier.

On June 4, 2003, we were served with a shareholder’s class action complaint (the “June Complaint”), filed in the Delaware Court of Chancery by Judy Altman, purporting to act on behalf of herself and other public stockholders of the Company. The June Complaint named Parlux Fragrances, Inc. as a defendant along with all of the Board, except Mr. David Stone. The June Complaint sought to enjoin the defendants from consummating a tender offer proposal from Quality King Distributors, Inc. and Ilia Lekach, the Company’s Chairman and Chief Executive Officer, to acquire the Company’s common stock, and sought to have the acquisition rescinded if it was consummated. In addition, the June Complaint sought unspecified damages, plus the fees, costs and disbursements of Ms. Altman’s attorneys.

The Company and the named defendants engaged Delaware counsel to defend the action, and the action was voluntarily dismissed on September 11, 2003. In addition, the tender offer proposal, which precipitated the Complaint, was withdrawn.

To the best of our knowledge, there are no other proceedings pending against us or any of our properties which, if determined adversely to us, would have a material effect on our financial position or results of operation.

Item 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

We did not submit any actions for shareholders’ approval during the quarter ended March 31, 2005 or through June 28, 2005.

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PART II

Item 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our Common Stock, par value $0.01 per share, has been listed on the National Association of Securities Dealers Automatic Quotation System (“NASDAQ”) National Small Cap List market since February 26, 1987 and commenced trading on the NASDAQ National Market on October 24, 1995 (PARL).

We believe that the number of beneficial owners of our common stock is approximately 4,000, including owners of common stock whose shares are held in the names of banks, brokers, nominees or other fiduciaries.

The following chart, as reported by the National Association of Securities Dealers, Inc., shows the high and low bid prices for our securities available for each quarter of the last two years and the interim period from April 1, 2005 through June 24, 2005. The prices represent quotations by the dealers without adjustments for retail mark-ups, markdowns or commissions and may not represent actual transactions.

	Common Stock
Fiscal Quarter	High	Low
First (April/June) 2003	3.890	2.200
Second (July/Sept.) 2003	3.750	2.910
Third (Oct./Dec.) 2003	5.360	3.120
Fourth (Jan./Mar.) 2004	13.730	4.560
First (April/June) 2004	12.090	7.150
Second (July/Sept.) 2004	13.490	8.050
Third (Oct./Dec.) 2004	24.410	12.510
Fourth (Jan./Mar.) 2005	27.840	19.300
First (April/June) 2005	30.100	14.850

We have not paid a cash dividend on our common stock nor do we contemplate paying any dividends in the near future. Our loan agreement restricts payment of dividends without prior approval.

The following chart outlines the Company’s equity compensation plan information as of March 31, 2005.

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders(1)		1,000		$2.81		315,863
Equity compensation plans not approved by security holders(2)		1,733,000		$2.18		0
Total		1,734,000		$2.18		315,863

———————

⁽¹⁾

See note 10 to the Company’s consolidated financial statements included with this filing for a discussion of the Company’s stock option plans.

⁽²⁾

See note 8(D) to the Company’s consolidated financial statements included with this filing for a discussion of the Company’s options and warrants granted in connection with employment and consulting arrangements.

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The following chart outlines the Company’s repurchases of its common stock during the fiscal year ended March 31, 2005, all of which were purchased on the open market.

Issuer Purchases of Equity Securities

Period	(a) Total Number of Shares Purchased (1)	(b) Average Price Paid Per Share	(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (2)
Month #5
8/1/2004-8/31/2004	132,850	$8.42	132,850	$6,882,000
Month #6
9/1/2004-9/30/2004	33,980	$9.02	33,980	$6,575,000

———————

⁽¹⁾

Purchased in accordance with the Company’s common stock buy-back program announced on August 6, 2004. See pages 20-21 of “Liquidity And Capital Resources” for further discussion.

⁽²⁾

Represents the remaining amount approved by the Company’s lender for repurchase of common stock. On August 16, 2004, the Company received approval to repurchase up to $8 million in share value.

Item 6.

SELECTED FINANCIAL DATA

The following data has been derived from audited consolidated financial statements. Consolidated balance sheets at March 31, 2005 and 2004, and the related consolidated statements of income and of cash flows for each of the three years in the period ended March 31, 2005 and notes thereto appear elsewhere in this Annual Report on Form 10-K.

	For the Year Ended March 31,
	2005		2004		2003		2002			2001
	(in thousands of dollars, except per share data)
Net sales	$	100,361	$	80,581	$	72,254	$	70,489		$	69,525
Costs/operating expenses		82,941		70,268		66,409		74,356			62,145
Operating income (loss)		17,420		10,313		5,845		(3,867	)		7,380
Net income (loss)		10,824		6,268		5,474		(5,655	)		3,926
Income (loss) per share:
Basic	$	1.20	$	0.75	$	0.56	$	(0.57	)	$	0.39
Diluted (1)	$	1.02	$	0.63	$	0.54	$	(0.57	)	$	0.38

———————

⁽¹⁾

The calculation of diluted loss per share was the same as the basic loss per share for fiscal 2002 since inclusion of potential common stock in the computation would be antidilutive.

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	At March 31,
	2005		2004		2003		2002		2001
	(in thousands of dollars)
Current assets	$	73,762	$	63,385	$	54,875	$	61,531	$	52,793
Current liabilities		13,192		9,505		15,219		23,869		22,257
Working capital		60,570		53,880		39,656		37,662		30,536
Trademarks and licenses, net		13,203		7,945		8,231		9,535		20,464
Long-term borrowings, net		—		—		102		962		1,686
Total assets		88,276		72,467		66,672		73,497		75,995
Total liabilities		14,895		11,226		16,379		25,573		25,121
Stockholders’ equity		73,381		61,240		50,293		47,924		50,874

Item 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and notes thereto appearing elsewhere in this annual report. Except for the historical matters contained herein, statements made in this annual report are forward looking and are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

SEC Financial Reporting Release No. 60, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies” (“FRR 60”), suggests companies provide additional disclosure and commentary on those accounting policies considered most critical. FRR 60 considers an accounting policy to be critical if it is important to the Company’s financial condition and results, and requires significant judgment and estimates on the part of management in its application. We believe the accounting policies described below represent our critical accounting policies as contemplated by FRR 60. See Note 1 to Consolidated Financial Statements for a detailed discussion on the application of these and other accounting policies.

Accounting for Intangible Assets. The value of our intangible assets, including brand licenses and trademarks, is exposed to future adverse changes if we experience declines in operating results or experience significant negative industry or economic trends. We review intangible assets for impairment using the guidance of applicable accounting literature. Indefinite-lived intangible assets are reviewed annually for impairment under the provisions of SFAS No. 142, Goodwill and Other Intangible Assets, during the Company’s fourth quarter of each fiscal year, or sooner, if events indicate a potential impairment. The identification and measurement of impairment of indefinite-lived intangible assets involves the estimation of the fair value of the related asset. The estimates of fair value are based on the best information available as of the date of the assessment, which primarily incorporate management ass umptions about discounted expected future cash flows. Future cash flows can be affected by changes in industry or market conditions.

Allowance for Sales Returns. As is customary in the prestige fragrance industry, we grant certain of our unrelated U.S. department store customers the right to return product which does not “sell-through” to consumers. At the time of sale, we record a provision for estimated product returns based on our historical “sell-through” experience, economic trends and changes in customer demand. Based upon this information, we provide an allowance for sales returns. It is only after the specific gift-giving season (Mother’s Day, Christmas, etc.) that the customer requests approval of the return for unsold items. We decide to accept returns on a case-by-case basis. There is considerable judgment used in evaluating the factors influencing the allowance for returns and additional allowances in any particular period may be needed, reducing net income or increasing net loss.

Allowances for Doubtful Accounts Receivable. We maintain allowances for doubtful accounts to cover uncollectable accounts receivable, and we evaluate our accounts receivable to determine if they will ultimately be collected. This evaluation includes significant judgments and estimates, including a customer-by-customer review for large accounts. If the financial condition of our customers, or any one customer, deteriorates resulting in an impairment of their ability to pay, additional allowances may be required.

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Inventory Write-downs. We record inventory write-downs for estimated obsolescence and shrinkage of inventory. Our estimates consider the cost of inventory, the estimated market value, the shelf life of the inventory and our historical experience. If there are changes to these estimates, or changes in consumer preferences, additional inventory write-downs may be necessary.

Income Taxes and Valuation Reserves. We record a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized. We consider projected future taxable income and ongoing tax planning strategies in assessing the valuation allowance. In the event we determine that we may not be able to realize all or part of our deferred tax asset in the future, an adjustment to the deferred tax asset would be charged to earnings in the period of such determination.

Stock-Based Compensation. We account for our compensation plans under the recognition and measurement provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. Pro forma information regarding net income and net income per share is required in order to show our net income as if we had accounted for employee stock options under the fair value method of SFAS No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation - Transition Disclosure. This information is contained in Note 1(T) to our consolidated financial statements. The fair values of options and shares issued pursuant to our plans at each grant date were estimated using the Black-Scholes option pricing model.

In December 2004, the FASB issued SFAS No. 123 (Revised 2004) (“SFAS No. 123(R)”), Share-Based Payment. SFAS No. 123(R) requires companies to expense the estimated fair value of stock options and similar equity instruments issued to employees. Currently, companies are required to calculate the estimated fair value of these share-based payments and can elect to either include the estimated cost in earnings or disclose the pro forma effect in the footnotes to their financial statements. As discussed above, we have chosen to disclose the pro forma effect. The fair value concepts were not changed significantly in SFAS No. 123(R); however, in adopting SFAS N0. 123(R), companies must choose among alternative valuation models and amortization assumptions.

The valuation model and amortization assumption used by us continues to be available, however, we have not yet completed our assessment of the alternatives. SFAS No. 123(R) will be effective for the Company beginning with the year starting April 1, 2006. Transition options allow companies to choose whether to adopt prospectively, restate results to the beginning of the year, or to restate prior periods with the amounts that have been included in the footnotes. We have not yet concluded on which transition option it will select. See Note 1(T) to our consolidated financial statements for the pro forma effect for the each of the years presented, using our existing valuation and amortization assumptions.

Since April 2004 we have not made any changes of these critical accounting policies, nor have we made any material changes in any of the critical accounting estimates underlying these accounting policies.

Significant Trends.

Over the last few years, a significant number of new prestige fragrance products have been introduced on a worldwide basis. The beauty industry in general is highly competitive and consumer preferences often change rapidly. The initial appeal of these new fragrances, launched for the most part in U.S. department stores, has fueled the growth of our industry. Department stores continue to lose sales to the mass market as a product matures. To counter the effect of lower department store sales, companies are required to introduce new products more quickly, which requires additional spending for development and advertising and promotional expenses. In addition, a number of the new launches are with celebrities (either entertainers or athletes) which require substantial royalty commitments and whose careers and/or appeal could change drastically, both positively and negatively, based on a single event. We believe these trends will continue. If one or more of our new product introductions would be unsuccessful, or the appeal of the celebrity would diminish, it could result in a substantial reduction in profitability and operating cash flows.

Results of Operation.

Our gross margins may not be comparable to other entities that include all of the costs related to their distribution network in costs of goods sold as compared to our allocating only a portion of these distribution costs to costs of goods sold and including the remaining unallocated amounts as selling and distribution expenses.

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Comparison of the year ended March 31, 2005 with the year ended March 31, 2004.

During the fiscal year ended March 31, 2005, net sales increased 25% to $100,360,981 as compared to $80,580,709 for the prior year. The increase was mainly attributable to, (1) the introduction of our new Paris Hilton fragrance, which commenced shipping in November 2004 and achieved gross sales of $11,032,795; (2) the launch of 360° Blue for men and women in September 2004, coupled with the full distribution of products launched in the prior year, resulted in an increase of $9,893,570 in total Perry Ellis brand sales from $67,969,863 to $77,863,453; and, (3) $1,337,642 in gross sales of XOXO brand products, which license was acquired during January 2005. The increase was partially offset by a reduction in gross sales of Chaleur d’Animale and Fred Hayman 273 Indigo brand products of $693,991 and $1,260,541, respectively. (See Note 8(C) to the accompanying consolidated financial statements for further discu ssion of the Animale and Fred Hayman brands).

Net sales to unrelated customers increased 24% to $47,449,801, compared to $38,138,631 for the prior year, mainly as a result of the Paris Hilton brand sales discussed above, as $9,594,260 of such sales were made to unrelated customers. Sales to related parties increased 25% to $52,911,180 compared to $42,442,078 for the prior year, mainly as a result of the Perry Ellis brand increase offset by the reduction in Animale and Fred Hayman brand products, discussed above. We expect that sales increases to unrelated customers in the upcoming fiscal year will outpace those of related customers with the further roll out of our Paris Hilton fragrance products, and our initial GUESS? fragrance product (anticipated during the Summer 2005 season) which will initially be sold mainly to unrelated customers.

Our overall cost of goods sold decreased as a percentage of net sales to 45% for the fiscal year ended March 31, 2005 compared to 49% for the prior year. Cost of goods sold as a percentage of net sales to unrelated customers and related parties approximated 43% and 47%, respectively, for the current year, as compared to 49% for both groups during the prior year. For the prior two fiscal years, the cost of goods sold to unrelated customers increased, and consequently gross margins decreased, due to a higher percentage of value sets being sold. Value sets, which include multiple products, have a higher cost of goods compared to basic stock items. The prior year included a higher percentage of value set sales to unrelated customers. Additionally, the current year sales of Paris Hilton brand products included a higher percentage of basic stock items. For the near future, we anticipate the percentage of value sets sold to unrelated customers will remain constant and that the overall cost of goods sold to unrelated customers will also remain relatively constant.

Operating expenses increased by 22% compared to the prior year from $30,659,884 to $37,543,482, decreasing as a percentage of net sales from 38% to 37%. However, individual components of our operating expenses experienced more significant changes. Advertising and promotional expenses increased 46% to $18,528,907 compared to $12,714,825 in the prior year, increasing as a percentage of net sales from 16% to 18%. This trend should continue, in line with projected sales increases to the U.S. department store channel, which requires increased promotional support. The current year includes approximately $5,067,000 of promotional costs for the recently introduced Paris Hilton fragrance. Selling and distribution costs increased 17% to $7,707,435 in the current year compared to $6,560,973 for the prior year, remaining relatively constant at 8% of net sales. The increase was mainly attributable to additional costs for tempor ary warehouse employees and warehouse storage space to handle the increased order flow, coupled with increases in salaries and health insurance costs for sales and warehouse personnel. General and administrative expenses decreased slightly compared to the prior year from $6,162,926 to $6,100,017, decreasing as a percentage of net sales from 8% to 6%. The decrease was mainly attributable to the decrease in legal and other professional fees and non-recurring charitable contributions, offset by increases in salaries, health insurance costs and bad debt expense. Depreciation and amortization increased by 1% during the current year from $1,256,593 to $1,266,652. Amortization of intangibles of approximately $263,000 relating to the January 2005 XOXO license acquisition (see Note 8B to the consolidated financial statements for further discussion) were offset by a reduction in depreciation, as molds used in production for certain Ocean Pacific brand products became fully depreciated. Royalties decreased by 1% in the current year from $3,964,567 to $3,940,471, decreasing as a percentage of net sales from 5% to 4%. The prior year included approximately $906,000 in minimum royalties payable under the Jockey license agreement, which were no longer required. The Jockey license expired on December 31, 2004 and was not renewed.

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As a result of the above factors, operating income increased to $17,419,941 or 17% of net sales for the current year, compared to $10,312,629 or 13% of net sales for the prior year. Net interest income was $146,593 as compared to net interest expense of $224,368 for the prior year. We did not borrow during the current year and invested our excess cash in money market deposit accounts.

Income before taxes for the current year was $17,560,617 compared to $10,109,057 in the prior year. Giving effect to the tax provision, we earned net income of $10,824,256 or 11% of net sales for the current year compared to $6,267,615 or 8% of net sales in the prior year.

Comparison of the year ended March 31, 2004 with the year ended March 31, 2003.

During the fiscal year ended March 31, 2004, net sales increased 12% to $80,580,709 compared to $72,253,699 for the prior year. The increase is mainly attributable to (1) the launch of “Perry m”, “Perry f”, and “360 Red” for men and women under the Perry Ellis line of fragrances, which resulted in an increase of $10,615,473 in total Perry Ellis brand gross sales from $57,354,411 to $67,969,884, and, (2) the launch of Ocean Pacific for men and women, which resulted in an increase in total Ocean Pacific brand gross sales of $3,374,117. These increases were offset by the reduction in gross sales of Animale and FHBH brand products of $3,762,730 and $2,662,933, respectively (which brands were sold and sublicensed during January and March 2003, respectively) and a $1,406,830 reduction in gross sales of Jockey brand products.

Net sales to unrelated customers decreased 24% to $38,138,631, compared to $50,505,473 for the prior year, as a result of the reductions discussed above. Additionally, the prior year included the launch of “Perry Man” and “Perry Woman”, for which the fiscal year ended March 31, 2004 gross sales decreased $5,350,155 compared to the prior launch year period. Net sales to related parties increased 95% to $42,442,078, compared to $21,748,226 for the prior year, as brands, which were originally launched in the U.S. department store market over the last few years reached full distribution potential. In addition, the products launched during the current period have been developed for immediate distribution in all of the Company’s channels. We anticipate that this trend in distribution channels will continue until the launch of a new Perry Ellis brand fragrance product, and the launch of the initia l GUESS? fragrance product.

Our overall cost of goods sold remained relatively stable as a percentage of net sales, decreasing from 50% for the fiscal year ended March 31, 2003 to 49% for the fiscal  year ended March 31, 2004. Cost of goods sold on sales to unrelated customers and related parties both approximated 49% for the fiscal year ended March 31, 2004, as compared to 47% and 57%, respectively, for the prior year. The increase in cost of goods sold to unrelated customers for the fiscal year ended March 31, 2004 was due to the purchase by unrelated parties of a higher percentage of value sets than in the prior year. These value sets have a higher cost of goods when compared to basic stock items. For the last two fiscal years, the cost of goods sold to unrelated customers has increased, and consequently gross margins have decreased, due to a greater number of value sets sold as discussed above. The fiscal year ended March 31, 2004 al so includes the sale of a higher percentage of basic stock items to related parties, which result in higher margins.

Operating expenses increased slightly compared to the prior year from $30,536,582 to $30,659,884, decreasing as a percentage of net sales from 42% to 38%. However, individual components of our operating expenses experienced more significant changes. Advertising and promotional expenses decreased 11% to $12,714,825 compared to $14,244,338 in the prior year, decreasing as a percentage of net sales from 20% to 16%. The prior year included promotional costs for “Perry Man” and “Perry Woman”, which launched during the fall of 2002. No such major launches occurred during the fiscal year ended March 31, 2004. Selling and distribution costs increased slightly to $6,560,973 in the fiscal year ended March 31, 2004 compared to $6,545,221 for the prior year, decreasing as a percentage of net sales from 9% to 8%. The increase was mainly attributable to increases in employee salaries and health insurance prem iums offset by a reduction in commissions paid to an international sales representative who previously sold FHBH products in the Caribbean and to reduced commissions to a sales representative in Mexico. During the fiscal year ended March 31, 2004, the Company increased its focus on the Mexican marketplace and engaged a distributor for Mexico in lieu of a commissioned representative. This distributor is owned and operated by individuals related to our Chairman/Chief Executive Officer. General and administrative expenses increased by 19% compared to the prior year from $5,188,592 to $6,162,926, increasing as a percentage of net sales from 7% to 8%. The increase is mainly attributable to increases in employee salaries, health

19

insurance premiums, legal and professional fees, and non-recurring charitable contributions, offset by a reduction in bad debt expense. Depreciation and amortization decreased by 7% during the fiscal year ended March 31, 2004 from $1,356,597 to $1,256,593. Royalties increased by 24% in the fiscal year ended March 31, 2004, increasing as a percentage of net sales from 4% to 5% as a result of minimum royalty requirements on Jockey brand products.

As a result of the above factors, operating income increased to $10,312,629 or 13% of net sales for the fiscal year ended March 31, 2004, compared to $5,845,289 or 8% of net sales for the prior year. Net interest expense decreased to $224,368 in the fiscal year ended March 31, 2004 as compared to $694,317 for the prior year. The decrease reflects a lower average balance outstanding under our line of credit as compared to the prior year, coupled with increased interest income generated on notes receivable. The fiscal year ended March 31, 2004 includes foreign exchange gains of $20,796 relating to the sales and collection activities with our Canadian distributor, the only country where we assume foreign exchange risk, due to the strengthening of the Canadian currency against the U.S. dollar. The prior year includes other income of $3,542,083 relating to the settlement of a lawsuit we filed in 2001 against a su pplier (See Note 12 to the Company’s consolidated financial statements for further discussion of the litigation settlement).

Income before taxes for the fiscal year ended March 31, 2004 was $10,109,057 compared to $8,692,922 in the prior year. Giving effect to the tax provision, we earned net income of $6,267,615 for the fiscal year ended March 31, 2004, compared to $5,474,459 in the prior year.

Liquidity and Capital Resources

Working capital increased to $60,570,303 at March 31, 2005 compared to $53,879,645 at March 31, 2004, the result of current year’s net income, offset by the funds used for the XOXO acquisition (see Note 8B to the Company’s consolidated financial statements for further discussion).

During the fiscal year ended March 31, 2005, net cash provided by operating activities was $14,280,497 compared with $7,537,136 in the prior year. The improvement was mainly attributable to the increase in net income of $4,556,641 and the $2,924,379 decrease in trade receivables from related parties.

Net cash used in investing activities was $6,122,750, in the current year, the result of $7,459,377 in payments in connection with the XOXO acquisition, referenced above, compared to cash provided by investing activities of $1,615,786 in the prior year.

The cash provided by financing activities during the current year was attributable to the release of $4,162,669 in restricted cash resulting from the full pay down on our line of credit. We also purchased $1,424,765 of treasury stock during the current period (see below). Additionally, we generated $984,090 and $2,212,904 of cash during the years ended March 31, 2005 and 2004, respectively, from the issuance of common stock in connection with the exercise of certain warrants and employee options. See Note 10 for further discussion.

The cash provided by operating and investing activities during the prior year was used to reduce debt, both long-term and under our line of credit, as well as repurchase $2,639,712 of our common stock.

As of March 31, 2005 and 2004, our ratios of the number of days sales in accounts receivable and inventory, on a 365-day basis, were as follows:

	March 31,
	2005		2004
Trade accounts receivable (1):
Unrelated		68		43
Related		59		99
Total:		63		73
Inventories		119		143

———————

⁽¹⁾

Calculated on gross trade receivables excluding allowances for doubtful accounts, sales returns and advertising allowances of approximately $2,128,000 and $1,756,000 in 2005 and 2004, respectively.

20

The increase in the number of day sales in accounts receivable from unrelated customers is attributable to the increase in gross sales to this customer group during the quarter ended March 31, 2005. The above calculation uses sales for the entire fiscal year. If only the last quarter was used, the number of days outstanding would have been 51, reasonable for this customer group mix of U.S. department stores and international distributors. Based on current circumstances, we anticipate this number of days to remain at approximately 60 days.

During prior years, the number of days sales in trade receivables from related parties exceeded those of unrelated customers, due mainly to the highly seasonal cash flow of Perfumania (See Item 1 “CUSTOMERS” for further discussion of our relationship with Perfumania). Although we expect this to continue, based on current information and published information concerning Perfumania’s increased borrowing capability and improved profitability, we anticipate a continuing improvement in the days outstanding, while still encountering some seasonal peaks.

Due to the lead time for certain of our raw materials and components inventory (up to 120 days), we are required to maintain a three to six month supply of some items in order to ensure production schedules. In addition, when we launch a new brand or Stock Keeping Unit, we often produce a six-month supply to ensure adequate inventories if the new products exceed our forecasted expectations. We believe that the significant gross margins on our products outweigh the additional carrying costs. The improvement in turnover between 2005 and 2004 is attributable to the 25% increase in sales for the comparable period, which resulted in a 15% increase in total cost of goods sold, while inventories increased by only 4%.

As of December 31, 2002, we had repurchased, under all phases of our common stock buy-back program, a total of 8,017,131 shares at a cost of $22,116,995. On February 6, 2003, we received approval from our lender to purchase an additional 2,500,000 shares not to exceed $7,500,000, which was ratified on February 14, 2003, by the Board. As of March 31, 2004, we had repurchased, in the open market, an additional 2,162,564 shares at a cost of $7,109,305 under this approval.

On August 6, 2004, the Board approved the repurchase of an additional 1,000,000 shares of our common stock, subject to certain limitations, including approval from our lender, which was subsequently received, for up to $8,000,000, on August 16, 2004. As of March 31, 2005, we repurchased, in the open market, 166,830 shares at a cost of $1,424,765. The accompanying consolidated balance sheets also include an additional 39,000 shares of treasury stock purchased at a cost of $133,472 prior to fiscal 1996.

During the period April 1, 2005 through June 24, 2005, we repurchased an additional 217,272 shares at a cost of $3,877,795.

On July 20, 2001, we entered into a three-year Loan and Security Agreement (the “Loan Agreement”) with GMAC Commercial Credit LLC (“GMACCC”). On January 4, 2005, the Loan Agreement was extended for an additional year through July 20, 2006. Under the Loan Agreement, we are able to borrow, on a revolving basis, depending upon the availability of a borrowing base, up to $20,000,000 at an interest rate of LIBOR plus 3.75% or the Bank of New York’s prime rate, at our option.

At March 31, 2005, based on the borrowing base at that date, availability under the credit line amounted to approximately $17,861,000, none of which was utilized.

Substantially all of our domestic assets collateralize this borrowing. The Loan Agreement contains customary events of default and covenants which prohibit, among other things, incurring additional indebtedness in excess of a specified amount, paying dividends, creating liens, and engaging in mergers and acquisitions without the prior consent of GMACCC. The Loan Agreement also contains certain financial covenants relating to net worth, interest coverage and other financial ratios, which we were in compliance with.

As of March 31, 2005, we did not have any material commitments for capital expenditures.

Management believes that funds from operations and our existing financing will be sufficient to meet our current operating needs. However, if we would expand operations through acquisitions, new licensing arrangements or both, we may need to obtain additional financing. There is no assurance that we could obtain such additional financing or what the terms of such financing, if available, would be.

21

Contractual Obligations

The following table sets forth information regarding our contractual obligations as of March 31, 2005 (in 000’s):

	For the Year Ending March 31,
	2006		2007		2008		2009		2010		Thereafter		Total
Type of Obligation
Operating Lease Obligations	$	722	$	94	$	64	$	—	$	—	$	—	$	880
Purchase Obligations (1)		37,718		—		—		—		—		—		37,718
Advertising Obligations (2)		25,633		32,168		28,934		28,085		25,532		175		140,527
Other Long-term Obligations (3)		3,729		4,797		4,230		4,429		2,920		200		20,305
	$	67,084	$	37,059	$	32,228	$	32,514	$	28,452	$	375	$	198,712

———————

⁽¹⁾

Represents purchase orders issued in the normal course of business for components, raw materials and promotional supplies.

⁽²⁾

Consists of advertising commitments under our licensing agreements. These amounts were calculated based on the guaranteed minimum sales goals, as set forth in the agreements. Unlike guaranteed minimum royalties, advertising and promotional spending are based on a percentage of actual net sales, and are not contractually required if there are no sales.  See Note 8B to the Company’s consolidated financial statements for further discussion of these amounts.

⁽³⁾

Consists of guaranteed minimum royalty requirements under our licensing agreements.

Off-Balance Sheet Arrangements

As of March 31, 2005 we did not have any “off-balance sheet arrangements” as that term is defined in Regulation S-K Item 303(a)(4).

Item 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

With the exception of Canada, we sell our products worldwide with all such sales being denominated in United States dollars. As a result, we are not at risk to foreign exchange translation exposure, other than with our Canadian distributor where we assume such risk. We believe a hypothetical 10% change in the exchange rate between the U.S. dollar and Canadian dollar would not have a material effect on our consolidated statement of income. We could, however, be subject to changes in political and economic conditions in many of these countries. We closely monitor such conditions and are able, for the most part, to adjust our sales strategies accordingly. During the fiscal years ended March 31, 2005 and 2004, we recorded foreign exchange (losses) gains of $(5,917) and $20,796, respectively, relating to sales/collection activity with our Canadian distributor.

Our exposure to market risk for changes in interest rates relates primarily to our bank line of credit, when utilized. The bank line of credit bears interest at a variable rate, as discussed above under “Liquidity And Capital Resources”. We mitigate interest rate risk by continuously monitoring the interest rates and electing the lower of the fixed rate LIBOR or prime rate option available under the line of credit. When borrowing for our operating and investing activities, we are exposed to interest rate risk. As of March 31, 2005 and 2004, the primary source of funds for working capital and other needs was our $20 million line of credit.

The line of credit, which was not utilized as of March 31, 2005, bears interest at a floating rate of prime. We believe hypothetical 10% adverse move in interest rates would not significantly effect future interest expense.

Item 8.

FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

The financial statements and supplementary data are included herein commencing on page F-1. The financial statement schedule is listed in the Index to Financial Statements on page F-1 and is incorporated herein by reference.

22

Item 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON

ACCOUNTING AND FINANCIAL DISCLOSURE

None

Item 9A.

CONTROLS AND PROCEDURES

Parlux Fragrances, Inc.’s Chief Executive Officer (its principal executive officer) and Chief Financial Officer (its principal financial officer) have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934), as of the end of the period covered by this report, based on the evaluation required by paragraph (b) of Rule 13a-15 under the Securities Act of 1934. They have concluded that, as of such date, the Company’s disclosure controls and procedures were adequate and effective.

There were no changes in the Company’s internal controls or procedures or in other factors during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B.

OTHER INFORMATION

None.

PART III

Item 10.

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required in response to this item is incorporated by reference to our Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report.

Item 11.

EXECUTIVE COMPENSATION

The information required in response to this item is incorporated by reference to our Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report.

Item 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required in response to this item is incorporated by reference to our Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report.

Item 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required in response to this item is incorporated by reference to our Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report.

Item 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required in response to this item is incorporated by reference to our Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report.

23

PART IV

Item 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a)

The following documents are filed as part of this report:

1.

Financial Statements

See Index to Financial Statements beginning on page F-1 of this annual report.

2.

Financial Statement Schedules

See Index to Financial Statements beginning on Page F-1 of this annual report.

3.

Exhibit Index

2.1

Asset Purchase Agreement, dated June 15, 1994, by and between Fred Hayman Beverly Hills Inc. and the Company (incorporated by reference to Exhibit 1 to the Company’s Report on Form 8-K, filed with the Securities and Exchange Commission (the “SEC”) on June 15, 1994 and as amended on June 29, 1994 and August 26, 1994)

2.2

Asset Purchase Agreement, dated November 2, 1994, by and between Sanofi Beauté and the Company (incorporated by reference to Exhibit 2.1 to the Company’s Report on Form 8-K, filed with the SEC on January 11, 1995 (the “1995” Form 8-K)

3(a)

Certificate of Incorporation of the Company, as amended (incorporated by reference to Exhibits 3.1 through 3.5 to the Registration Statement on Form S-3 (File No. 33-89806), declared effective on March 13, 1995 and Exhibit 4.6 of Registration Statement on Form S-3, declared effective on October 2, 1996 (File No. 333-11953)

3(b)

By-Laws of the Company (incorporated by reference to Exhibit 3.6 to the Company’s Registration Statement on Form S-3, declared effective on March 13, 1995 (File No. 33-89806)

4.30

Revolving Credit and Security Agreement, dated July 20, 2001, between the Company and GMAC Commercial Credit LLC (“GMACCC”) (incorporated by reference to Exhibit  4.30 to the Company’s Report on Form 8-K, filed with the SEC on July 26, 2001)

4.32

Amendment No. 4 to Revolving Credit and Security Agreement, dated as of January 4, 2005, between the Company and GMACCC (incorporated by reference to Exhibit 4.32 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2004, filed on February 14, 2005 (“the December 31, 2004 Form 10-Q”).

10.1

Stock Option Plan (incorporated by reference to Annex A to the Company’s Preliminary Proxy Statement, filed on August 16, 1996

10.2

Employee Stock Option Plan 2000 (incorporated by reference to Annex “A” to the Company’s Definitive Proxy Statement, filed on August 25, 2000)

10.37

Facility lease agreement, dated June 21, 1995 between the Company and Port 95-2, Ld. (incorporated by reference to Exhibit 10.37 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1995, filed on August 11, 1995)

10.48

Stock Purchase Agreement, dated as of August 31, 1999, between the Company and Perfumania, Inc., (incorporated by reference to Exhibit 10.48 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999, filed on November 12, 1999)

10.64

Agreement, dated March 28, 2003, between the Company and Victory International (USA) LLC (incorporated by reference to Exhibit 10.64 to the Company’s Annual Report on Form 10-K for the year ended March 31, 2003, filed on June 30, 2003)

24

10.66

License Agreement, dated as of November 1, 2003, between the Company and GUESS?, Inc. and GUESS? IP Holder L.P. (“Portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission”) (incorporated by reference to Exhibit 10.66 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003, filed on November 14, 2003)

10.67

License Agreement, dated as of June 1, 2004, between the Company and Paris Hilton Entertainment, Inc. (“Portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission) (incorporated by reference to Exhibit 10.67 to the Company’s Annual Report on Form 10-K for the year ended March 31, 2004, filed on June 28, 2004 (“the March 31, 2004 Form 10-K”))

10.68

License Agreement, dated September 15, 2004, between the Company and Maria Sharapova (“Portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission”) (incorporated by reference to Exhibit 10.68 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, filed on November 12, 2004)

10.69

License Agreement, dated as of December 8, 2004, between the Company and Andy Roddick. (“Portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission”) (incorporated by reference to Exhibit 10.69 to the Company’s December 31, 2004 Form 10-Q)

10.70

Asset Purchase Agreement, dated January 6, 2005, between the Company and Victory International (USA) LLC (incorporated by reference to Exhibit 10.70 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2004, filed on February 14, 2005)

10.71

License Agreement, dated January 26, 2005, between the Company and Paris Hilton Entertainment, Inc. (“Portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission”) (incorporated by reference to Exhibit 10.71 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2004, filed on February 14, 2005)

14.1

Parlux Fragrances, Inc.’s Code of Business Conduct and Ethics, adopted by the Board of Directors on April 30, 2004 (incorporated by reference to Exhibit 14.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2004)

The following exhibits are attached:

10.72

License Agreement, dated April 6, 2005, between the Company and Gund, Inc.

10.73

License Agreement, dated May 11, 2005, between the Company and Paris Hilton Entertainment, Inc. (“Portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission”)

10.74

License Agreement, dated May 13, 2005, between the Company and Paris Hilton Entertainment, Inc. (“Portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission”)

10.75

Employment Agreement, with Ilia Lekach, dated as of June 1, 2005

10.76

Employment Agreement, with Frank A. Buttacavoli, dated as of June 1, 2005

10.77

Consulting Agreement, with Cosmix, Inc., dated as of June 1, 2005

10.78

Consulting Agreement, with Cambridge Development Corp., dated as of June 1, 2005

23.1

Consent of Deloitte & Touche LLP, an independent registered public accounting firm

31.1

Certification of Chief Executive Officer Pursuant to § 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Chief Financial Officer Pursuant to § 302 of the Sarbanes-Oxley Act of 2002

25

32.1

Certification of Chief Executive Officer Pursuant to § 906 of the Sarbanes-Oxley Act of 2002, as amended

32.2

Certification of Chief Financial Officer Pursuant to § 906 of the Sarbanes-Oxley Act of 2002, as amended

(b)

Reports on Form 8-K

On January 13, 2005, the Company filed a Form 8-K in connection with the acquisition of the exclusive worldwide licensing rights for the XOXO fragrance brand.

26

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

PARLUX FRAGRANCES, INC.

/s/ ILIA LEKACH

Ilia Lekach, Chief Executive Officer,
President and Chairman

(Principal Executive Officer)

Dated:  July 8, 2005

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated:

/s/ FRANK A. BUTTACAVOLI

Frank A. Buttacavoli, Executive Vice President, Chief Operating Officer, Chief Financial Officer and Director (Principal Financial and Principal Accounting Officer)

/s/ GLENN GOPMAN

Glenn Gopman, Director

/s/ ESTHER EGOZI CHOUKROUN

Esther Egozi Choukroun, Director

/s/ JAYA KADER ZEBEDE

Jaya Kader Zebede, Director

/s/ DAVID STONE

David Stone, Director

/s/ ISAAC LEKACH

Issac Lekach, Director

27

PARLUX FRAGRANCES, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
FINANCIAL STATEMENTS:
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets	F-3
Consolidated Statements of Income	F-4
Consolidated Statements of Changes in Stockholders’ Equity	F-5
Consolidated Statements of Cash Flows	F-6
Notes to Consolidated Financial Statements	F-7
FORM 10-K SCHEDULES:
Schedule II - Valuation and Qualifying Accounts	F-26

All other Schedules are omitted as the required information is not applicable or the information is presented in the financial statements or the related notes thereto.

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Parlux Fragrances, Inc.

Ft. Lauderdale, Florida

We have audited the accompanying consolidated balance sheets of Parlux Fragrances, Inc. and subsidiaries (the “Company”) as of March 31, 2005 and 2004, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended March 31, 2005. Our audits also included the financial statement schedule listed in the accompanying index. These financial statements and the financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company at March 31, 2005 and 2004, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2005, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the formation set forth therein.

As described in Note 2 to the consolidated financial statements, the Company conducts significant transactions with related parties.

Deloitte & Touche LLP

Certified Public Accountants

Fort Lauderdale, Florida

June 24, 2005

F-2

PARLUX FRAGRANCES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	March 31, 2005			March 31, 2004
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	12,368,904		$	654,633
Restricted cash		—			4,162,669
Trade receivables, net of allowance for doubtful accounts, sales returns and advertising allowances of approximately $2,128,000 and $1,756,000, respectively		6,689,750			2,747,845
Trade receivable from related parties		8,580,093			11,504,472
Income tax receivable		—			231,366
Notes receivable, current portion		—			1,708,511
Inventories		32,676,807			31,561,553
Prepaid expenses and other current assets, net		8,682,608			5,973,937
Investment in affiliate		4,764,073			4,839,693
TOTAL CURRENT ASSETS		73,762,235			63,384,679
Equipment and leasehold improvements, net		927,199			1,079,954
Trademarks and licenses, net		13,202,911			7,944,924
Other		383,629			57,139
TOTAL ASSETS	$	88,275,974		$	72,466,696
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Borrowings, current portion	$	—		$	170,927
Accounts payable		11,845,483			8,457,127
Income taxes payable		260,848			—
Accrued expenses		1,085,601			876,980
TOTAL CURRENT LIABILITIES		13,191,932			9,505,034
Deferred tax liability		1,703,442			1,721,229
TOTAL LIABILITIES		14,895,374			11,226,263
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY :
Preferred stock, $0.01 par value, 5,000,000 shares authorized, no shares issued and outstanding at March 31, 2005 and 2004		—			—
Common stock, $0.01 par value, 30,000,000 shares authorized, 19,506,115 and 19,191,115 shares issued at March 31, 2005 and 2004, respectively		195,061			191,911
Additional paid-in capital		80,818,158			78,039,205
Retained earnings		20,363,250			9,538,994
Accumulated other comprehensive income		2,655,196			2,696,623
		104,031,665			90,466,733
Less - 10,346,525 and 10,179,695 shares of common stock in treasury, at cost, at March 31, 2005 and 2004, respectively		(30,651,065	)		(29,226,300	)
TOTAL STOCKHOLDERS' EQUITY		73,380,600			61,240,433
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	88,275,974		$	72,466,696

See notes to consolidated financial statements.

F-3

PARLUX FRAGRANCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

	Year Ended March 31,
	2005			2004			2003
Net sales:
Unrelated customers, including licensing fees of $129,500 in 2005 and $18,750 in 2004	$	47,449,801		$	38,138,631		$	50,505,473
Related parties		52,911,180			42,442,078			21,748,226
		100,360,981			80,580,709			72,253,699
Cost of goods sold, including $2,342,483, $2,919,266 and $3,203,485 of promotional items in 2005, 2004 and 2003, respectively:
Unrelated customers		20,371,535			18,607,927			23,515,711
Related parties		25,026,023			21,000,269			12,356,117
		45,397,558			39,608,196			35,871,828
Gross margin		54,963,423			40,972,513			36,381,871
Operating expenses:
Advertising and promotional		18,528,907			12,714,825			14,244,338
Selling and distribution		7,707,435			6,560,973			6,545,221
General and administrative		6,100,017			6,162,926			5,188,592
Depreciation and amortization		1,266,652			1,256,593			1,356,597
Royalties		3,940,471			3,964,567			3,201,834
Total operating expenses		37,543,482			30,659,884			30,536,582
Operating income		17,419,941			10,312,629			5,845,289
Interest income		149,422			196,528			125,039
Interest expense and bank charges		(2,829	)		(420,896	)		(819,356	)
Exchange (loss) gain		(5,917	)		20,796			(133	)
Litigation settlement, net of expenses		—			—			3,542,083
Income before income taxes		17,560,617			10,109,057			8,692,922
Income taxes provision		(6,736,361	)		(3,841,442	)		(3,218,463	)
Net income	$	10,824,256		$	6,267,615		$	5,474,459
Income per common share:
Basic	$	1.20		$	0.75		$	0.56
Diluted	$	1.02		$	0.63		$	0.54

See notes to consolidated financial statements.

F-4

PARLUX FRAGRANCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

YEARS ENDED MARCH 31, 2005, 2004, AND 2003

	Common Stock			Additional Paid-In Capital		Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive (Loss) Income			Treasury Stock				Total
	Number Issued	Par Value										Number Of Shares	Cost
BALANCE at April 1, 2002	17,993,277	$	179,933	$	74,011,221	$	(2,203,080	)	$	(1,110,139	)	8,017,131	$	(22,116,995	)	$	48,760,940
Comprehensive income:
Net income	—		—		—		5,474,459			—				—			5,474,459
Change in unrealized holding loss on investment in affiliate	—		—		—		—			453,722		—		—			453,722
Foreign currency translation adjustment	—		—		—		—			118		—		—			118
Total comprehensive income	—		—		—		—			—		—		—			5,928,299
Issuance of common stock upon exercise of employee stock options	53,563		535		73,114		—			—		—		—			73,649
Purchase of treasury stock, at cost	—		—		—		—			—		1,476,700		(4,469,593	)		(4,469,593	)
BALANCE at March 31, 2003	18,046,840		180,468		74,084,335		3,271,379			(656,299	)	9,493,831		(26,586,588	)		50,293,295
Comprehensive income:
Net income	—		—		—		6,267,615			—				—			6,267,615
Change in unrealized holding gain on investment in affiliate, net of taxes of $126,435	—		—		—		—			3,352,094		—		—			3,352,094
Foreign currency translation adjustment	—		—		—		—			828		—		—			828
Total comprehensive income	—		—		—		—			—		—		—			9,620,537
Issuance of common stock upon exercise of warrants	1,048,000		10,480		1,982,144		—			—		—		—			1,992,624
Issuance of common stock upon exercise of employee stock options	96,275		963		219,317		—			—		—		—			220,280
Tax benefit from exercise of warrants and employee stock options	—		—		1,753,409		—			—		—		—			1,753,409
Purchase of treasury stock, at cost	—		—		—		—			—		685,864		(2,639,712	)		(2,639,712	)
BALANCE at March 31, 2004	19,191,115		191,911		78,039,205		9,538,994			2,696,623		10,179,695		(29,226,300	)		61,240,433
Comprehensive income:
Net income	—		—		—		10,824,256			—		—		—			10,824,256
Change in unrealized holding gain on investment in affiliate, net of taxes of $28,736	—		—		—		—			(46,884	)	—		—			(46,884	)
Foreign currency translation adjustment	—		—		—		—			5,457		—		—			5,457
Total comprehensive income																	10,782,829
Issuance of common stock upon exercise of warrants	305,000		3,050		952,915		—			—		—		—			955,965
Issuance of common stock upon exercise of employee stock options	10,000		100		28,025		—			—		—		—			28,125
Tax benefit from exercise of warrants and employee stock options	—		—		1,798,013		—			—		—		—			1,798,013
Purchase of treasury stock, at cost	—		—		—		—			—		166,830		(1,424,765	)		(1,424,765	)
BALANCE at March 31, 2005	19,506,115	$	195,061	$	80,818,158	$	20,363,250		$	2,655,196		10,346,525	$	(30,651,065	)	$	73,380,600

See notes to consolidated financial statements.

F-5

PARLUX FRAGRANCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year ended March 31,
	2005			2004			2003
Cash flows from operating activities:
Net income	$	10,824,256		$	6,267,615		$	5,474,459
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,266,652			1,256,593			1,356,597
Provision for doubtful accounts		120,000			8,232			200,000
Write-downs of prepaid promotional supplies and inventory		2,129,000			2,290,000			920,000
Deferred income tax provision		121,983			285,671			328,963
Changes in assets and liabilities net of effect of brand licensing/sales and license acquisition:
(Increase) decrease in trade receivables - customers		(4,061,905	)		995,493			1,675,952
Decrease in note and trade receivables - related parties		2,924,379			429,480			854,368
Decrease (increase) in income tax receivable		231,366			(231,366	)		1,745,401
Increase in inventories		(1,482,377	)		(7,100,256	)		(2,239,646	)
(Increase) decrease in prepaid expenses and other current assets		(3,122,205	)		814,117			87,962
(Increase) decrease in other non-current assets		(326,490	)		316,527			(304,056	)
Increase (decrease) in accounts payable		3,388,356			1,036,722			(2,697,675	)
Increase in accrued expenses and income taxes payable		2,267,482			1,168,308			453,395
Total adjustments		3,456,241			1,269,521			2,381,261
Net cash provided by operating activities		14,280,497			7,537,136			7,855,720
Cash flows from investing activities:
Purchases of equipment and leasehold improvements, net		(371,884	)		(382,042	)		(620,016	)
Collections on notes receivable from unrelated parties		1,708,511			1,997,828			—
Cash paid for XOXO license acquisition, including payments on short-term note		(7,459,377	)		—			—
Cash received from brand licensing/sales:
Animale		—			—			2,333,333
Fred Hayman		—			—			2,000,000
Bal a Versailles		—			—			200,000
Net cash (used in) provided by investing activities		(6,122,750	)		1,615,786			3,913,317
Cash flows from financing activities:
Net withdrawal (deposit) restricted cash		4,162,669			(2,684,828	)		(229,364	)
Payments - note payable to GMACCC, net		—			(5,444,971	)		(6,363,419	)
Payments - note payable to Fred Hayman Beverly Hills		(170,927	)		(794,418	)		(739,023	)
Payments - notes payable to Bankers Capital Leasing		—			(27,999	)		(163,456	)
Net decrease in notes receivable from officer		—			742,884			94,281
Purchases of treasury stock		(1,424,765	)		(2,639,712	)		(4,469,593	)
Proceeds from issuance of common stock, net		984,090			2,212,904			73,649
Net cash provided by (used in) financing activities		3,551,067			(8,636,140	)		(11,796,925	)
Effect of exchange rate changes on cash		5,457			828			118
Net increase (decrease) in cash and cash equivalents		11,714,271			517,610			(27,770	)
Cash and cash equivalents, beginning of year		654,633			137,023			164,793
Cash and cash equivalents, end of year	$	12,368,904		$	654,633		$	137,023

See notes to consolidated financial statements.

F-6

PARLUX FRAGRANCES INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED MARCH 31, 2005, 2004, AND 2003

1.  

NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A.

Nature of business

Parlux Fragrances, Inc. was incorporated in Delaware on July 23, 1984, and is a manufacturer and distributor of prestige fragrances and beauty related products, on a worldwide basis.

See Note 8(B) for further discussion of recently signed license agreements to manufacture and distribute watches, cosmetics and handbags, purses and other small leather goods, for which sales of all products, except cosmetics, are planned during the fiscal year ending March 31, 2006.

B.

Principles of consolidation

The consolidated financial statements include the accounts of Parlux Fragrances, Inc., and its wholly-owned subsidiaries, Parlux S.A., a French company (“S.A.”), and Parlux, Ltd. (jointly referred to as the “Company”). All material intercompany accounts and transactions have been eliminated in consolidation.

C.

Accounting estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“generally accepted accounting principles”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The more significant estimates relate to the carrying value of accounts receivable from related parties, reserve for doubtful accounts, sales returns and advertising allowances, inventory obsolescence, periods of depreciation and amortization for trademarks, licenses, and equipment, and the carrying value of intangibles. Actual results could differ from those estimates.

D.

Revenue recognition

Revenue is recognized when the product is shipped to a customer, or in the limited circumstances, at destination, when terms provide that title passes at destination. Estimated amounts for sales returns and allowances are recorded at the time of sale.

Licensing income, which is included in sales to unrelated customers, is recognized ratably over the terms of the contractual license agreements.

E.

Restricted cash

The Company had $4,162,669 of cash on deposit at March 31, 2004 which represents collections on trade accounts receivable pending transfer to its lender, as stipulated in its revolving credit agreement discussed in Note 7.  During April 2004, these funds were released from restriction and transferred into the Company’s operating account since there were no amounts outstanding at March 31, 2004 under the revolving credit facility.

F.

Inventories and cost of goods sold

Inventories are stated at the lower of cost (using the first-in, first-out method) or market.  The cost of inventories includes product costs, inbound freight and handling charges, including an allocation of the Company’s applicable overhead in an amount of $2,456,000 and $2,307,000 at March 31, 2005 and 2004, respectively.

F-7

Cost of goods sold includes the cost of inventories discussed above, as well as gift-with-purchase products.

G.

Investment in Affiliate

Investment in Affiliate consists of an investment in common stock of E Com Ventures, Inc. (“ECMV”), the parent company of Perfumania, Inc. (“Perfumania”) (see Note 2).  Such securities are considered available-for-sale and are recorded at fair value. Changes in unrealized gains and losses of the Company’s investment are charged or credited as a component of accumulated other comprehensive income (loss), net of tax, and are included in the accompanying statements of changes in stockholders’ equity. A decline in the fair value of an available-for-sale security below cost that is deemed other than temporary is charged to earnings.

H.

Equipment and leasehold improvements

Equipment and leasehold improvements are carried at cost.  Equipment is depreciated using the straight-line method over the estimated useful life of the asset.  Leasehold improvements are amortized over the lesser of the estimated useful life or the lease period. Repairs and maintenance charges are expensed as incurred, while betterments and major renewals are capitalized. The cost of assets and related accumulated depreciation is removed from the accounts when such assets are disposed of, and any related gains or losses are reflected in current earnings.

I.

Trademarks and licenses

Trademarks and licenses are recorded at cost and those with a finite life are amortized over the estimated periods of benefit. Amortization expense was $542,012, $286,221, and $43,207 for the years ended March 31, 2005, 2004, and 2003, respectively.

Indefinite-lived intangible assets are reviewed annually for impairment under the provisions of SFAS No. 142, Goodwill and Other Intangible Assets, during the Company’s fourth quarter of each fiscal year, or sooner, if events indicate a potential impairment. The identification and measurement of impairment of indefinite-lived intangible assets involves the estimation of the fair value of the related asset. The estimates of fair value are based on the best information available as of the date of the assessment, which primarily incorporates management assumptions about discounted expected future cash flows. Future cash flows can be affected by changes in industry or market conditions.

J.

Long-lived assets

Long-lived assets are reviewed for impairment whenever events or changes in business circumstances indicate that the carrying value of the assets may not be recoverable.  Impairment losses are recognized if expected undiscounted future cash flows of the related assets are less than their carrying values. The impairment loss is determined based on the difference between the carrying value of the assets and anticipated future cash flows discounted at a value commensurate with the risk involved, which is management’s estimate of fair value. Management does not believe that there are any unrecorded impairment losses as of  March 31, 2005.

K.

Advertising and promotion costs

Advertising and promotional expenditures are expensed to operations as incurred. These expenditures include print and media advertising, as well as in-store cooperative advertising and promotions.

Cooperative advertising, which is under the direct control of our customer and includes a percentage rebate or deduction based on net sales to the customer, is accrued and recorded as a reduction of net sales at the time of sale. Cooperative advertising with our customers, which is under the direct control of, and at the option of the Company, including catalogue and other forms of print advertising, are included in advertising and promotional expense. The costs associated with the specific advertisements are recorded as incurred, and when applicable, are offset against

F-8

trade accounts receivable. Such cooperative advertising costs under our direct control amounted to approximately  $3,276,000, $2,240,000, and $3,013,000, and have been included in advertising and promotional expenses for the years ended March 31, 2005, 2004, and 2003, respectively (including $50,000 and $35,000 to Perfumania in 2004 and 2003, respectively).

L.

Selling and distribution expenses

Selling and distribution expenses include labor costs (wages and other benefits) for employees directly involved in the selling and marketing of the Company’s products, sales commissions to independent sales representatives, and the other overhead costs relating to these areas.

Additionally, this caption includes approximately $2,481,000, $2,039,000 and $2,036,000 for the years ended March 31, 2005, 2004 and 2003, respectively, relating to the cost of warehouse operations not allocated to inventories and other related distribution expenses (excluding shipping expenses which are recorded as cost of goods sold). A portion of these expenses is allocated to inventory in accordance with generally accepted accounting principles.

M.

General and administrative expenses

General and administrative expenses include labor costs (wages and other benefits) for employees not directly involved in the selling and distribution of the Company’s products, professional service fees, corporate activities and other overhead costs relating to these areas.

N.

Shipping and handling fees and costs

Amounts billed to customers for shipping and handling, which amount is not significant, are included in net sales. The Company classifies the cost related to shipping and handling in cost of goods sold.

O.

Research and development costs

Research and product development costs, which amounted to approximately $96,000, $120,000, and $272,000 for the years ended March 31, 2005, 2004 and 2003, respectively, are expensed as incurred.

P.

Income taxes

The Company follows the liability method in accounting for income taxes. The liability method provides that deferred tax assets and liabilities are recorded, using currently enacted tax rates, based upon the difference between the tax bases of assets and liabilities and their carrying amounts for financial statement purposes.

Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. Income tax expense is the tax payable for the period and the change during the period in deferred tax assets and liabilities.

Q.

Foreign currency translation

The Company’s functional currency for its French foreign subsidiary is the local currency (Euro). Other income and expense includes foreign currency gains and losses, which are recognized as incurred.

R.

Fair value of financial instruments

The carrying value of the Company’s financial instruments, consisting principally of cash and cash equivalents, receivables, notes receivable, accounts payable and borrowings, approximate fair value due to either the short-term maturity of the instruments or borrowings with similar interest rates and maturities.

F-9

S.

Basic and diluted earnings per share

Basic earnings per common share calculations are determined by dividing earnings attributable to common stockholders by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing earnings attributable to common stockholders by the weighted average number of shares of common stock and dilutive potential common stock equivalents outstanding during the year.

T.

Stock based compensation

In December 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 148, “Accounting for Stock-Based Compensation--Transition and Disclosure--an amendment of SFAS 123”. SFAS No. 148 amends SFAS No. 123, “Accounting for Stock-Based Compensation”, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company has chosen to continue to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principle s Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Accordingly, compensation expense for stock options is measured as the excess, if any, of the market value of the Company’s  stock at the date of the grant (using the Black-Scholes option-pricing model), over the amount an employee must pay to acquire the stock. No stock-based compensation cost is reflected in the accompanying consolidated statements of income, as all warrants and options granted had an exercise price equal to the market value of the underlying common stock on the date of grant.

In calculating the potential effect for proforma disclosure, the fair market value on the date of grant was calculated using the Black-Scholes option-pricing model with the following weighted average assumptions:

	2005	2004	2003
Expected life (years)	(1)	5	5
Interest rate	(1)	3%	3%
Volatility	(1)	70%	70%
Dividend Yield	(1)	—	—

———————

⁽¹⁾

No stock options or warrants were granted during 2005.

F-10

If compensation cost had been determined based on the fair value at the grant date under SFAS No. 123, the Company’s net income and income per share would have been as follows:

	For the years ended March 31,
	2005		2004		2003
Net income, as reported	$	10,824,256	$	6,267,615	$	5,474,459
Add:  Stock-based employee compensation expense included in net income, net of related tax effects		—		—		—
Deduct:  Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		174,343		265,128		32,611
Pro forma net income	$	10,649,913	$	6,002,487	$	5,441,848
Basic net income per share:
As reported	$	1.20	$	0.75	$	0.56
Proforma	$	1.18	$	0.72	$	0.55
Diluted net income per share:
As reported	$	1.02	$	0.63	$	0.54
Proforma	$	1.00	$	0.61	$	0.53

In December 2004, the FASB issued SFAS No. 123 (Revised 2004), Share-Based Payment, (SFAS No. 123(R)). This statement requires companies to expense the estimated fair value of stock options and similar equity instruments issued to employees. Currently, companies are required to calculate the estimated fair value of these share-based payments and can elect to either include the estimated cost in earnings or disclose the pro forma effect in the footnotes to their financial statements. The Company has chosen to disclose the pro forma effect. The fair value concepts were not changed significantly in SFAS No. 123(R); however, in adopting this standard, companies must choose among alternative valuation models and amortization assumptions. The valuation model and amortization assumption used by the Company continues to be available, but it has not yet completed its assessment of the alternatives. The new standard will be effective for the Company beginning with the fiscal year starting on April 1, 2006. Transition options allow companies to choose whether to adopt prospectively, restate results to the beginning of the year, or to restate prior periods with the amounts that have been included in the footnotes. The Company has not yet concluded on which transition option it will select. See above for the pro forma effect for each of the three years in the period ended March 31, 2005, using our existing valuation and amortization assumptions.

U.

Cash flow information

The Company considers temporary investments with an original maturity of three months or less to be cash equivalents. Supplemental disclosures of cash flow information are as follows:

	2005		2004		2003
Cash paid for:
Interest	$	3,862	$	424,665	$	820,923
Income taxes	$	4,324,235	$	1,880,325	$	853,728

F-11

Supplemental disclosures of non-cash investing and financing activities are as follows:

Year ended March 31, 2005:

·

Change in unrealized holding gain of ($46,884) on the investment in affiliate, net of deferred taxes of $28,736.

·

The Company realized an income tax benefit of $1,798,013 in connection with the exercise of warrants and employee stock options.

Year ended March 31, 2004:

·

The conversion of trade accounts receivable into a subordinated note receivable from Perfumania in the amount of $5,000,000.

·

Change in unrealized holding gain of $3,352,094 on the investment in affiliate, net of deferred taxes of $126,435.

·

The Company realized an income tax benefit of $1,753,409 in connection with the exercise of warrants and employee stock options.

Year ended March 31, 2003:

·

The conversion of trade accounts receivable into a subordinated note receivable from Perfumania in the amount of $3,000,000.

·

Change in unrealized holding loss of $453,722 on the investment in affiliate.

·

The consideration received for the sale of assets relating to the sublicense of the Fred Hayman Beverly Hills brands included an interest-bearing note from the sublicensee, as discussed in Note 8 (C).

·

The consideration received from the sale of the Animale brand and assets related thereto, included an interest-bearing note from the purchaser in the amount of $2,000,000 as discussed in Note 8 (C).

V.

Accumulated Other Comprehensive Income

The balance in accumulated other comprehensive income, and the changes during each of the three years in the period ended March 31, 2005, are as follows:

	Foreign Currency Items			Unrealized Gain (Loss) On Investment in Affiliate			Total Accumulated Other Comprehensive Income (Loss)
Balance at April 1, 2002	$	(369,058	)	$	(741,081	)	$	(1,110,139	)
Current period change		118			453,722			453,840
Balance at March 31, 2003		(368,940	)		(287,359	)		(656,299	)
Current period change		828			3,352,094			3,352,922
Balance at March 31, 2004		(368,112	)		3,064,735			2,696,623
Current period change		5,457			(46,884	)		(41,427	)
Balance at March 31, 2005	$	(362,655	)	$	3,017,851		$	2,655,196

W.

Segment Information

As of March 31, 2005, the Company operated solely in one segment, the marketing and manufacture of prestige fragrances and beauty related products. See Note 13 for further discussion of our sales to international customers.

F-12

2.  

RELATED PARTY TRANSACTIONS AND SIGNIFICANT CUSTOMERS

The Company had net sales of $35,330,772, $31,964,407, and $12,823,696 during the fiscal years ended March 31, 2005, 2004 and 2003, respectively, to Perfumania, a wholly-owned subsidiary of ECMV, a company in which the Company’s Chairman and Chief Executive Officer has an ownership interest and held identical management positions until February 2004. Perfumania is the Company’s largest customer, and transactions with them are closely monitored by the Company’s Audit Committee and Board of Directors. Perfumania offers the Company the opportunity to sell its products in approximately 230 retail outlets and its terms with Perfumania take into consideration the companies’ over 15 year  relationship. Pricing and terms with Perfumania reflect (a) the volume of Perfumania’s purchases, (b) a policy of no returns from Perfumania, (c) minimal spending for advertising and promotion, (d) free exp osure of the Company’s products provided in Perfumania’s store windows and (e) minimal distribution costs to fulfill Perfumania orders shipped directly to their distribution center.

While the Company’s invoice terms to Perfumania appear as net ninety (90) days, for over ten years, the Board of Directors has granted longer payment terms, taking into consideration the factors discussed above. The Board evaluates the credit risk involved and imposes a specific dollar limit, which is determined based on Perfumania’s reported results and comparable store sales performance. Management monitors the account activity to ensure compliance with the Board limit. Net trade accounts receivable owed by Perfumania to the Company totaled $8,566,939 and $10,890,338 at March 31, 2005 and 2004, respectively. Amounts due from Perfumania are non-interest bearing and were paid in accordance with the terms established by the Board (See Note 13 for further discussion of this concentration of credit risk).

On July 1, 1999, Perfumania and the Company’s Board of Directors approved the transfer of 1,512,406 shares of Perfumania treasury stock to the Company in consideration for a partial reduction of the outstanding trade receivable balance in the amount of $4,506,970. The transfer price was based on a per share price of $2.98 ($11.92 post reverse split discussed below), which approximated 90% of the closing price of Perfumania’s common stock for the previous 20 business days. The agreement was consummated on August 31, 1999, and the shares registered in June 2000. Effective February 1, 2000, ECMV was formed as a holding company and accordingly, former Perfumania shareholders now hold common stock in ECMV. During the first quarter of the fiscal year ended March 31, 2002, the Company recorded a non-cash charge to earnings of $2,858,447 which reflected an other-than-temporary decline in value of the investment in affiliate based upon a sustained reduction in the quoted market price of $1.09 per share ($4.36 post reverse split) as of June 30, 2001, compared to the original cost per share of $2.98 ($11.92 post reverse split).

On March 21, 2002, ECMV effected a one-for-four reverse stock split; accordingly, the Company now owns 378,101 shares with a cost basis of $1,648,523 or $4.36 per share.  As of March 31, 2005, the fair market value of the investment in ECMV had increased to $4,764,073 ($12.60 per share after the reverse split).

As of June 24, 2005 the fair market value of the investment in ECMV was $5,539,180 ($14.65) per share after the reverse split).

The following unaudited summarized financial data was obtained from ECMV’s public filings (in 000’s):

	Balance Sheet Data
	January 29, 2005		January 31, 2004
Current assets	$	82,025	$	65,405
Total assets	$	107,817	$	92,463
Current liabilities	$	79,785	$	74,495
Total liabilities	$	92,757	$	82,241
Stockholders’ Equity	$	15,060	$	10,222

F-13

	Statement of Operations Data For Fiscal Year Ended
	January 29, 2005		January 31, 2004
Net Sales	$	225,003	$	212,568
Costs and operating expenses		212,501		217,012
Depreciation and amortization		5,875		6,103
Income (loss) from operations		6,627		(10,547	)
Net income (loss)	$	3,151	$	(12,872	)

During June 2003 the Company and Perfumania entered into a $5 million subordinated note agreement which converted $5 million of the outstanding trade receivable due from Perfumania to the Company as of that date. The note was repayable in installments of $250,000 each month from July through October 2003, $500,000 on November 30, 2003, $3,000,000 on December 31, 2003, and $250,000 on January 31, 2004 and February 29, 2004. Accrued interest was payable with each principal installment. The loan was repaid in accordance with its terms.

In addition to its sales to Perfumania, the Company had net sales of $17,580,408, $10,477,671, and $8,924,530 during the years ended March 31, 2005, 2004, and 2003, respectively, to fragrance distributors owned/operated by individuals related to the Company’s Chairman/CEO. These sales are included as related party sales in the accompanying statements of operations. As of March 31, 2005 and 2004, trade receivables from related parties include $13,154 and $614,134 respectively, from these customers, which were current in accordance with their sixty (60) or ninety (90) day terms.

During the year ended March 31, 2005, the Company purchased $250,500 in television advertising on the “Adrenalina  Show”, which is broadcasted in various U.S. markets and in Latin American countries. The Company’s Chairman/CEO has a controlling ownership interest in a company, which has the production rights to the show.

3.

INVENTORIES

The components of inventories are as follows:

	March 31,
	2005		2004
Finished products	$	21,733,452	$	18,000,231
Components and packaging material		7,201,610		9,094,932
Raw material		3,741,745		4,466,390
	$	32,676,807	$	31,561,553

4.

PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets are as follows:

	March 31,
	2005		2004
Promotional supplies, net	$	3,355,789	$	3,129,411
Deferred tax assets		1,812,402		1,923,436
Prepaid advertising		1,660,363		484,145
Prepaid royalties		1,022,281		107,000
Other		831,773		329,945
	$	8,682,608	$	5,973,937

F-14

5.

EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Equipment and leasehold improvements are comprised of the following:

	March 31,						Estimated useful lives (in years)
	2005			2004
Molds and equipment	$	4,836,393		$	6,251,775		3-7
Furniture and fixtures		989,266			915,424		3-5
Leasehold improvements		732,209			658,215		5-7
		6,557,868			7,825,414
Less: accumulated depreciation and amortization		(5,630,669	)		(6,745,460	)
	$	927,199		$	1,079,954

Depreciation and amortization expense on equipment and leasehold improvements for the years ended March 31, 2005, 2004 and 2003 was $724,640, $970,372, and $1,313,390, respectively. There were no amounts subject to capital leases at March 31, 2005 and 2004.

6.  

TRADEMARKS AND LICENSES

Trademarks and licenses are attributable to the following brands:

	March 31,						Estimated Life (in years)
	2005			2004
XOXO	$	5,800,000		$	—		5
Fred Hayman Beverly Hills (“FHBH”)		2,820,361			2,820,361		10
Perry Ellis and Other		329,106			329,106		5-25
Animale		—			122,965		—
		8,949,467			3,272,432
Less – accumulated amortization		(1,634,806	)		(1,215,758	)
Subtotal of amortizable intangibles		7,314,661			2,056,674
Perry Ellis		5,888,250			5,888,250		indefinite
	$	13,202,911		$	7,944,924

Future amortization of licenses and trademarks is as follows (in 000’s):

	For the year ending March 31,	Amount
2006		$	1,291
2007			1,291
2008			1,291
2009			1,272
2010			1,257
Thereafter			912
		$	7,314

See Note 8 (B) for further discussion of the XOXO brand and Note 8 (C) for further discussion of the FHBH and Animale brands.

F-15

7.

BORROWINGS

The composition of borrowings is as follows:

	March 31, 2005		March 31, 2004
Revolving credit facility payable to GMAC Commercial Credit, interest at LIBOR plus 2.75%, or prime (5.25% at March 31, 2005) .	$	—	$	—
Note payable to Fred Hayman Beverly Hills (FHBH), collateralized by the acquired licensed trademarks, interest at 7.25%, payable in equal monthly installments of $69,863, including interest, through June 2004		—		170,927
		—		170,927
Less: long-term borrowings		—		—
Short-term borrowings	$	—	$	170,927

On July 20, 2001, the Company entered into a three-year Loan and Security Agreement (the “Loan Agreement”) with GMAC Commercial Credit LLC (“GMACCC”). On January 4, 2005, the Loan Agreement was extended for an additional year through July 20, 2006. Under the Loan Agreement, the Company is able to borrow, on a revolving basis, depending on the availability of a borrowing base, up to $20,000,000 at an interest rate of LIBOR plus 2.75% or the Bank of New York’s prime rate, at the Company’s option.

At March 31, 2005, based on the borrowing base at that date, availability under the credit line amounted to approximately $17,861,000, none of which was utilized.

Substantially all of the domestic assets of the Company collateralize this borrowing. The Loan Agreement contains customary events of default and covenants which prohibit, among other things, incurring additional indebtedness in excess of a specified amount, paying dividends, creating liens, and engaging in mergers and acquisitions without the prior consent of GMACCC. The Loan Agreement also contains certain financial covenants relating to net worth, interest coverage and other financial ratios, which the Company was in compliance with at March 31, 2005.

8.

COMMITMENTS AND CONTINGENCIES

A.

Leases:

The Company leases its office space and certain equipment under operating leases expiring on various dates through 2007. Total rent expense charged to operations for the years ended March 31, 2005, 2004 and 2003 was approximately $1,080,000, $900,000 and $1,000,000, respectively.

At March 31, 2005, the future minimum annual rental commitments under noncancellable operating leases are as follows (in 000’s):

	For the year ending March 31,	Amount
2006		$	722
2007			94
2008			64
		$	880

B.

License and Distribution Agreements:

During the year ended March 31, 2005, the Company held exclusive worldwide licenses to manufacture and sell fragrance and other related products for Perry Ellis, Ocean Pacific (“OP”), Paris Hilton, XOXO, and Jockey.

F-16

Effective November 1, 2003, the Company entered into an exclusive license agreement with GUESS? and GUESS? IP HOLDER L.P., to develop, manufacture and distribute prestige fragrances and related products on a worldwide basis. The term of the agreement continues through December 2009, and is renewable for an additional five years if certain sales levels are met. The Company anticipates that the first GUESS? fragrance will be launched during July 2005.

On September 15, 2004, the Company entered into an exclusive worldwide license agreement with Ms. Maria Sharapova, to develop, manufacture and distribute prestige fragrances and related products under her name. The initial term of the agreement expires on June 30, 2008 and is renewable for an additional three-year period. The Company anticipates that the first fragrance under this agreement will be launched during fall 2005.

As of December 8, 2004, the Company entered into an exclusive worldwide license agreement with Mr. Andy Roddick, to develop, manufacture and distribute prestige fragrances and related products under his name. The initial term of the agreement expires on June 30, 2009 and is renewable for an additional three-year period. The Company anticipates that the first fragrance under this agreement will be launched during spring 2006.

On January 7, 2005, the Company entered into a purchase and sale agreement, effective January 6, 2005, (the “Purchase Agreement”) with Victory International (USA), LLC (“Victory”), whereby it acquired the exclusive worldwide licensing rights, along with inventories, molds, designs and other assets, relating to the XOXO fragrance brand. As consideration, Victory was paid approximately $7.46 million, of which $2.55 million was in the form of a 60-day promissory note payable in two equal installments on February 6 and March 6, 2005. The payments were made as scheduled.

On December 1, 2003, Victory had entered into a license agreement with Global Brand Holdings, LLC (the “Fragrance License”) to manufacture and distribute XOXO branded fragrances. The first XOXO fragrances were introduced by Victory during December 2004. Under the Purchase Agreement, Victory assigned its rights, and the Company assumed the obligations, under the Fragrance License.

On January 26, 2005, the Company entered into an exclusive worldwide license agreement with Paris Hilton Entertainment, Inc. (“PHEI”), to develop, manufacture and distribute watches and other time pieces under the Paris Hilton name. The initial term of the agreement expires on June 30, 2010 and is renewable for an additional five-year period. The Company anticipates that the first watches under this agreement will be launched prior to December 2005.

Under all of these license agreements, we must pay a royalty and spend minimum amounts for advertising based on sales volume.

The Company believes it is presently in compliance with all material obligations under the above agreements. The Company expects to incur continuing obligations for advertising and royalty expense under all of these license agreements. As of March 31, 2005, the minimum amounts of these obligations derived from the aggregate minimum sales goals, set forth in the agreements, over the remaining contract periods are as follows (in 000’s):

	Fiscal year ending March 31,
	2006		2007		2008		2009		2010		After
Advertising	$	25,633	$	32,168	$	28,934	$	28,085	$	25,532	$	175
Royalties	$	3,729	$	4,797	$	4,230	$	4,429	$	2,920	$	200

Effective April 6, 2005, the Company entered into an exclusive license agreement with GUND, Inc., to develop, manufacture and distribute children’s fragrances and related products on a worldwide basis under the babyGund trademark. The agreement continues through June 2010, and is renewable for an additional two years if certain sales levels are met. The Company anticipates that the first products under this agreement will be launched during fall 2006.

F-17

On May 11, 2005, the Company entered into an exclusive worldwide license agreement with PHEI, to develop, manufacture and distribute cosmetics under the Paris Hilton name. The initial term of the agreement expires on January 15, 2011 and is renewable for an additional five-year period. The Company anticipates that the first cosmetics under this agreement will be launched during fall 2006.

On May 13, 2005, the Company entered into an exclusive worldwide license agreement with PHEI, to develop, manufacture and distribute handbags, purses, wallets and other small leather goods, under the Paris Hilton name. The initial term of the agreement expires on January 15, 2011 and is renewable for an additional five-year period. The Company anticipates that the first products under this agreement will be launched during fall 2006.

C.

Trademarks:

Through various acquisitions since 1991, the Company acquired worldwide trademarks and distribution rights to  ANIMALE and LIMOUSINE. In addition during 1994, FHBH granted the Company an exclusive 55-year royalty free license. Accordingly, there are no licensing agreements requiring the payment of royalties by the Company on these trademarks and the Company had the rights to license all of these trademarks, other than FHBH, for all classes of  merchandise.

On January 16, 2003, the Company entered into an agreement with the Animale Group, S.A., to sell the inventory, promotional materials, molds, and intangibles, relating to the Animale brand for $4,000,000, which closely approximates the brand’s net book value at the date of sale. At closing, the purchaser paid $2,000,000 in cash and provided a $2,000,000 note payable in twelve equal monthly installments of $166,667, plus interest at prime plus 1%, through January 31, 2004, which was paid in accordance with its terms.

As part of the agreement the Company did not include the inventory of Chaleur d’Animale, the Animale brand’s newest product introduction, and maintained the rights to, and manufactured and distributed this product line on a royalty-free basis, until January 2005, at which time the Company destroyed all remaining inventory (which was not significant) and wrote-off fully amortized intangibles relating to this brand.

On March 28, 2003, the Company entered into an exclusive agreement to sublicense the FHBH rights to Victory for a royalty of 2% of net sales, with a guaranteed minimum annual royalty of $50,000. The initial term of the agreement is for five years, renewable every five years at the sublicensee’s option. As part of the agreement, the Company sold the inventory, promotional materials and molds relating to FHBH for its approximate book value. At closing, the purchaser paid $2,000,000 in cash and provided a promissory note due in twelve monthly installments of approximately $170,000, plus interest at prime plus 1%, commencing January 2004, which was paid in accordance with its terms. As of March 31, 2004, notes receivable in the accompanying consolidated balance sheet of $1,708,511 related entirely to this transaction.

The Sublicense Agreement excluded the rights to “273 Indigo” for men and women, the latest fragrance introduction for the FHBH brand. Such rights, as well as the rights to any other new FHBH fragrance additions, were to transfer to the sublicensee after twelve (12) months from the date of launch. The sublicensee would have been required to purchase the inventory and promotional materials relating to the new additions for a price equal to our book value, up to $500,000.

On October 17, 2003, the parties amended the Sublicense Agreement, granting new FHBH product development rights to the sublicensee. In addition, the guaranteed minimum annual royalty increased to $75,000 and royalty percentage on sales of new FHBH products increased to 3% of net sales. The sublicensee is no longer required to purchase inventory and promotional materials relating to “273 Indigo”, and the Company may continue to manufacture and distribute “273 Indigo” products.

F-18

D.

Employment and Consulting Agreements:

The Company has contracts with certain officers, employees and consultants which expire during March 2009. Minimum commitments under these contracts total approximately $4,575,000, ($1,150,000, $1,075,000, $1,125,000 and $1,225,000 for the fiscal years ended March 31, 2006, 2007, 2008, and 2009, respectively). In addition, warrants to purchase 760,000 shares of common stock at a price of $1.86 were granted to officers and directors during 2002 in connection with their previous contracts. These warrants are exercisable for a ten-year period from the date of grant, vest over the three-year term of the applicable contract starting on March 31, 2004 (end of contract’s initial year), and double in the event of a change in control. As of March 31, 2005, 506,668 of these warrants were vested.

All of the previously described warrants were granted at or in excess of the market value of the underlying shares at the date of grant.

E.

Purchase Commitments and Contingencies:

As of March 31, 2005, the Company is contingently liable in the amount of approximately $38 million for purchase orders issued  in the normal course of business for components, raw materials and promotional supplies. The purchase orders, for the most part, stipulate delivery dates ranging from thirty days to periods exceeding one year, based on forecasted production needs.

The Company is a party to legal and administrative proceedings arising in the ordinary course of business. The outcome of these actions is not expected to have a material effect on the Company’s financial position or results of operations.  See Note 12 to the consolidated financial statements for further discussion.

9.

INCOME TAXES

The components of the provision for income taxes for each of the years ended March 31 are as follows:

	Years Ended March 31,
	2005		2004		2003
Current taxes:
U.S. federal	$	5,803,516	$	3,024,049	$	2,724,601
U.S. state and local		811,062		531,722		164,899
		6,614,578		3,555,771		2,889,500
Deferred tax		121,983		285,671		328,963
Income tax expense	$	6,736,561	$	3,841,442	$	3,218,463

The following table reconciles the statutory federal income tax rate to the Company’s effective tax rate for the years ended March 31 as follows:

	2005			2004			2003
Statutory federal income tax rate		35.0	%		35.0	%		35.0	%
Increase (decrease) resulting from:
Change in valuation allowance		0.0	%		0.1	%		2.2	%
Other		3.3	%		2.9	%		(0.2	)%
		38.3	%		38.0	%		37.0	%

F-19

Deferred income taxes as of March 31 are provided for temporary differences between financial reporting carrying value and the tax basis of the Company’s assets and liabilities under SFAS No. 109. The tax effects of temporary differences are as follows:

	2005			2004
Deferred Tax Assets:
Allowance for doubtful accounts, sales returns and allowances	$	604,848		$	485,514
State net operating loss carry forwards		—			9,656
Inventory write-downs		1,063,619			1,185,336
Other, net		143,935			242,930
Deferred tax asset	$	1,812,402		$	1,923,436
Deferred Tax Liabilities:
Depreciation and amortization	$	(1,605,743	)	$	(1,594,794	)
Net Deferred Tax Liability on Available-For-Sale Securities
Unrealized gain on investment in affiliate		(97,699	)		(126,435	)
Deferred tax liability	$	(1,703,442	)	$	(1,721,229	)

10.

STOCK OPTION AND OTHER PLANS

In October 1996, the Company’s shareholders ratified the establishment of a new stock option plan (the “1996 Plan”) which reserved 250,000 shares of its common stock for issue thereunder. Only employees who are not officers or directors of the Company shall be eligible to receive options under the 1996 Plan. Options granted under the 1996 Plan were exercisable for five years from the date of grant and vested 25% after each of the first two years, and 50% after the third year.

As of March 31, 2005, and since the inception of the 1996 Plan, options have been granted to purchase 184,137 shares (net of cancellations) at exercise prices ranging from $1.375 to $2.813 per share. Through March 31, 2005, 183,137 options had been exercised and all remaining options were vested. During May 2005, the remaining 1,000 options were exercised.

The following table summarizes the activity for options covered under the 1996 Plan:

	1996 Plan
	Amount			Weighted Average Exercise Price
Balance at April 1, 2002		172,838			$2.26
Granted		—
Exercised		(53,563	)		$1.38
Canceled/Expired		(8,550	)		$1.38
Balance at March 31, 2003		110,725			$2.40
Granted		—
Exercised		(96,275	)		$2.29
Canceled/Expired		(3,450	)		$2.10
Balance at March 31, 2004		11,000			$2.81
Granted		—
Exercised		(10,000	)		$2.81
Balance at March 31, 2005		1,000			$2.81

F-20

In October 2000, the Company’s shareholders ratified the establishment of an additional option plan (the “2000 Plan”) which reserved an additional 250,000 shares of its common stock for issue thereunder with the same expiration and vesting terms as the 1996 Plan. To date, no grants have been made under the 2000 Plan and the shares underlying the options have not been registered.

The following table summarizes the activity and related information for all other options and warrants outstanding, including the warrants discussed under commitments in Note 8 (D):

	Amount
Balance at April 1, 2002		2,266,000		$2.28
Granted		780,000		$1.86
Exercised		—		—
Canceled/Expired		—		—
Balance at March 31, 2003		3,046,000		$2.15
Granted		40,000		$3.60
Exercised		(1,048,000	)	$1.90
Canceled/Expired		—		—
Balance at March 31, 2004		2,038,000		$2.32
Exercised		(305,000	)	$3.13
Balance at March 31, 2005		1,733,000		$2.18

On February 4, 2004, the Company filed with the Securities and Exchange Commission (“SEC”) a registration statement on Form S-3 (file number 333-112472) to register 1,306,000 shares of the Company’s common stock on behalf of certain selling shareholders, including 1,270,000 shares of common stock relating to warrants granted prior to 2000. All of the shares are shares issuable, or that have already been issued, upon the exercise of warrants held by the selling shareholders. Although the Company was not entitled to receive any of the proceeds from any subsequent resale of the shares, it would receive approximately $2,800,000 if all of the warrants are exercised. The registration statement was declared effective by the SEC on April 26, 2004. As of March 31, 2005, 1,304,000 of these warrants have been exercised and the Company has received proceeds of $2,786,589 (1,048,000 and $1,992,624 as of March 31, 2004).

The following table summarizes information about these options and warrants outstanding at March 31, 2005:

		Options and Warrants Outstanding				Warrants Exercisable
	Range of Exercise Prices	Amount	Weighted Average Exercise Price		Weighted Average Remaining Life	Amount	Weighted Average Exercise Price
$1.86-$2.81		1,717,000		$2.16	6	1,463,668		$2.22
$3.60		15,000		$3.60	3	15,000		$3.60
$8.00		2,000		$8.00	1	2,000		$8.00
		1,734,000		$2.18	7	1,480,668		$2.24

The Company has established a 401-K plan covering substantially all of its U.S. employees. Commencing on April 1, 1996, the Company matched 25% of the first 6% of employee contributions, within annual limitations established by the Internal Revenue Code. The cost of the matching program totaled approximately $57,000, $43,000, and $54,000 for the years ended March 31, 2005, 2004, and 2003, respectively.

F-21

11.

BASIC AND DILUTED EARNINGS PER COMMON SHARE

The following is the reconciliation of the numerators and denominators of the basic and diluted net income per common share calculations:

	2005			2004			2003
Net income	$	10,824,256		$	6,267,615		$	5,474,459
Weighted average number of shares issued		19,294,719			18,092,796			18,011,046
Weighted average number of treasury shares		(10,280,957	)		(9,770,006	)		(8,161,890	)
Weighted average number of shares outstanding used in basic earnings per share calculation		9,013,762			8,322,790			9,849,156
Basic net income per common share	$	1.20		$	0.75		$	0.56
Weighted average number of shares outstanding used in basic earnings per share calculation		9,013,762			8,322,790			9,849,156
Effect of dilutive securities:
Stock options and warrants		1,633,434			1,575,605			330,708
Weighted average number of shares outstanding used in diluted earnings per share calculation		10,647,196			9,898,395			10,179,864
Diluted net income per common share	$	1.02		$	0.63		$	0.54
Antidilutive securities not included in diluted earnings per share computation:
Options and warrants to purchase common stock		—			16,000			1,171,072
Exercise price		—		$	4.56–$8.00		$	2.44–$8.00

12.

LEGAL PROCEEDINGS

On December 8, 2003, the Company was served with a complaint (the “Complaint”) filed in the Circuit Court for the Eleventh Judicial Circuit in Miami-Dade County, which was amended on January 26, 2004. The Complaint was a derivative action, in which the nominal plaintiffs, the Macatee Family Limited Partnership and Chatham, Partners I, LP, purported to be suing for the benefit of the Company itself and all of its public shareholders. The Complaint named Parlux Fragrances, Inc. as the nominal defendant and all of the current members of the Board of Directors as the defendants. It sought unspecified damages allegedly arising out of breaches of fiduciary duties in connection with transactions involving the Company and Mr. Ilia Lekach, its Chief Executive Officer or companies in which he had an ownership interest.  The Complaint sought to enjoin the Company from continuing to enter into such transactions , sought payment of costs and fees to Plaintiffs’ counsel and other unstated relief.

The Company and the Board members engaged experienced Florida securities counsel to vigorously defend the action. A Motion to Dismiss was filed on February 27, 2004. A hearing on the Motion was held on April 14, 2004 and the Complaint was dismissed, without prejudice. The Court suggested the Plaintiffs serve a demand  upon the Corporation to examine the issues alleged in the Complaint rather than file an Amended Complaint, but gave the Plaintiffs thirty (30) days to file an Amended Complaint if they chose to do so. Following the order granting dismissal, the Company voluntarily furnished detailed information to Plaintiff’s counsel supporting the Company’s view that there was no legitimate basis for the claims previously asserted. Based on that submission, Plaintiffs requested additional time to consider their amendment. Additional exchanges of correspondence followed and additional extensions of tim e were granted. On June 25, 2004, the Plaintiffs filed an Amended Complaint, which was received by the Company’s counsel on June 29, 2004. The Amended Complaint, for the most part, contained similar allegations and requests for relief as included in the original Complaint. On August 12, 2004, the Company responded to the Amended Complaint denying the allegations and requesting dismissal as well as reimbursement of legal fees and costs. The Plaintiffs’ initial deposition occurred on October 21, 2004.

F-22

On December 8, 2004, Plaintiff’s filed a Motion for an Interim Award of $168,824 in attorneys’ fees and reimbursement of expenses. Plaintiffs also noticed the depositions of three of the Company’s Board members, who agreed and provided dates for their appearances. Plaintiff’s counsel was informed of the rejection of their claim, which the Company believes was without merit.

On December 22, 2004, Plaintiffs filed for voluntary dismissal of the action, without prejudice. No payment was made to the Plaintiffs or Plaintiffs counsel by the Company or the Company’s insurance carrier.

There are no other proceedings pending against the Company, which, if determined adversely, would have a material effect on the Company’s financial position or results of operations.

On May 8, 2001, and as amended on June 8, 2001, the Company filed a legal complaint against a component supplier to recover out-of-pocket costs and damages resulting from the supplier having delivered faulty components for two of its fragrances.

On September 25, 2002, the parties entered into a settlement agreement whereby the Company would receive cash consideration of $3,958,000 from the supplier’s insurance carrier, plus an additional $42,564 from the supplier. These funds were received on October 7, 2002, and the suit was dismissed.

The Company has recorded the settlement in the accompanying consolidated statement of income for the year ended March 31, 2003, net of certain expenses as follows:

Proceeds from settlement	$	4,000,564
Less expenses directly related to the claim and incurred during the period April 1, 2002 through March 31, 2003:
Legal fees		326,327
Refurbishing costs		132,154
Net litigation settlement recorded	$	3,542,083

Refurbishing expenses and legal fees incurred prior to April 1, 2002, were expensed directly to cost of goods sold and general and administrative expenses, respectively.

The above expenses did not include other general and administrative costs such as employee travel in connection with the lawsuit discovery process.

13.

CONCENTRATION OF REVENUE SOURCES AND CREDIT RISKS:

During the last three fiscal years, the following brands have accounted for 10% or more of the Company’s gross sales:

	2005	2004	2003
PERRY ELLIS	75%	81%	75%
OCEAN PACIFIC	11%	13%	10%
PARIS HILTON	11%	—%	—%

Financial instruments which potentially subject the Company to credit risk consist primarily of trade receivables from department and specialty stores in the United States, distributors throughout the world, and Perfumania. To reduce credit risk for trade receivables from unaffiliated parties, the Company performs ongoing evaluations of its customers’ financial condition but does not generally require collateral. Management has established an allowance for doubtful accounts for estimated losses. The allowances for doubtful accounts are considered adequate to cover estimated credit losses.

No unrelated customer accounted for more than 10% of the Company’s net sales during the years ended March 31, 2005 and 2004. During the year ended March 31, 2003, one unrelated customer accounted for approximately 19% of the Company’s net sales.

F-23

Revenues from Perfumania represented 35%, 18% and 26% of the Company’s net sales during the years ended March 31, 2005, 2004, and 2003, respectively. To reduce credit risk, on occasion, the Company, based on its reviews of Perfumania’s financial condition, converts certain trade receivables into subordinated notes receivable. (See Note 2 for a detailed discussion of a previous conversion of trade receivables into notes receivable from Perfumania). During the years ended March 31, 2005, 2004 and 2003, revenues from other related parties represented approximately 18%, 13% and 12%, respectively, of the Company’s net sales, and receivables from these two customers were current in accordance with their sixty (60) or ninety (90) day terms.

As reported in ECMV’s public filings, during May 2004, Perfumania entered into a three-year amended and restated senior secured revolving credit facility with its then current lender and a new participant, increasing its borrowing capabilities from $40 million to $60 million. In addition, ECMV’s financial statements included in its Annual Report on Form 10-K for the year ended January 29, 2005, reflects a net income of $3.1 million. (See Note 2 for summarized financial data obtained from ECMV’s public filing). Management continues to evaluate its credit risk and assess the collectibility of the Perfumania receivables. Perfumania’s reported financial information, as well as the Company’s payment history with Perfumania, indicates that, historically, their first quarter ended approximately April 30, is Perfumania’s most difficult quarter as is the case with most U.S. based retailers. Th e Company has, in the past, received significant payments from Perfumania during the last three months of the calendar year, and has no reason to believe that this will not continue. Based on management’s evaluation, no allowances have been recorded as of March 31, 2005. Management will continue to evaluate Perfumania’s financial condition on an ongoing basis and consider the possible alternatives and effects, if any, on the Company.

Gross sales to unrelated international customers totaled approximately $31,619,000, $28,418,000, and $38,364,000, for the years ended March 31, 2005, 2004 and 2003, respectively. These gross sales by region were as follows (in 000’s):

	Year Ended March 31,
	2005		2004		2003
Latin America	$	17,273	$	11,343	$	10,271
Middle East		4,182		6,066		15,559
Asia/Pacific		3,837		2,810		3,143
Europe		2,170		2,509		2,697
Canada		1,462		2,167		2,669
Caribbean		1,038		2,496		3,259
Duty Free & Other		1,657		1,027		766
	$	31,619	$	28,418	$	38,364

At March 31, 2005 and 2004, trade receivables from foreign customers (all payable in U.S. dollars) amounted to approximately $5,519,000 and, $2,118,000, respectively.

F-24

14.

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):

The following is a summary of the Company’s unaudited quarterly results of operations for the years ended March, 31, 2005 and 2004 (in thousands, except per share amounts).

	Quarter Ended
	June 30, 2004		September 30, 2004		December 31, 2004		March 31, 2005
Net sales	$	22,961	$	22,723	$	28,748	$	25,928
Gross margin		11,270		11,404		16,053		16,236
Net income		2,190		2,375		2,868		3,391
Income per common share:
Basic	$	0.24	$	0.26	$	0.32	$	0.37
Diluted	$	0.21	$	0.23	$	0.27	$	0.32
	Quarter Ended
	June 30, 2003		September 30, 2003		December 31, 2003		March 31, 2004
Net sales	$	16,942	$	18,253	$	25,764	$	19,622
Gross margin		8,046		8,792		12,809		11,326
Net income		717		1,402		1,687		2,462
Income per common share:
Basic	$	0.08	$	0.17	$	0.21	$	0.30
Diluted	$	0.08	$	0.15	$	0.18	$	0.24

F-25

PARLUX FRAGRANCES, INC. AND SUBSIDIARIES

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

Description	Balance at beginning of period		Additions charged to costs and expenses		Net Deductions			Balance at end of period
Year ended March 31, 2005
Reserves for:
Doubtful accounts	$	235,198	$	120,000	$	155,855		$	199,343
Sales returns		758,487		3,561,399		3,560,068			759,818
Demonstration and co-op advertising allowances		761,842		3,275,595		2,868,593			1,168,844
	$	1,755,527	$	6,956,994	$	6,584,516		$	2,128,005
Year ended March 31, 2004
Reserves for:
Doubtful accounts	$	312,425	$	8,232	$	85,459		$	235,198
Sales returns		600,686		2,660,459		2,502,658			758,487
Demonstration and co-op advertising allowances		820,448		3,216,600		3,275,206			761,842
	$	1,733,559	$	5,885,291	$	5,863,323		$	1,755,527
Year ended March 31, 2003
Reserves for:
Doubtful accounts	$	103,470	$	200,000	$	(8,955	)	$	312,425
Sales returns		648,236		4,534,429		4,581,979			600,686
Demonstration and co-op advertising allowances		678,649		4,313,357		4,171,558			820,448
	$	1,430,355	$	9,047,786	$	8,744,582		$	1,733,559

F-26

EX-10.72

                                                                   EXHIBIT 10.72
                          GUND, INC. LICENSE AGREEMENT
                                   TERM SHEET

1.  LICENSEE:
                  Parlux Fragrances, Inc.
                  3725 S.W. 30th Avenue
                  Fort Lauderdale, Fl. 33312

                  State of Incorporation:   Delaware
                  Contact Name: Ilia Lekach
                  Telephone No.  954-316-9008
                  Facsimile No.    954-316-8155

2.  LICENSOR:
                  Gund, Inc.
                  P.O. Box H
                  Edison, New Jersey 08818
                  Contact Name:  Doug Branch
                  Telephone No.  732-819-4466
                  Facsimile No.    732-248-1542

3.  REPRESENTATIVE: The Wildflower Group, LLC.

4.  PROPERTY: The trademark babyGUND, and all copyrights pertaining to the
babyGUND line, owned by Gund, Inc. Specifically excluded from the Property are
the names of all BABYGUND characters, which Licensee shall not use without
written permission from Licensor. Licensee acknowledges that Licensor has
obtained registrations for the trademark BABYGUND only in the jurisdictions and
International Classes identified in Exhibit D to this License Agreement.

5.  DATE OF AGREEMENT:  April 6, 2005

6.  LICENSED PRODUCTS:  Infant and children's  cosmetics and toiletries limited
to the following  hypoallergenic,  non-toxic and 100% safe for children items:

                                    Shampoo;
                                    Hair conditioner;
                                    Hair lotion;
                                    Bubble bath;
                                    Body lotion;
                                    Body cream;
                                    Children's perfume (fragrance water); and
                                    Children's cologne (fragrance water).

In the event Licensee wishes to package a Licensed Product with a babyGUND plush
product, said plush product must be purchased from Licensor. All of such plush
products must have been approved for sale/use by all required regulatory
agencies. The cost to Licensee shall be at Licensor's best price and free of a
royalty charge. Licensee shall pay to Representative the Royalty based on the
net gross sales of the entire Licensed Product/plush toy packaged item, not such
the net gross sales of only the Licensed Product.


                                       i


7.   TERRITORY: Worldwide

8.   CHANNELS OF DISTRIBUTION: Better department stores, duty free shops, gift
shops, perfumeries and baby specialty stores, all subject to further
specification and Licensor approval. Specifically excluded from the distribution
are wholesale clubs, mass-market retailers, supermarkets and drugstores. For
purposes of this agreement, "Mass Market" shall be defined as Wal-Mart, Kmart,
Target and stores trading in a like manner, and "wholesale clubs" shall be
defined as Costco, Sam's and stores trading in a like manner.

9.   TERM

(A). INITIAL TERM:  From the Date of Agreement to June 30, 2010 as follows:

         Year 1 - From date of execution through September 30, 2006
         Year 2 - October 1, 2006 through September 30, 2007
         Year 3 - October 1, 2007 through September 30, 2008
         Year 4 - October 1, 2008 through September 30, 2009
         Year 5 - October 1, 2009 through June 30, 2010

(B). RENEWAL TERM: Provided Licensee earns and pays to Licensor Royalties during
the Initial Term that total in excess of one million dollars U.S.
(U.S.$1,000,000), Licensee will have the option to renew this Agreement for one
(1) additional two-year period (the "Renewal Period") upon notifying Licensor in
writing of its intent to renew by no later than March 31, 2010. The Advance and
Guarantee for the Renewal Period are contained in Paragraph 12(b) herein. In the
event Licensee does not earn and pay to Licensor Royalties during the Initial
Term of at least $1,000,000, this Agreement shall terminate upon the expiration
of the Initial Term unless Licensor, at its discretion, elects to renew this
Agreement and Licensee has requested such renewal on a timely basis. The Advance
and Guarantee for the Renewal Period are contained in Paragraph 12(b) herein.

10.  ADVANCE:  One hundred thousand dollars ($100,000) against first year
royalties.

11.(A) INITIAL TERM GUARANTEE: Five hundred thousand dollars ($500,000),
including the Advance above.

   (B) RENEWAL TERM GUARANTEE:  Three hundred thousand dollars ($300,000).

12.  GUARANTEE PAYMENT SCHEDULE:
          (A). INITIAL TERM:
                       $100,000 due upon Licensee's execution of this Agreement
                       $100,000 due July 1, 2006
                       $100,000 due July 1, 2007
                       $100,000 due July 1, 2008
                       $100,000 due July 1, 2009

          (B). RENEWAL TERM:
                       $150,000 due July 1, 2010
                       $150,000 due July 1, 2011

13.  ROYALTY: Five Percent (5%) of Net Sales.


                                       ii



14.  ROYALTY DUE DATES: Forty five (45) days after the end of each quarter. All
payments  to  Licensor  shall be made in United States dollars.

15.  MARKETING PLAN: On or before January 1, 2006, and before April 1 of each
subsequent year, a yearly marketing plan is to be submitted to Licensor for
approval. The marketing plan is to include, but is not limited to, a specific
description of each product and proposed product launch date, retail launch
strategy, as well as an overall babyGund marketing strategy. Additionally,
Licensee will describe the product time line from concept to completion.

16.  MARKETING OBLIGATIONS:
(a)      On or before September 1, 2006, subject to Licensee obtaining all of
         the required approvals from regulatory agencies, Licensee shall
         actively market Licensed Products. If, by that date Licensee fails to
         have actively marketed and sold into retail Licensed Products in one or
         more categories of Licensed Products, then rights in any category
         wherein Licensee has failed to so perform shall revert to Licensor.

(b)      Subject to the receipt of regulatory approvals, if Licensee does not by
         September 15, 2007 actively, aggressively, and effectively sell the
         Licensed Products for any period of six consecutive months, such
         failure shall be a material breach of this Agreement.

17.  SELL-OFF: Ninety (90) days.

18.  DUE DATES: Submission of first product concepts: September 1, 2005.
                Sales presentation to retailers: February 28, 2006.
                Submission of packaging, hangtags and labels cards, etc:
                  March 31, 2006.
                Submission of samples from first manufacturing run:
                  June 1, 2006.
                Projected Ship Date:  June 30, 2006

19.  ADVERTISING PROGRAM: Advertising minimum per License Year is ten percent
(10%) of Net Sales of Licensed Products to be spent by Licensee. Licensee will
also show Licensed Products at all of its major trade shows, which is a separate
expense and is not considered as an advertising expense.

Advertising shall be defined as direct out-of-pocket costs (excluding overhead
or allocated costs) for: the purchase of advertising units in newspapers,
magazines, television, radio, billboards (including related artwork and
production charges for these five categories), cooperative advertising, retailer
demonstration charges, retailers' catalogues, gifts-with-purchase including the
free aspect of value sets, direct mail, blow-ins, billing inserts (both scented
and unscented), pamphlets, free goods, window and counter displays (including
testers, dummies, counter cards, and other visual aids), in-store demonstrators
and models, special events, contests, promotions and publicity related expenses
to these special events, contests and promotions.

20.  MINIUMUM GENERAL COMPREHENSIVE INSURANCE REQUIRED: $2,000,000

21.  SAMPLES: Licensee shall provide Licensor, free of charge, with twelve (12)
samples of each completed product manufactured pursuant to this Agreement.


                                      iii


                             GUND LICENSE AGREEMENT
                          STANDARD TERMS AND CONDITIONS

         This Agreement is made as of the date indicated in Paragraph 5 of the
Term Sheet by and between Gund, Inc., a corporation of the State of New Jersey,
having an office and place of business at One Runyons Lane, P.O. Box H, Edison,
New Jersey 08818 ("Licensor") and Licensee, as identified in Paragraph 1 of the
Term Sheet ("Licensee").

         This Gund License Agreement comprises two components: the attached Term
Sheet and the Standard Terms and Conditions.

1.       DEFINITIONS.

a)       Property. Those particular designs and characters belonging to
         Licensor, identified in Paragraph 4 of the Term Sheet, including
         adaptations thereof and additions thereto, and such other names and
         designs as may be designated by Licensor in writing to be used in
         connection herewith.

(b)      Licensed Products: Those particular products specified in Paragraph 6
         of the Term Sheet and incorporating the Property.

(c)      Territory: Those particular territories specified in Paragraph 7 of the
         Term Sheet.

(d)      Channels of Distribution: Those particular channels of distribution
         specified in Paragraph 8 of the Term Sheet.

2.       GRANT OF RIGHTS.

(a)      Licensee acknowledges that Licensor owns and has all right, good title
         and interest in the Property and that the same is fully valid,
         subsisting and enforceable.

(b)      Licensor hereby grants to Licensee the non-exclusive right during the
         Term to manufacture or have manufactured for it and to promote,
         advertise, distribute and sell the Licensed Products utilizing the
         Property throughout the Territory. Licensee shall have the right to
         manufacture or have manufactured for it Licensed Products outside the
         Territory subject to Paragraph 6(e) hereof. Notwithstanding the
         foregoing, provided Licensee is not in breach of this Agreement,
         Licensor shall not license a third party(ies), during the Term in the
         Territory, for the Licensed Products granted Licensee herein.

(c)      All proprietary rights and goodwill in the Property shall inure to the
         benefit of Licensor and not Licensee. Licensee shall acquire no
         property rights in the Property by reason of its use thereof, and if,
         by operation of law, or otherwise, Licensee is deemed to, or appears
         to, own any property rights in the Property, Licensee shall, at
         Licensor's request, execute any and all documents necessary to confirm
         or otherwise establish Licensor's rights therein. Licensee shall take
         no action in denigration of the rights of Licensor in the Property and
         Licensee will not in any way during this agreement and thereafter
         attack the Property.

(d)      Corporate and Trade Names: Licensee shall not adopt, use or register
         any corporate name, trade name, trademark, product name, service mark
         or certification mark, or other designation similar to or
         incorporating, in part or in whole, any trademark owned by Licensor
         (including the names of any characters included in the Property)
         without the prior written consent of Licensor.

                                       1


(e)      Domain Names: Licensee shall not adopt, use or register any domain
         names in any general top-level domain (gTLD) or country code top-level
         domain (ccTLD) similar to or incorporating, in part or in whole, any
         trademark owned by Licensor (including the names of any characters
         included in the Property) without the prior written consent of
         Licensor.

3.       ARTWORK. Licensee hereby recognizes the valuable tangible and
         intangible property right which Licensor has in its artwork and
         accordingly, Licensee agrees to maintain control at all times over any
         and all of Licensor's artwork in its possession. Licensee will submit
         an accounting from time to time, as requested in writing by Licensor of
         Licensor's artwork in its possession, together with any copies thereof,
         and shall return them to Licensor provided they are not then in use, if
         and when requested to do so or shall release them to Licensor's
         authorized representative when requested to do so in writing by
         Licensor. Licensee will not make any of Licensor's artwork available to
         third parties for said third parties' use, except as a subcontractor
         for Licensee.

4.       ADVANCE, GUARANTEE AND ROYALTY, AND OTHER LICENSEE OBLIGATIONS.

(a)      ADVANCE. Licensee shall pay Licensor an advance in the amount specified
         in Paragraph 10 of the Term Sheet upon execution hereof. Such advance
         shall be credited against first year's royalties.

(b)      GUARANTEE. Licensee shall pay Licensor a minimum guarantee for the
         Initial Term in the amount specified in Paragraph 11(a) of the Term
         Sheet by the end of the initial term. Licensee shall pay Licensor the
         Guarantee, in addition to the Advance, in accordance with the schedule
         set forth in Paragraph 12(a) of the Term Sheet and each guarantee
         payment shall be credited against that year's royalties. For example,
         and for the avoidance of doubt, the $100,000 due July 1, 2007 shall be
         applied against royalties earned during the year September 1, 2007
         through September 30, 2008.

(c)      RENEWAL TERM. Provided this Agreement is renewed pursuant to Paragraph
         9(b) of the Term Sheet, Licensee shall pay Licensor a minimum guarantee
         for the Renewal Term in the amount specified in Paragraph 11(b) of the
         Term Sheet by the end of the renewal term. Licensee shall pay Licensor
         the Guarantee in accordance with the schedule set forth in Paragraph
         12(b) of the Term Sheet and each guarantee payment shall be credited
         against that year's royalties.

(d)      ROYALTY. The Royalty shall be a percentage of Net Sales, as specified
         in Paragraph 13 of the Term Sheet.

(e)      Licensee agrees to pay to Licensor the Royalty. Royalties shall be
         computed on Net Sales with respect to each calendar quarter, or portion
         thereof, during the term of this Agreement, and shall be paid within
         forty five (45) days after the end of each calendar quarter and within
         thirty (30) days after the date of termination of this Agreement.
         Royalty payments shall be in U.S. dollars and shall be sent to the
         address set forth in Paragraph 2 of the Term Sheet. Each Royalty
         payment shall be accompanied by the written statement specified in
         Paragraph 12 hereof.

(f)      Net Sales shall mean the gross invoice amount billed customers (in U.S.
         dollars of all sales of all Licensed Products sold by Licensee
         including discontinued, discounted and surplus sales), less discounts
         and allowances actually allowed customers, as reflected in the invoice


                                       2


         itself, (except cash discounts which shall not be deductible in the
         calculation of Royalties) and net of all returns actually made or
         allowed as supported by credit memos issued customers. Deduction for
         returns, discounts and allowances shall not exceed ten percent (10%) of
         gross invoice amount. No costs incurred in the manufacturing, selling,
         advertising, or distributing of the Licensed Products, or any indirect
         expenses, shall be deducted, whether or not same are reflected on the
         invoice itself, nor shall any deduction be made for any other
         allowances or for uncollectible accounts. For the purposes of this
         Agreement, free Licensed Products delivered by Licensee to any of its
         customers and Licensed Products sold by Licensee to any of its
         customers with whom Licensee shall not have dealt at arms' length shall
         be treated as if such Licensed Products had been sold by Licensee and
         shall be included in the calculation of "Net Sales" at Licensee's
         normal selling price.

(g)      Interest at one percent (1%) over the prime rate as listed in the Wall
         Street Journal shall be incurred on Royalties and Guarantee payments
         from and after the date due, which interest shall not be credited
         against the Guarantee.

(h)      All Royalties paid by Licensee shall not be refundable under any
         circumstances.

(i)      Licensee shall also meet the due dates for various submissions to
         Licensor, as specified in Paragraph 18 of the Term Sheet.

5.       TERM.

(a)      The Initial Term of this license agreement shall be the term specified
         in Paragraph 9(a) of the Term Sheet.

(b)      RENEWAL AND RENEWAL TERM: Renewal and the Renewal Term shall be as
         specified in Paragraph 9 (b) of the Term Sheet.

(c)      SELL OFF: The Sell-Off Period shall be the period specified in
         Paragraph 17 of the Term Sheet. After expiration of the Agreement, and
         subject to Paragraph 15(g) hereof, Licensee may sell the Licensed
         Products during the period set forth in Paragraph 17 of the Term Sheet.
         During the sell-off period, Licensee shall market the Licensed Products
         only through its normal Channels of Distribution for Licensed Products.
         Licensee shall not barter Licensed Products. Licensee shall continue to
         adhere to all of the provisions of this Agreement, including, without
         limitation, those relating to payment of Royalties, and provided
         Licensee has complied with providing of statements pursuant to
         Paragraph 15(g), Licensee shall be entitled, during the sell-off
         period, to sell the inventory of Licensed Products remaining at no more
         than a 25% discount from its pre-established wholesale price point for
         each Product.

6.       QUALITY AND APPROVALS.

(a)      Licensee warrants that the Licensed Products shall be of good quality
         and free of defects in design, material and workmanship and shall be
         suitable for their intended purpose; that no injurious, poisonous,
         deleterious or toxic substance, material, paint or dye will be used in
         or on the Licensed Products; that the Licensed Products will not be
         inherently dangerous to the users thereof; and that the Licensed
         Products will be manufactured, packaged, marketed, sold and distributed
         in compliance with all applicable laws and regulations and voluntary
         industry standards in the Territory. Licensed Products not complying
         with applicable laws, regulations and voluntary standards shall be
         deemed unapproved, even if previously approved by Licensor, and shall
         not be shipped unless and until they have been brought into full
         compliance therewith. Both before and after Licensee places Licensed
         Products on the market, Licensee shall follow reasonable and proper
         procedures for testing that the Licensed Products comply with such


                                       3


         laws, regulations and standards. Licensee shall, upon request, furnish
         Licensor evidence satisfactory to Licensor that Licensee has complied
         with any or all of the foregoing.

(b)      As soon as Licensee becomes aware of any fact, circumstance, event or
         report which does, might or will affect the reputation of the Licensed
         Products, Licensor and/or Licensee (including, but not limited to,
         complaints or adverse reports in relation to the safety, quality or
         fitness for use of the Licensed Products in any way), Licensee shall
         promptly inform Licensor and continue to keep Licensor informed of the
         steps being taken by Licensee to address any such fact, circumstance,
         event or report.

(c)      Prior to manufacture and/or marketing and/or sale of any Licensed
         Products pursuant hereto, Licensee shall submit to Licensor at each
         stage, the concept, rough art, final artwork, and one (1) prototype of
         each of the Licensed Products to be sold, and of the package design
         therefor, for Licensor's written approval as to artwork, quality,
         appearance, materials, workmanship and all other construction and
         aesthetic aspects of the Licensed Products, as specified in Paragraph 6
         of the Term Sheet, and following Licensor's written instructions, as
         may from time to time be issued. Licensee shall also submit five (5)
         production samples of first run for Licensor's written approval.
         Licensee shall also submit to Licensor for its written approval copies
         of all proposed advertising and promotional materials for the Licensed
         Products. All submissions of artwork, prototypes, production samples
         and advertising and promotional materials shall be accompanied by the
         Submission Form designated by Licensor from time to time. Submissions
         as to which approval or disapproval is not given in writing within
         seven (7) business days after receipt thereof by Licensor shall be
         deemed disapproved, except that Licensee shall have the right to
         contact Licensor of the lack of approval or disapproval and if no
         comment is given by Licensor within an additional five (5) business
         days of Licensee contacting Licensor, approval shall be deemed given.
         During the term hereof Licensee shall, at Licensor's request and from
         time to time, furnish additional samples of finished Licensed Products
         to Licensor at cost to insure that the quality of the Licensed Products
         made pursuant hereto conforms to the samples approved.

(d)      The rights granted hereunder do not permit the sale of "seconds" or
         "irregulars". All Licensed Products not meeting the standard of
         approved samples shall be destroyed or the Property shall be removed or
         obliterated from the same.

(e)      Licensor shall be entitled to revoke any approval previously given by
         giving written notice of same to Licensee explaining the reason for the
         revocation. Such revocation shall be effective as to any such Licensed
         Products or other materials not yet manufactured or in the process of
         manufacture. As to any such Licensed Products or other materials
         already manufactured or in the process of manufacture, Licensor shall
         have the right to purchase same at their Replacement Value (as defined
         below); however, Licensee shall have the right to complete and sell or
         distribute such Licensed Products or other materials unless (a)
         Licensor exercises its purchase rights, or (b) such Licensed Products
         or other materials are not in compliance with the requirements of this
         Agreement. "Replacement Value" shall mean Licensee's costs, excluding
         any overhead allocated by Licensee in the manufacture of the Licensed
         Products.

(f)      In the event that Licensee purchases plush animal heads for the tops of
         the Licensed Products from Licensor, Licensor warrants that the plush
         animal heads will be manufactured in compliance with all applicable
         laws and regulations and voluntary industry standards in the Territory.

                                       4


7.       MANUFACTURE OF LICENSED PRODUCTS BY THIRD PARTIES

(a)      In the event that Licensee desires to have a person or firm other than
         Licensee manufacture any of the Licensed Products for promotion,
         advertising, distribution, and sale by Licensee, Licensee shall first
         notify Licensor of the name and address of such manufacturer and obtain
         the execution by such manufacturer of the Manufacturer's Agreement
         attached hereto as Exhibit A. Licensee shall promptly forward to
         Licensor a copy of each such executed Manufacturer's Agreement. All
         such manufacturers shall agree to abide by the Code of Conduct attached
         to the Manufacturer's Agreement. If any such manufacturer utilizes the
         Property for any unauthorized use, Licensee shall cooperate fully in
         bringing such utilization to an immediate halt. Licensor shall be
         entitled to terminate this Agreement if such a manufacturer violates
         the terms of the Manufacturer's Agreement in two (2) or more instances,
         including a violation of the Code of Conduct, except that Licensee may
         utilize another manufacturer, so long as said manufacturer is approved
         in advance by Licensor and signs in advance a Manufacturer's Agreement.

(b)      Licensee shall furnish to Licensor the addresses of all production
         facilities used by Licensee for manufacturing the Licensed Products. At
         Licensor's request, Licensee shall make arrangements for Licensor or
         Licensor's representatives to inspect such production facilities during
         normal business hours.

(c)      Licensee covenants on behalf of Licensee's own manufacturing
         facilities, if any, to comply with the Code of Conduct included in
         Exhibit A and incorporated herein by this reference, in the
         manufacturing, packaging and distribution of Licensed Products.
         Licensee further agrees to require all manufacturers to covenant to
         comply with the Code of Conduct in the manufacturing, packaging and
         distribution of the Licensed Products by signing the Manufacturer's
         Agreement. The Code of Conduct shall not be interpreted to require
         Licensee or its manufacturers to violate any applicable law.

(d)      Licensee and the manufacturers agree that Licensor and its designated
         agents (including third parties) may engage in monitoring activities to
         confirm compliance with this Paragraph 7. Licensee agrees to promptly
         reimburse Licensor for the reasonable cost of inspections performed
         pursuant to this Paragraph when any of Licensee's manufacturing
         facilities or any manufacturer does not pass the inspection(s)
         conducted by a recognized third party inspecting agency and such
         inspection finds a material breach of this Agreement, the
         Manufacturer's Agreement or the Code of Conduct. The amount reimbursed
         will not be pro-rated in the event the manufacturer is also used by
         other licensees or vendors.

8.       MARKETING PLAN AND OBLIGATIONS.

(a)      Licensee shall submit a yearly marketing plan to Licensor on or before
         the dates specified in Paragraph 15 of the Term Sheet. The marketing
         plan is to include, but is not limited to, a specific description of
         each product and proposed product, launch date, retail launch strategy,
         as well as an overall babyGund marketing strategy. Additionally,
         Licensee will describe the product time line from concept to
         completion.

(b)      Licensee agrees to manufacture Licensed Products in sufficient quantity
         to meet the reasonably anticipated demand therefor. Licensee further
         agrees to promote the sale of Licensed Products and to use its best
         efforts to sell Licensed Products as widely as possible within the
         Territory. Licensee agrees to have commenced shipping of the Licensed
         Products by the date set forth in Paragraph 18 of the Term Sheet. If
         Licensee fails to commence shipping by such date, or if Licensee fails
         to manufacture and sell Licensed Products in sufficient quantities to
         meet the reasonably anticipated demand for same, and to continually


                                       5


         manufacture, sell, and ship same thereafter in the same fashion, then
         Licensor may terminate Licensee's rights hereunder for the Licensed
         Product by giving fifteen (15) days written notice of such termination
         to Licensee.

(c)      If, by the date specified in Paragraph 16(a) of the Term Sheet,
         Licensee fails to have actively marketed and sold into retail Licensed
         Products in one or more items or categories of Licensed Products, then
         rights in any item or category wherein Licensee has failed to so
         perform shall revert to Licensor.

(d)      If, by the date specified in Paragraph 16(b) of the Term Sheet,
         Licensee does not actively, aggressively, and effectively sell the
         Licensed Products pursuant to the approved Marketing Plan for any
         period of six consecutive months, at retail through at least one of the
         entities listed in the Channels of Distribution, such failure shall be
         a material breach of this Agreement.

(e)      Licensee agrees that during the final calendar year of this Agreement
         it will not manufacture an amount of Licensed Products that is in
         excess of the amount manufactured during the highest manufacturing year
         of any prior calendar year.

9.       ADVERTISING PROGRAM.

(a)      Licensee shall advertise the Licensed Products. Licensee shall prepare
         copy for all such advertising and submit the same to Licensor, together
         with a proposal regarding where such advertising shall be run, for
         Licensor's written approval. Submissions as to which approval or
         disapproval is not given in writing within seven (7) business days
         after receipt thereof by Licensor shall be deemed disapproved, except
         that Licensee shall have the right to contact Licensor of the lack of
         approval or disapproval and if no comment is given by Licensor within
         an additional five (5) business days of Licensee contacting Licensor,
         approval shall be deemed given. Licensee upon such approval shall take
         all steps needed to advertise the Licensed Products in accordance with
         the proposal.

(b)      Licensee will spend a minimum percentage of Net Sales, as specified in
         Paragraph 19 of the Term Sheet, on advertising, marketing and promoting
         (as defined in Paragraph 19 of the Term Sheet) the Licensed Products
         and such program will be subject to approval of Licensor. Licensee will
         also feature Licensed Products at all of its major trade shows, which
         expense shall be separate and apart from the above requirements for
         advertising and promotion of Licensed Products.

10.      COPYRIGHT AND TRADEMARK PROTECTION.

(a)      Notices. Licensee agrees to affix to the Licensed Products, packaging
         therefor, and advertising and promotional materials depicting the
         Licensed Products, copyright and trademark notices in compliance with
         applicable copyright and trademark laws. The required notices shall
         appear on hang-tags and labels for the Licensed Products. Submissions
         as to the size and positioning of notices which approval or disapproval
         is not given in writing within seven (7) business days after receipt
         thereof by Licensor shall be deemed disapproved, except that Licensee
         shall have the right to contact Licensor of the lack of approval or
         disapproval and if no comment is given by Licensor within an additional
         five (5) business days of Licensee contacting Licensor, approval shall
         be deemed given. Such notices shall be in the form shown in Exhibit B.

                                       6


(b)      Copyrights. Licensee agrees to cooperate with Licensor, at Licensor's
         expense, in obtaining and preserving for Licensor copyright protection
         for the Property and executing all documents that, in Licensor's
         judgment, are necessary therefor and to maintain records (including
         invoices, correspondence and related material) of and, at Licensor's
         request, to advise Licensor with respect to, the publication dates of
         all adaptations, derivative works, new works and other works by
         Licensee utilizing the likenesses of any of the characters, scenes, or
         other elements contained in the Property. Licensee hereby sells,
         assigns and transfers to Licensor its entire worldwide right, title and
         interest in and to all such "new works," including, but not limited to,
         the copyrights thereon and Licensee agrees that, to the extent allowed
         by law, every such new work shall be considered a "work made for hire"
         for Licensor. Licensee additionally agrees when requested to do so by
         Licensor to aid Licensor in registering the copyrights, and to obtain
         design registrations where appropriate, for any such new works in
         Licensor's name and at Licensor's expense in all parts of the Territory
         which permit such registration. Licensee warrants that the use of such
         new works by Licensor or its licensees shall not infringe the rights of
         any person. During and after the term of this Agreement, Licensee shall
         refrain from asserting, directly or indirectly, any interest or
         property right in any copyrights of Licensor which are the subject
         matter of this Agreement, or any adaptations thereof, and which are not
         in the public domain.

(c)      Trademarks. Licensee agrees to cooperate with Licensor in obtaining and
         preserving for Licensor trademark protection for the names of the
         Property and any characters contained therein and executing all
         documents that in Licensor's judgment are necessary therefor and to
         maintain records of and, at Licensor's request, to advise Licensor with
         respect to use by Licensee of the name of the Property and the names of
         individual characters within the Property and to provide Licensor with
         such additional samples of said names as used on the Licensed Products,
         dates of first use and dates of first use in interstate commerce, and
         such materials and information as Licensor deems necessary to enable
         Licensor to apply for trademark registration for the name of the
         Property and characters in connection with all Licensed Products.
         Licensee further agrees to recognize Licensor's trademark rights in any
         name used in connection with the Property and the names of individual
         characters within the Property and to do nothing in derogation or
         dilution thereof, either during the term of this Agreement or at any
         time thereafter.

(d)      Customs. Licensee agrees to cooperate with Licensor in obtaining and
         preserving for Licensor recordations with the U.S. Customs Service of
         any trademarks or copyrights included in the Property by executing all
         documents that in Licensor's judgment are necessary therefor and by
         maintaining records of and, at Licensor's request, advising Licensor of
         the names of all entities involved in the manufacture and importation
         of Licensed Products (including, but not limited to, manufacturers and
         import/export agents).

11.      BOOKS AND RECORDS. Licensee agrees to keep full and accurate books of
         account and records concerning all transactions hereunder, and Licensor
         shall have the right and on reasonable notice during ordinary business
         hours (at its expense), either itself or through a firm of independent
         certified public accountants, to examine and to take excerpts from such
         books of account and records. Said books of account and records shall
         be preserved and maintained by Licensee and kept available for
         inspection by Licensor for at least three (3) years from the expiration
         or termination of this Agreement and Licensee agrees to permit
         inspection and audit thereof by Licensor or its independent certified
         public accountants during said period. If such audit reveals a
         shortfall in the payment of royalties by Licensee, the same shall be
         paid within ten (10) days of Licensor giving notice to Licensee of such
         shortfall, together with interest thereon. If an audit reveals a
         shortfall of five percent (5%) or more of Net Sales in any quarter,
         Licensee shall reimburse Licensor for the full out-of-pocket cost of


                                       7


         the audit, including cost of auditors for travel and actual working
         time. Licensor shall be permitted to inspect and audit Licensee's books
         and records for a period of three (3) years after any royalty is due.

12.      STATEMENTS. On each date Licensee makes payment of Royalties to
         Licensor pursuant to Paragraph 4 above, Licensee shall send to Licensor
         two (2) copies of a written statement in reasonably specific detail,
         concerning the computation of Royalties then due and payable to
         Licensor. Each such statement shall show the stock number, item
         description, quantity shipped, gross invoice amount billed customers,
         any deductible discounts, allowances, and returns, and the reportable
         sales of each Product and shall be in the form attached hereto as
         Exhibit C. Receipt or acceptance by Licensor of any statement furnished
         pursuant hereto or any sums paid by Licensee hereunder shall not
         preclude Licensor from questioning the correctness thereof at any time,
         and if any inconsistencies or mistakes are discovered in such
         statements or payments, they shall be immediately rectified and prompt
         adjustments and corresponding payments shall be made to compensate
         therefor. In addition to supplying the form attached as Exhibit C,
         Licensee will use its best efforts to also report royalties on a
         country by country basis in any form that Licensee is able to generate.

13.      INDEMNIFICATION.

(a)      Licensee agrees to defend, indemnify and hold Licensor and its
         affiliated companies harmless from and against any and all claims of
         third parties (and liabilities, judgments, penalties, losses, costs,
         damages and expenses resulting directly therefrom, including reasonable
         attorneys' fees) arising by reason of, or in connection with, any act
         or omission pursuant to or in breach of this Agreement by Licensee, its
         agents or employees, including but not limited to, claims arising out
         of the manufacture, distribution, exploitation, advertising, sale, use
         or consumption of the Licensed Products, but excepting claims of third
         parties in respect of the use by Licensee in accordance with this
         Agreement of the Property licensed hereunder.

(b)      Licensor agrees to defend, indemnify and hold Licensee, and its
         affiliated companies, harmless from and against any and all claims of
         third parties (and liabilities, judgments, penalties, losses, costs,
         damages and expenses resulting therefrom, including reasonable
         attorneys' fees) arising by reason of, or in connection with, the use
         by Licensee of the copyrights contained in the Property pursuant to the
         terms hereof. Licensor further agrees to defend, indemnify and hold
         Licensee, and its affiliated companies, harmless from and against any
         and all claims of third parties (and liabilities, judgments, penalties,
         losses, costs, damages and expenses resulting therefrom, including
         reasonable attorneys' fees) arising in the jurisdictions identified in
         Exhibit D to this Agreement by reason of, or in connection with, the
         use by Licensee of the trademark BABYGUND pursuant to the terms hereof.
         Licensor specifically disclaims any indemnification of Licensee and its
         affiliated companies with respect to any and all claims of third
         parties (and liabilities, judgments, penalties, losses, costs, damages
         and expenses resulting therefrom, including reasonable attorneys' fees)
         arising in jurisdictions other than those identified in Exhibit D to
         this Agreement by reason of, or in connection with, the use by Licensee
         of the trademark BABYGUND.

(c)      Without limiting the foregoing indemnification obligations, Licensee
         agrees to maintain at its own expense, during the term of this
         Agreement and for one (1) year thereafter, with an insurer or insurers
         (rated at least A-/XII by the most current A.M. Best Publication),
         commercial general liability insurance including products/completed
         operations, blanket contractual liability, and personal injury and
         advertising injury liability coverage in amounts no less than Two


                                       8


         Million Dollars ($2,000,000) combined single limit for each single
         occurrence for bodily injury and property damage, and within thirty
         (30) days from the date hereof to submit to Licensor a certificate
         evidencing such insurance, that Licensor has been named as additional
         insured parties on said insurance and that said insurance shall be
         primary coverage before any other similar insurance available to
         Licensor. The certificate shall provide for at least thirty (30) days
         advance written notice to Licensor of any cancellation or change in
         such coverage.

(d)      Each party agrees to notify the other promptly in writing of, and to
         keep the other fully advised with respect to, such claims indemnified
         hereunder, and the progress of any legal actions relating thereto in
         which the other party is not a participant. Each party shall have the
         right to assume the defense of a claim instituted against the other
         party for which the party assuming the defense is obligated to
         indemnify the other party. In the event that a party assumes the
         defense of a claim against the other party, the party assuming the
         defense shall not enter into any compromise or settlement of the claim
         without the prior written consent of the other party, which consent
         shall not be unreasonably withheld or delayed. Each party shall have
         the right to participate at its own expense in the defense of any claim
         instituted against it, and, if such party does so participate, it shall
         not have the right to recover against the other party the costs and
         expenses of participation in such suit. The foregoing indemnifications
         shall not be deemed to entitle either party to recover against the
         other party for consequential damages or lost profits, whether actual,
         anticipated or estimated.

14.      THIRD PARTY INFRINGEMENT.

(a)      Licensee hereto shall promptly notify Licensor of any apparent
         infringement of any rights granted by Licensor to Licensee hereunder.
         Licensor shall have the exclusive right to institute legal action (at
         its own expense) against the infringer or to otherwise terminate such
         infringement. Licensee shall have no right to make any demands or
         claims, bring suit, effect any settlements or take any other action
         with respect to such an infringement without the prior written consent
         of Licensor.

(b)      Monetary damages recovered by a party hereto in connection with an
         infringement shall first be applied for recoupment of expenses,
         including reasonable legal expenses, incurred by the party prosecuting
         the action or otherwise terminating the infringement, and the balance
         of such damages shall be divided, two-thirds to the party prosecuting
         the action or otherwise terminating the infringement and one-third to
         the other party hereto. If the party prosecuting such action considers
         that it is legally necessary or desirable to do so, it may join the
         other party hereto as a party plaintiff at the expense of the party
         prosecuting such action and plead the damages of such party.

(c)      The parties agree to cooperate with each other with respect to any
         suits or other action taken under this paragraph and to keep the other
         party promptly and fully advised with respect thereto.

15.      BREACH AND TERMINATION.

(a)      Licensor shall have the right to terminate this Agreement immediately
         by written notice to the Licensee in the event that:

         (i)      Licensee uses any unapproved artwork or promotional materials
                  after receipt of written notice;

                                       9


         (ii)     Licensee fails to make any payments set forth in Paragraph 4
                  hereof within ten (10) days after receipt of written notice;

         (iii)    Licensee assigns or sublicense its rights hereunder, except as
                  permitted in Paragraph 20 hereof;

         (iv)     any governmental agency finds that any of the Licensed
                  Products are defective or unsafe in any way and Licensee is
                  unable to bring such Licensed Products into compliance within
                  sixty (60) days from receipt of notice from any governmental
                  agency (ies). As an alternative, Licensee may agree to destroy
                  and no longer produce such products;

         (v)      Licensee fails to maintain the insurance required by Paragraph
                  13(c) and does not obtain such insurance within five (5)
                  business days after receipt of written notice;

         (vi)     Licensee is adjudicated bankrupt, becomes insolvent, makes any
                  assignment for the benefit of its creditors, has its assets
                  placed in the hands of a receiver, files a petition in
                  bankruptcy, has filed against it a petition in bankruptcy
                  which is not discharged within sixty (60) days after its
                  filing, or is dissolved or liquidated (in which case,
                  Licensee, its receivers, representatives, trustees, agents, or
                  successors shall have no right to sell, exploit or in any way
                  deal with the Licensed Products, except in accordance with the
                  written consent and instructions of Licensor);

         (vii)    the Licensee fails to have the Manufacturer's Agreement,
                  Exhibit A hereto, executed as required by Paragraph 7(a)
                  hereof within thirty (30) days of Licensee notifying Licensor
                  of the name and address of such manufacturer; or

         (viii)   the Licensed Products are found to be manufactured by
                  manufacturers who violate the "Child Labor", "Involuntary
                  Labor" and "Coercion and Harassment" standards contained in
                  the Code of Conduct;

         (ix)     more than two (2) Manufacturer's Agreements are terminated in
                  any twelve (12) month period by Licensor for the
                  manufacturer's failure to pass compliance inspections as
                  referenced in Paragraph 7 (d) hereof;

         (x)      Licensee takes any action that brings the Licensed Products in
                  public disrepute.

(b)      If either party hereto is in material breach of any terms and
         conditions of this Agreement other than as set forth in subparagraph
         (a), and such party fails to cure the breach within fifteen (15) days
         after the date of receipt of written notice from the other party
         advising of the nature of such breach, or if either party breaches a
         provision of this Agreement after being notified in writing of a
         previous breach of the same provision in the same calendar year
         (whether the first breach was cured or not), then the party not in
         default shall have the right to terminate this Agreement forthwith by
         written notice to the party in breach.

(c)      In the event of a termination by Licensor pursuant to subparagraph (a)
         or (b) hereof, all unpaid Advances and Minimum Guarantees shall be
         immediately due and payable.

(d)      Except as provided in subparagraph (g) below, upon the termination or
         expiration of this Agreement, Licensee agrees to immediately and
         permanently discontinue the manufacture, sale and distribution of the
         Licensed Products, and to immediately and permanently discontinue use


                                       10


         of the Property, including any adaptations thereof or designs made by
         others in the same style, which it is granted the right to use by
         virtue of this Agreement.

(e)      Termination of this Agreement pursuant to this Paragraph shall be
         without prejudice to any rights which either party may have against the
         other party hereto.

(f)      Subject to subparagraph (g) below, Licensee hereby acknowledges that
         its failure to cease the manufacture, sale or distribution of the
         Licensed Products upon the termination or expiration of this Agreement
         will result in damage to Licensor and to the rights of any subsequent
         licensee for which there is no adequate remedy at law; accordingly, in
         the event of such failure, Licensor shall be entitled to equitable
         relief by way of temporary and permanent injunctions and such other
         relief as any court of competent jurisdiction may deem just and proper.

(g)      Provided Licensee is not in breach of this Agreement and provided the
         inventory statements as described herein below in this Paragraph 15(g)
         are supplied by Licensee to Licensor, in the event of expiration or
         termination of this Agreement, except for a termination by Licensor
         pursuant to subparagraphs (a) or (b) hereof, after the date of
         expiration or termination Licensee shall have the nonexclusive right,
         for the Sell-Off Period indicated in Paragraph 5, to promote,
         advertise, sell and distribute Licensed Products in inventory remaining
         unsold as of said date of expiration or termination pursuant to the
         terms of this Agreement. Inventory statements of all Licensed Products
         on hand at the time the statements are issued, must be furnished to
         Licensor within ninety (90) days and thirty (30) days prior to the date
         of expiration, or thirty (30) days after the date of termination, and
         must be certified to be true and correct. During the Sell-Off Period,
         Licensee shall continue to adhere to all provisions of this Agreement,
         including without limitation payment of Royalties and Licensee shall be
         entitled to sell the inventory of Licensed Products remaining at no
         more than a 25% discount from its pre-established wholesale price point
         for each Product. Licensee shall monitor its production so as not to
         manufacture Licensed Products during the Sell-Off Period except to the
         extent of on-hand component inventory, and shall monitor its inventory
         position to minimize sales of Licensed Products during the Sell-Off
         Period. Licensee shall not excessively or unnecessarily build up its
         inventory of Licensed Products prior to the expiration or termination
         of this Agreement and Licensee shall only complete the manufacture of
         on-hand component inventory if such components relate solely to the
         Property and are not generic components.

 (h)     Upon the expiration or termination of this Agreement for whatever
         reason, or the expiration of any Sell-Off Period, if applicable,
         Licensee shall immediately either return to Licensor or destroy its
         remaining inventory of the Licensed Products as well as any dies,
         molds, negatives, plates, or other articles or implements from which
         the Property can be perceived or produced, other than those which have
         been rented by Licensor to Licensee which must be returned intact to
         Licensor. In the event of destruction, Licensee shall furnish to
         Licensor a certificate of such destruction, and Licensor shall have the
         right, at its election, to have a representative selected by it observe
         any such destruction.

16.      NON-COMPETITION. Licensee warrants and represents that it is not
         currently in the plush toy business and that it has no plans to enter
         the plush toy business. Licensee agrees that, during the term of this
         Agreement, as specified in Paragraph 9 of the Term Sheet, and for two
         (2) years following the expiration of this Agreement or its termination
         pursuant to Paragraph 15 hereof, it shall not manufacture, display,
         distribute, promote, offer for sale or sell, or induce any third party
         to manufacture, display, distribute, promote, offer for sale or sell
         any plush products anywhere in the world. Should Licensee manufacture,
         display, distribute, promote, offer for sale or sell, or induce any
         third party to manufacture, display, distribute, promote, offer for
         sale or sell any plush toy products anywhere in the world prior to the


                                       11


         expiration of the time limits of this paragraph, Licensor shall be
         entitled to liquidated damages in the amount of two hundred fifty
         thousand dollars ($250,000).

17.      PREMIUMS. Licensee agrees that it will not use or authorize the use of
         the Licensed Products as premiums. As used herein, the term "premium"
         shall be defined as combination sales, free or self-liquidating items
         offered to the public in connection with the sale or promotion of a
         product or service, or any similar scheme or device, the prime intent
         of which is to use the Licensed Product in such a way as to sell
         products, services or business image of the user of such item. Licensor
         reserves all rights to the utilization of products which feature the
         Property in connection with any premium, give-away or promotional
         arrangement, fan club, charitable and/or fund-raising activity, or the
         like, which reserved right may be exercised by Licensor concurrently
         with the rights licensed to Licensee hereunder without regard to the
         extent to which any such rights may be competitive with Licensee or the
         license granted hereunder.

18.      WITHDRAWAL OF PROPERTY. Licensee agrees that Licensor may withdraw any
         Property hereunder which would infringe or reasonably be claimed to
         infringe the right of a third party, provided that Licensor purchases
         the Licensed Product and other materials utilizing such withdrawn
         Property which cannot be sold or used by Licensee at their Replacement
         Value as defined in Paragraph 6(d) hereof.

19.      NOTICES. Any notice or other communication required or permitted to be
         given by either party hereto shall be mailed by first class, Certified
         Mail, Return Receipt Requested, United States mail, and by overnight
         courier addressed as specified in Paragraphs 1 and 2 of the Term Sheet.
         Notices or other communications mailed as herein provided shall be
         deemed to have been given when received or when an attempt to deliver
         same was made as evidenced by a duly executed return receipt.

20.      NON-ASSIGNABILITY. Licensee may not assign or transfer any of its
         rights or obligations under this Agreement by law, change of control or
         otherwise without the prior written consent of Licensor, which will not
         be unreasonably withheld.

21.      AMENDMENTS. This Agreement expresses the entire understanding of the
         parties hereto and replaces any prior oral or written agreements
         concerning the subject matter hereof, and Licensee acknowledges that it
         has not executed this Agreement in reliance upon any promise,
         agreement, representation or warranty not expressly set forth in this
         Agreement. No amendment or supplementation hereof shall be effective or
         binding on either party hereto unless reduced to writing and executed
         by the duly authorized representatives of both parties hereto.

22.      FOREIGN TAXES. In the event that the Territory includes countries
         outside the United States or its territories, Licensee shall withhold
         the amount of income or other taxes, if any, payable by Licensor and
         levied by governmental agencies in such countries on payments payable
         by Licensee to Licensor pursuant to this Agreement, and shall promptly
         effect payment thereof to the appropriate authority. Licensee shall
         transmit to Licensor within thirty (30) calendar days after such
         payment, official tax receipts or other documentary evidence issued by
         said tax authority sufficient to enable Licensor to support a claim for
         United States income tax credit, if any, in respect of any such taxes
         so paid. Licensee agrees to indemnify and hold Licensor harmless from
         any governmental claim due to Licensee's failure to perform in
         accordance with this Paragraph.

                                       12


23.      CONFIDENTIALITY. All proprietary information relating to a party or any
         of its affiliates which the other party may learn, including without
         limitation, financial information and business plans and, with respect
         to Licensee, the identity of and other information regarding the
         manufacturers of the Licensed Products, sales and customer information
         and product design information, creative concepts and marketing,
         advertising and promotional concepts and plans which Licensee uses or
         proposes to use in connection with the business to be conducted by it
         hereunder, is its valuable property. Each party acknowledges the need
         to preserve the confidentiality and secrecy of the other party's such
         information. Thus, during and after the term of the Agreement, neither
         party will use or disclose any such information of the other except as
         necessary for the conduct of the business to be conducted hereunder.

24.      APPLICABLE LAW. The validity, construction and performance of this
         Agreement shall be governed by, and interpreted in accordance with, the
         laws of the State of New York. In any dispute relating to this
         Agreement, the parties hereto admit venue and submit themselves to the
         exclusive jurisdiction of the tribunals of the United States District
         Court for the Southern District of New York, expressly waiving any
         venue to which they may be entitled by their present or future
         domiciles.

25.      NO AGENCY. Nothing in this Agreement shall be construed to make either
         party hereto the agent or representative of the other party and neither
         party shall so hold itself out nor shall either party be liable or be
         bound by any act or omission of the other party, nor may any party bind
         the other party in any manner.

26.      WAIVER. Failure of either party at any time to require the performance
         of any provision under this Agreement shall not affect the right of
         such party to require full performance thereafter and a waiver by
         either party of a breach of any provision of this Agreement shall not
         be taken or held to be a waiver of any further or similar breach or as
         nullifying the effectiveness of such provision.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.

                                       GUND, INC.

                                       By /s/ Jim Madonna
                                          ---------------
                                       Jim Madonna
Date: April 6, 2005                    Title:  President

                                       PARLUX FRAGRANCES, INC.

                                       By /s/ Frank A. Buttacavoli
                                          ------------------------
                                       Frank A. Buttacavoli
Date: April 6,   2005                  Title: Executive Vice President/COO/CFO

                                       13

                                    EXHIBIT A

                   MANUFACTURER'S AGREEMENT & CODE OF CONDUCT

Licensee:

Location of manufacturing facility(s):

Licensed Products:

         The undersigned understands that Gund, Inc. ("Licensor"), has licensed
the above-named Licensee to manufacture or have manufactured for it the
above-named Licensed Products utilizing certain designs and names proprietary to
Licensor (such products Licensor designs being referred to as (the "Licensed
Products"). In order to induce Licensor to consent to the manufacture of the
Licensed Products by the undersigned, the undersigned agrees that it will not
manufacture the Licensed Products for anyone but the Licensee or sell the
Licensed Products to anyone but the Licensee; that it will not manufacture the
Licensed Products anywhere other than the above-named Location; that it will not
(unless Licensor otherwise consents in writing) manufacture or sell any other
merchandise utilizing any of the same designs or names, or any substantially
similar designs; that it will permit such representative as Licensor may from
time to time designate to inspect the activities of the undersigned with
relation to its manufacture of the Licensed Products; and that whenever the
Licensee ceases to require the undersigned to manufacture the Licensed Products,
the undersigned will deliver to Licensor or its designee any molds, plates,
engravings, negatives, transparencies, or other devices used to reproduce the
said designs or will give satisfactory evidence of the destruction thereof. The
undersigned will cease to manufacture Licensed Products for the Licensee upon
receiving written notice to that effect from the Licensee or Licensor.
Additionally, the undersigned agrees to abide by the annexed Code of Conduct and
to permit Licensor to engage in monitoring activities, including unannounced
inspections, to confirm compliance with the Code of Conduct. Licensor shall be
entitled to invoke any remedy permitted by law for violation of this agreement
by the undersigned.

                                              Name of Manufacturer:

Dated:____________, 20__                      __________________________________

                                              Address:__________________________

                                              By________________________________

                                              Title_____________________________


                                       1

                        CODE OF CONDUCT FOR MANUFACTURERS

Gund is committed to:

         !        a standard of excellence in every aspect of our business and
                  in every corner of the world;

         !        ethical and responsible conduct in all of our operations;

         !        respect for the rights of all individuals; and

         !        respect for the environment.

Gund expects all manufacturers of Gund merchandise to share these same
commitments. At a minimum, Gund requires that all manufacturers of Gund
merchandise meet the following standards:

CHILD LABOR                Manufacturers will not use child labor.

                           The term "child" refers to a person younger than 15
                           (or 14 where local law allows) or, if higher, the
                           local legal minimum age for employment or the age for
                           completing compulsory education.

                           Manufacturers employing young persons who do not fall
                           within the definition of "children" will also comply
                           with any laws and regulations applicable to such
                           persons.

INVOLUNTARY LABOR          Manufacturers will not use any forced or involuntary
                           labor, whether prison, bonded, indentured or
                           otherwise.

COERCION AND               Manufacturers will treat each employee with dignity
HARASSMENT                 and respect, and will not use corporal punishment,
                           threats of violence or other forms of physical,
                           sexual, psychological or verbal harassment or abuse.

NONDISCRIMINATION          Manufacturers will not discriminate in hiring and
                           employment practices, including salary, benefits,
                           advancement, discipline, termination or retirement,
                           on the basis of race, religion, age, nationality,
                           social or ethnic origin, sexual orientation, gender,
                           political opinion or disability.

ASSOCIATION                Manufacturers will respect the rights of employees to
                           associate, organize and bargain collectively in a
                           lawful and peaceful manner, without penalty or
                           interference.


HEALTH AND SAFETY          Manufacturers will provide employees with a safe and
                           healthy workplace in compliance with all applicable
                           laws and regulations, ensuring at a minimum,
                           reasonable access to portable water and sanitary
                           facilities, fire safety, and adequate lighting and
                           ventilation.

                           Manufacturers will also ensure that the same
                           standards of health and safety are applied in any
                           housing that they provide for employees.

                                       2


COMPENSATION               We expect manufacturers to recognize that wages are
                           essential to meeting employees' basic needs.
                           Manufacturers will, at a minimum, comply with all
                           applicable wage and hour laws and regulations,
                           including those relating to minimum wages, overtime,
                           maximum hours, piece rates and other elements of
                           compensation, and provide legally mandated benefits.
                           If local laws do not provide for overtime pay,
                           manufacturers will pay at least regular wages for
                           overtime work. Except in extraordinary business
                           circumstances, manufacturers will not require
                           employees to work more than the lesser of (a) 48
                           hours per week and 12 hours overtime of (b) the
                           limits on regular and overtime hours allowed by local
                           law or, where local law does not limit the hours of
                           work, the regular work week in such country plus 12
                           hours overtime. In addition, except in extraordinary
                           business circumstances, employees will be entitled to
                           at least one day off in every seven-day period.

PROTECTION OF              Manufacturers will comply with all applicable
THE ENVIRONMENT            environmental laws and regulations.

OTHER LAWS                 Manufacturers will comply with all applicable
                           laws and regulations, including those pertaining to
                           the manufacture, pricing, sale and distribution of
                           merchandise.

                           All references to "applicable laws and regulations"
                           in this Code of Conduct include local and national
                           codes, rules and regulations as well as applicable
                           treaties and voluntary industry standards.

SUBCONTRACTING             Manufacturers will not use subcontractors for the
                           manufacture of Gund merchandise or components thereof
                           without Gund's express written consent, and only
                           after the subcontractor has entered into a written
                           commitment with Gund to comply with this Code of
                           Conduct.

MONITORING AND             Manufacturers will authorize Gund and its designated
COMPLIANCE                 agents (including third parties) to engage in
                           monitoring activities to confirm compliance with this
                           Code of Conduct, including unannounced on-site
                           inspections of manufacturing facilities and employer-
                           provided housing; reviews of books and records
                           relating to employment matters; and private
                           interviews with employees . Manufacturers will
                           maintain on site all documentation that may be needed
                           to demonstrate compliance with this Code of Conduct.

PUBLICATION                Manufacturers will take appropriate steps to ensure
                           that the provisions of this Code of conduct are
                           communicated to employees, including the prominent
                           posting of a copy of this code of conduct, in the
                           local language and in a -place readily accessible to
                           employees, at all time.

                                       3

                                    EXHIBIT B

                    FORM OF NOTICE CONCERNING COPYRIGHTS AND
                         TRADEMARKS REQUIRED OF LICENSEE

                                   BABYGUND(R)
                   (This notice shall be utilized in all cases
                 where the trademark BABYGUND is utilized on or
                     in connection with Licensed Products.)

                                  (C)GUND, INC.
                (This notice shall be utilized in all cases where
                 GUND artwork is utilized on Licensed Products)

                                       1

                                   EXHIBIIT C

                                LICENSED PROPERTY
                             ROYALTY REPORTING FORM

DATE___________________________________  LICENSED PROPERTY______________________

LICENSEE_______________________________  ROYALTY RATE___________________________

QUARTER FOR PERIOD ENDING______________  COUNTRY________________________________



===================================================================================================================
PRODUCT STYLE  PRODUCT DESCRIPTION  UNITS    UNIT       TOTAL  RETURNS  DISCOUNTS  TOTAL NET SALES  ROYALTY EARNED
OR I.D. #                           SHIPPED  WHOLESALE  GROSS
                                             PRICE      SALES
- -------------------------------------------------------------------------------------------------------------------
                                                                            


- -------------------------------------------------------------------------------------------------------------------
TOTALS
===================================================================================================================


REMIT TO:                                 TOTAL GROSS SALES_____________________
                                          LESS RETURNS, DISCOUNTS_______________
         Gund, Inc.                       TOTAL NET SALES_______________________
         P.O. Box H                       ROYALTY EARNED________________________
         Edison, NJ 08818                 AMOUNT OF CHECK ENCLOSED______________
         Attention:        Doug Branch    REVISED ADVANCE ALANCE________________
                                          Y-T-D ROYALTIES ______________________
                                          ANNUAL GUARANTEE______________________

         Approved and certified to be correct by:
                  Name:  ____________________________
                  Title:  ___________________________


                                    EXHIBIT D

                                   GUND, INC.



  Trademark Report by                                                                                                Pag          1
  Status   ACTIVE
  Mark:    baby*
   REFEREN           MARK                              FILE      APPL              REG       REG              STAT          CLAS
                                                                                                        
  AUSTRALIA
  1056/0375          BABY GUND                       12/21/2    861245           9/17/20    861245           REGISTE         28
                     (STYLIZED) & TEDDY
        28 - Games and playthings; toys, stuffed toys, activity toys, bath toys,
        plush toys, musical toys, plush play sets, dolls, rattles, gymnastic and
        sporting articles not included in other

  CANADA
  1056/0479          BABY GUND                       3/31/20    1,173,077                                    PENDING         N/A
                     (STYLIZED) & DESIGN
        N/A - (1) Paper napkins; table covers; party banners made of paper;
        party signs made of paper; centerpieces made of paper and balloons;
        party treat bags; party invitation; party thank you cards; paper party
        favors; paper party decorations; party decorating kits made of paper;
        party cutouts made of paper; party sign-in-sheets; gift wrap; gift bags;
        stickers; (2) paper plates; paper cups (3) footwear; plush slippers,
        athletic footwear; sandals, shoes, boots, foot

  1056/0522          BABY GUND                       2/19/20    1207295                                      PENDING         N/A
                     (STYLIZED) & DESIGN
        N/A - Bed linens, blankets, throws, wood-framed mirrors, picture frames
        made of wood, rugs, lamps, stroller blankets, chair pads, cushions for
        chairs, diaper stackers, mobiles, towels,

  1056/0425          BABY GUND                       4/29/20    1,139,183                                    PENDING         N/A
                     (STYLIZED) & TEDDY
        N/A - Certificate holders, tooth holders, baby rattles; piggy banks;
        spoons, forks, knives, plates, cups and bowls for infants and children;
        jewelry; christomas tree and window ornaments; children's and infant's
        clothing, namely, shorts, short sets, tops, bottoms, dresses, coveralls,
        rompers, creepers, overalls, overall sets, infants and children's
        underwear, shortalls, shortall sets, t-shirts, three-piece sets
        consisting of diaper shirts, tops and bottoms; coordinating sets
        consisting of tops and bottoms; layette sets, sleepwear; jackets,
        zippered pull-over jackets, windsuits, buntings, snowsuits, ski sets,
        raincoats, slickers, ponchos, rain

  1056/0457          BABY GUND                       8/16/20    1,149,982                                    PENDING         N/A
                     (STYLIZED) & TEDDY
        N/A - Covers and/or netting for baby's strollers, umbrellas to be
        affixed to baby strollers, umbrellas; diaper bags, rolling luggage,
        overnight baby bags, travel bags, day care bags, lunch
         bags, backpacks, soft baby carriers worn on the body; nap mats; activity bars, memory board

  1056/0558          BABY GUND                       11/5/20    1,236,479                                    PENDING         N/A
                     (STYLIZED) AND
        N/A - Books for infants and children

 1056/0556          BABY GUND                       11/5/20    1,236,482                                     PENDING         N/A
                     (STYLIZED) AND
        N/A - Cosmetics and toiletries for infants and children, namely,
        shampoo, hair conditioners, hair lotions; bubble bath; body lotions,
        body creams; perfume and cologne

1056/0058            BABYGUND                        2/15/19    675697           10/15/1    418097           REGISTE         N/A
        N/A - Stuffed toys and mobiles

  CHINA
  1056/0335          BABY GUND                       6/9/200    200008133        10/21/2    1653084          REGISTE         28
                     (STYLIZED) & TEDDY
        28 - Toys, baby rattles; dolls





                                                                                                                    Pag           2
Trademark Report by
   REFEREN           MARK                              FILE      APPL              REG       REG              STAT          CLAS
                                                                                                        
EUROPEAN UNION
  1056/0379          BABY GUND                       1/5/200    2026797          2/25/20    2026797          REGISTE         25,28
                     (STYLIZED) & TEDDY
        25 - Clothing, footwear, headgear, footsies, being footwear for babies
        28 - Games and playthings; gymnastic and sporting articles not included
        in other classes; decorations for Christmas trees; plush toys, rattles,
        activity toys, bath toys, plush play sets;

  HONG KONG
   1056/0344         BABY GUND                         5/30/20  2000 12025        11/19/2    13107/2001      REGISTE         28
                     (STYLIZED) & TEDDY
        28 - Plush toys and rattles; games and playthings; gymnastic and sporting articles not included

  JAPAN
  1056/0199          BABYGUND                        4/12/19    39139/1996       1/16/19    4101826          REGISTE         28
        28 - Toys

  MEXICO
  1056/0403          BABY GUND                       7/31/20    499099           3/27/20    741195           REGISTE         28
                     (STYLIZED) & TEDDY
        28 - Toys, rattles
  1056/0157          BABYGUND & DESIGN               12/30/1    130425           12/30/1    415197           REGISTE         28
                     (OLD LOGO)
        28 - Games and playthings; gymnastic and sporting articles not included in other classes;

  NAMIBIA (S.W.
  1056/0339          BABY GUND                       4/5/200    00/0453          10/10/2    2000/0453        REGISTE         28
                     (STYLIZED) & TEDDY
        28 - Games and playthings; gymnastic and sporting articles not included other classes;

  NEW ZEALAND
  1056/0377          BABY GUND                       12/21/2    629644           12/21/2    629644           REGISTE         28
                     (STYLIZED) & TEDDY
        28 - Games and playthings; plush toys, rattles, activity toys, bath
        toys, plush play sets, musical

  SOUTH KOREA
  1056/0343          BABY GUND                       4/3/200    2000-16077       6/21/20    496034           REGISTE         28
                     (STYLIZED) & TEDDY
        28 - Plush toys, rattles, toys of cloth

TAIWAN
  1056/0189          BABYGUND                        1/31/19    85-5153          4/16/19    758722           REGISTE         28
        28 - Toys, playthings, stuffed toys, plush toys

  UNITED STATES
  1056/0480          BABY GUND                       1/9/200    76/481,116                                   ALLOWE          25
                     (STYLIZED) & DESIGN
        25 - Footwear; plush slippers, athletic footwear; sandals, shoes, boots; foot socks; aqua
  1056/0484          BABY GUND                       3/21/20    76/499,586       11/18/2    2,784,156        REGISTE         21,16,
                     (STYLIZED) & DESIGN                                                                                     20
        21 - Non-metal priggy banks
        16 - Bookends
        20 - Photo frames; trinket boxes and stacking boxes made of resin;
        decorative drawer pulls made of resin; gazing globes, namely waterglobes
        made primarily of resin





                                                                                                                    Pag           3
Trademark Report by
   REFEREN           MARK                              FILE      APPL              REG       REG              STAT          CLAS
                                                                                                        
  T23443US02         BABY GUND                       1/9/200    76/977,303                                   PENDING         16,21,
                     (STYLIZED) & DESIGN                                                                                     28
        16 - Paper napkins; table covers; party banners made of paper; party
        signs made of paper; centerpieces made of paper and balloons; party
        treat bags; party imitations; party thank you cards; paper party favors;
        paper party decorations; party decorating kits made of paper; party
        21 - Paper plates; paper cups 28 - Centerpieces mde of balloons and paper;
        balloons

  1056/0329          BABY GUND                       3/21/20    76/007,891       8/21/20    2,479,541        REGISTE         10,12,
                     (STYLIZED) & TEDDY                                                                                      25
        10 - Teething rings, pacifier clips
        12 - Children's car seat strap wraps
        25 - Infant's booties
        28 - Plush toys, rattles

  1056/0357          BABY GUND                       9/5/200    76/121,828       12/17/2    2,664,098        REGISTE         11,24,
                     (STYLIZED) & TEDDY                                                                                      28
        11 - Lamps
        24 - Nursery organizers of fabric; comforters, quilts, crib bumpers, bed
        sheets, crib sheets, dust ruffles, textile wall hangings, fabric
        valances, bed blankets, pillow bumpers made of
        28 - Crib mobiles

  1056/0426          BABY GUND                       4/17/20    76/397,057       3/8/200    2,931,198        REGISTE         06,08,
                     (STYLIZED) & TEDDY                                                                                      14
        06 - Certificate holder, tooth holder, baby rattle and piggy bank, all
        of the foregoing made of
        08 - Spoons, forks and knives for infants and children
        14 - Jewelry; ornaments made of precious metal; baby rattles,
        piggy banks, tooth holders, certificate holders, all of the foregoing
        made in whole or part of precious metals
        21 - Plates, cups and bowls for infants and children

  1056/0530          BABY GUND                       4/17/20    76/976,558       6/1/200    2,849,084        REGISTE         25
                     (STYLIZED) & TEDDY
        25 - CHILDREN'S AND INFANT'S CLOTHING, NAMELY, SHORTS, SHORT SETS, TOPS,
        BOTTOMS, DRESSES, COVERALLS, ROMPERS, CREEPERS, OVERALLS, OVERALL SETS
        COMPRISED OF OVERALL AND TOP; INFANTS AND CHILDREN'S UNDERWEAR,
        SHORTALLS, SHORTALL SETS COMPRISED OF SHORTALL AND TOP; T-SHIRTS,
        THREE-PIECE SETS CONSISTING OF DIAPER SHIRTS, TOPS AND BOTTOMS;
        COORDINATING SETS CONSISTING OF TOPS AND BOTTOMS; LAYETTE SETS COMPRISED
        OF GOWN AND CAP, TOP AND PANT, CARDIGAN, TOP AND PANT, SHORTALL AND TOP,
        OVERALL AND TOP, CARDIGAN AND PANT, CREEPER AND PANT, CREEPER AND SHORTS
        OR COVERALLS AND BLANKET; SLEEPWEAR; JACKETS, ZIPPERED PULL-OVER
        JACKETS, WINDSUITS, BUNTINGS, SNOWSUITS, RAINCOATS, SLICKERS, PONCHOS,
        RAIN JACKETS, RAIN SUITS, SWIM SUITS, SWIM COVER-UPS; SWIMWEAR SETS
        CONSISTING OF SWIMSUIT OR SWIM TRUNKS AND COVER-UP; SHORT SETS
        CONSISTING OF SHORTS AND TOPS; GIFT SETS COMPRISED OF

  1056/0559          BABY GUND                       10/27/2    78/506,748                                   PENDING         16
                     (STYLIZED) & TEDDY
        16 - Books for infants and children

  1056/0557          BABY GUND                       10/27/2    78/506,757                                   PENDING         03
                     (STYLIZED) & TEDDY
        03 - Cosmetics and toiletries for infants and chldren, namely, shampoo,
        hair conditioners, hair lotions; bubble bath; baby lotions, body creams;
        perfume and cologne

  1056/0543          BABY GUND                       7/13/20    78/450,000                                   PENDING         008,
                                                                                                                             010,
                                                                                                                             014,
                                                                                                                             016,
        008 - Spoons, Forks                                                                                                  018,
        010 - Ice Pack Holders                                                                                               020
        014 - Cups, Plates, Trinket Boxes, Birth Certificate Holders, Piggy
        Banks, all of the foregoing
        016 - Bookends, Growth Charts For Use On Walls, Photograph Albums,
        Laminated Reminder
        018 - Pajama Bags
        020 - Clothes hangers, Resin Figurines, Picture Frames
        021 - Hair Combs, Hair Brushes, Hair Comb and Hair Brush Sets, Porcelain
        Cups, Porcelain
        024 - Blankets, Towels, Bath Mitts, Fabric Signs In The Nature Of Door
        Hangers
        025 - Infant Diaper Covers Made Of Textile
        028 - Plush Toys, Plush Toys With Blanket Bodies, Mobiles, Rattles





                                                                                                                    Pag           4
Trademark Report by
   REFEREN           MARK                              FILE      APPL              REG       REG              STAT          CLAS
                                                                                                        
  1056/0453       BABY GUND                          8/5/200    76/437,327       ALLOWE     12,20,21
        12 - Covers and netting for baby strollers, umbrellas to be affixed to
        baby stroller
        20 - Nap mats
        21 - Thermal insulated lunch bags made of fabric for food or beverage
        25 - Pajamas, blanket sleepers, nightgowns, onesies
        28 - Activity bars memory board sets, toys designed to be attached to
        baby stroller
        18 - Umbrellas, rolling luggage and soft baby carriers worn on the body

  1056/0523          BABY GUND                       8/5/200    76/976,518       5/25/20    2,846,300        REGISTE         18
        18 - Diaper bags, baby overnight bags, travel bags, day care bags, backpacks

  1056/0412          BABY JUNGLE                     9/17/20    76/312,874       11/4/20    2,780,232        REGISTE         28,16,
        28 - Plush toys, rattles, music toys                                                                                 20
        16 - Bookends
        20 - Picture Frames

  1056/0170          BABY SNUFFY                     8/19/19    74/306,008       3/12/19    1,962,167        REGISTE         28
        28 - Plush stuffed toys

  1056/0187          BABYGUND                        2/7/199    75/054,415       9/9/199    2,095,931        REGISTE         25
        25 - Clothing, namely, overalls, jackets, pants, shorts, outerwear, booties, headbands, t-shirts,

  1056/0125          BABYGUND                        2/19/19    74/140,148       12/29/1    1,743,975        REGISTE         28
        28 - Stuffed toys

EX-10.73

THROUGHOUT THIS AGREEMENT, WHERE INFORMATION HAS BEEN REPLACED BY AN ASTERISK
(*), THAT INFORMATION HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE
24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE
OMITTED INFORMATION HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.

                                                                   EXHIBIT 10.73

                           COSMETIC LICENSE AGREEMENT

     This COSMETIC LICENSE AGREEMENT ("Agreement") is made and effective as of
the 11TH DAY OF MAY, 2005 (the "effective date"), by and between PARIS HILTON
ENTERTAINMENT INC., with offices at 250 North Canon Drive, 2nd Floor, Beverly
Hills, CA 90210 ("Licensor"), and PARLUX FRAGRANCES, INC., a public Delaware
corporation with offices at 3725 S.W. 30th Avenue, Ft. Lauderdale, Fl. 33312
("Licensee") (together the "Parties").

                              W I T N E S S E T H :

     WHEREAS, by way of a master license (the "Master License") from Ms. Paris
Hilton, an individual with a mailing address of c/o Ms. Wendy White, 250 North
Canon Drive, 2nd Floor, Beverly Hills, CA 90210, to Licensor, Licensor has the
sole and exclusive rights to license the Licensed Mark (as hereinafter defined)
pursuant to the terms hereof; and,

     WHEREAS, the Parties entered into a license agreement on May 21, 2004 in
which Licensor granted Licensee the sole and exclusive rights to manufacture and
distribute fragrances and related products bearing the Licensed Mark( the
"Fragrance License"); and,

     WHEREAS, the Parties entered into a license agreement on January 6, 2005 in
which Licensor granted Licensee the sole and exclusive rights to manufacture and
distribute watches and other timepieces bearing the Licensed Mark ( the "Watch
License"); and,

     WHEREAS, the Fragrance License provided Licensee with a right of first
refusal for cosmetics, skin care products and home/environmental products such
as candles, potpourri and incense; and,

     WHEREAS, Licensee is familiar with the business of manufacturing, promoting
and selling cosmetics, skin care and treatment products and now Licensee desires
to obtain the exclusive right and license to use the Licensed Mark in the
Territory (as hereinafter defined) in connection with the manufacture,
promotion, distribution and sale of such products; and,

     WHEREAS, Licensor is willing to grant the license pursuant to the terms
contained herein.

                                     Page 1



     NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, the parties hereto covenant and agree as follows:

                                    ARTICLE 1

                                   DEFINITIONS

The following definitions shall apply:

     A.   TERRITORY. All countries of the world and all duty-free-shops, ships,
airplanes, military bases and diplomatic missions of every country of the world,
including the world-wide web.

     B.   ARTICLES. Cosmetics, skin care and skin treatment products. The
parties acknowledge that Licensor has an agreement with Hollywood Prescription
Corp. that runs through December 31, 2005 (and may be extended for up to 2 years
through December 31, 2007), copy attached, providing that Licensor and Paris
Hilton cannot promote any other lip treatment (i.e., lip exfoliant, lip balm,
lip gloss or lip-enhancing serum), which agreement has be amended in accordance
with the attached modification and thus the definition of Articles is limited,
if at all, in accordance with the attached modification of the Hollywood
Prescription Corp. contract amendment.

     C.   LICENSED MARK. The trademark PARIS HILTON and such other trademarks as
are, from time to time, agreed to by Licensor. Licensor's current applications
in various parts of the World for the Licensed Mark are detailed on the annexed
Exhibit A. In Germany, Austria, Switzerland and Italy (collectively, the
"Restricted Countries") Licensor and Paris Hilton are precluded from endorsing,
selling or licensing any products that are not sold under the PARIS HILTON
trademark. Thus, in the Restricted Countries, all Articles sold pursuant to this
Agreement must be sold under the PARIS HILTON trademark and none other.

     D.   NET SALES. The sales price at which Licensee or any Subsidiary or
Affiliate (as hereinafter defined) bills its Non-Subsidiary or Affiliate
customers for Articles less: (i) all returns of damaged, defective or other
merchandise, uncollectible accounts, trade and cash discounts and allowances,
and taxes directly applicable to the sale of Articles (such as sales, use, value
added or similar taxes); (ii) all freight and shipping charges, insurance costs
and duties and other governmental charges paid by the Licensee to the extent
stated separately on any invoice; (iii) all receipts from the sale of
discontinued and close-out merchandise (which shall include only Articles sold
at a discount of 25% or more from the normal price charged to that specific
customer and then only to the extent that the aggregate gross sales thereof in
any contract year do not exceed fifteen percent (15%) of total gross sales);
and, (iv) all receipts from the sale of samples, displays, brochures,
gift-with-purchase and similar advertising and promotional materials and
packaging supplies. Notwithstanding the terms of sub-section (iii) above,
Licensee shall not be excused from paying royalties on the sales of the Articles
in which the Licensee

                                     Page 2



receives a minimum gross margin of 25%, in which gross margin is defined as
sales price to the customer less Licensee's cost of goods and shipping. For
purposes of calculating royalties, any sales of Articles that are not at
arms-length shall have a royalty amount charged to them at Licensee's
arms-length cost.

     E.   SUBSIDIARY. Any corporation or other entity which is 100% directly or
indirectly owned by Licensee.

     F.   AFFILIATE. Any corporation or other entity which is at least 50% owned
by Licensee.

                                    ARTICLE 2

                             GRANT OF LICENSE RIGHTS

     RIGHTS GRANTED. Upon the terms and conditions of this Agreement, Licensor
hereby grants to Licensee, during the term of this Agreement, the sole and
exclusive right and license to use the Licensed Mark in the Territory as a
trademark in connection with the manufacture, promotion, sale and distribution
solely of the Articles and on all packaging materials, containers and
promotional materials related to the Articles and in connection with the
publicity, sales and advertising of the Articles, including in newspapers,
magazines, radio, television, cinema and similar media presently existing or
that may exist in the future. Articles may be sold through the channels
customarily used to sell similar products of comparable prestige and quality in
the ordinary course of business as described in paragraph A of Article 7 below.
Licensor shall not, during any period this Agreement is in effect, grant any
rights to any third party in connection with the Articles for the Trademark or
any other trademark which includes PARIS HILTON or any derivative thereof.

     Notwithstanding the foregoing, Licensee acknowledges that Licensor and
Paris Hilton have an agreement with Hollywood Prescription Corp. that runs
through December 31, 2005 (and may be extended for up to 2 years through
December 31, 2007) providing that Licensor and Paris Hilton cannot promote any
other lip treatment (i.e., lip exfoliant, lip balm, lip gloss or lip-enhancing
serum) and thus such goods are excluded from the definition of Articles in this
Agreement. Specifically, the Hollywood Prescription Corp. agreement provides
that: During the Term of the Agreement, neither... [Licensor nor Paris Hilton]
will authorize (and... [Licensor and Paris Hilton] represent and warrant that
neither... has previously authorized, which authority is still in effect) the
use of... [PARIS HILTON's] name, picture, image, likeness or voice, nor during
the Term of the Agreement will... [Paris Hilton] render any services, give any
testimonials or endorsements in any advertising in any medium, nor engage in any
promotional activities, in connection with: (i) any other lip treatment (i.e.
lip exfoliant, lip baum, lip gloss or lip-enhancing serum) or (ii) any other
product or services that in its advertising or publicity denigrates [Hollywood
Prescription Corp.] or the Products.

                                     Page 3



                                    ARTICLE 3

                             EXCLUSIVITY OF LICENSE

     Other than as previously disclosed herein, Licensor will not grant any
other license effective during the term of this Agreement for the use of the
Licensed Mark on or in connection with the Articles in the Territory. Licensor
and Ms. Paris Hilton may use or grant others the right to use the Licensed Mark
on or in connection with goods of all other types and descriptions (with the
acknowledgement that Licensor has previously granted various licenses to
Licensee for a variety of goods in the Territory). Licensor acknowledges that
Licensee may manufacture and/or distribute in parts of the Territory goods
similar to the Articles covered by this Agreement which bear other trademarks.
Licensor further acknowledges and consents to Licensee obtaining other
additional licenses for the manufacture and/or distribution of other similar
lines of goods during the term of this Agreement. Licensee will not, during the
term of this Agreement and thereafter, attack either Licensor's and/or Paris
Hilton's title in and to the Licensed Mark or the validity of this License.

     Notwithstanding the foregoing, Licensee acknowledges that Ms. Paris Hilton
has entered into an agreement with the company Guess?, Inc. to act as a model
and spokesperson for their products, some of which may be Articles. Such
agreement terminates on April 30, 2005.

                                    ARTICLE 4

                                TERM OF AGREEMENT

     Subject to the rights of termination set forth in this Agreement, the
initial term of this Agreement shall be for five (5) years commencing on the
execution date above and terminating on January 15, 2011 (the "Initial Term").
Licensee shall have the option to renew this Agreement for an additional
five-year period as long as the Minimum Royalties (as hereinafter defined) for
the Initial Term have been fully paid. Licensee shall notify Licensor of its
intent to either renew or not renew no later than June 30, 2010. Each twelve
(12) month period commencing on each January 16th and ending on January 15th
shall constitute and be referred to herein as an "Annual Period." However, the
initial Annual Period shall commence on the execution date above and shall
terminate on January 15, 2007.

                                    ARTICLE 5

                                 CONFIDENTIALITY

     The Parties acknowledge that all information relating to the business and
operations of Licensor and Licensee which they learn or have learned during or
prior to the term of this Agreement is confidential. The Parties acknowledge the
need to preserve the confidentiality and secrecy of such information and agree
that, both during the term

                                     Page 4



of this Agreement and after the expiration or termination hereof, they shall not
use or disclose same, and shall take all necessary steps to preserve in all
respects such confidentiality and secrecy. The provisions of this paragraph
shall not apply with respect to any information which has entered the public
domain through no fault of Parties. The provisions of this paragraph shall
survive the expiration or termination of this Agreement.

                                    ARTICLE 6

                               DUTIES OF LICENSEE

     A.   BEST EFFORTS. During the term of this Agreement, Licensee will use its
best efforts to exploit the rights herein granted throughout the Territory and
to sell the maximum quantity of Articles therein consistent with the high
standards and prestige represented by the Licensed Mark.

     B.   DESIGN AND SAMPLE MAKING. Licensor shall not be responsible for the
production, design or sample making of the Articles and Licensee shall bear all
costs related thereto.

                                    ARTICLE 7

                                QUALITY STANDARDS

     A.   MANUFACTURE OF ARTICLES; QUALITY CONTROL.

          (i)    The contents and workmanship of Articles shall be at all times
of the highest quality consistent with the reputation, image and prestige of the
Licensed Mark and Articles shall be distributed and sold with packaging and
sales promotion materials appropriate for such high quality Products. The
parties agree that the Articles shall be of such premium quality, prestige and
price similar to that of MAC, ESTEE LAUDER and SMASHBOX products.

          (ii)   All Articles shall be manufactured, labeled, sold, distributed
and advertised in accordance with all applicable national, state and local laws
and regulations.

          (iii)  Licensee shall submit to Licensor for approval the proposed
Articles, along with the proposed packaging and other material, designs,
sketches, colors, tags, containers and labels (the "Approval Package") for
Licensor's review, which approval shall not be unreasonably withheld. In the
event that Licensor does not respond to Licensee within 10 days of the receipt
of any and all items within the scope of the Approval Package, any such item
shall be deemed approved.

          (iv)   During the term of this Agreement, upon Licensor's request,
Licensee shall submit, free of charge to Licensor, the then current production
samples of each Article marketed. Production samples submitted by Licensee for
this purpose may be retained by Licensor. Further, Licensee shall provide
Licensor with 100 samples of the various Articles being distributed each year
for Licensor to use for public relations

                                     Page 5



and promotional purposes. All Articles to be sold hereunder shall be at least
equal in quality to the Approval Package presented to Licensor. Licensor and its
duly authorized representatives shall have the right, upon reasonable advance
notice and during normal business hours, at Licensor's expense, to examine
Articles in the process of being manufactured.

     B.   REQUIRED MARKINGS. Licensee shall cause to appear on all packaging of
Articles, (i) "the trademark, PARIS HILTON" is licensed to "Parlux Fragrances,
Inc."; and such additional legends, markings and notices complying with the
requirements of any law or regulation in the Territory and (ii) such legends,
markings and notices as Licensor, from time to time, may reasonably request.

     C.   DISTRIBUTION. In order to maintain the reputation, image and prestige
of the Licensed Mark, Licensee's normal distribution patterns shall consist of
those retail establishments whose location, merchandising and overall operations
are consistent with the products described in paragraph A (i) of Article 7
above.

     D.   SALES FORCE. During the term of this Agreement, Licensee shall
maintain a non-exclusive sales force suitable to carry out the purpose of this
Agreement.

                                    ARTICLE 8

                           GUARANTEED MINIMUM ROYALTY

          In consideration of both the license granted and the services to be
performed by Ms. Paris Hilton hereunder, Licensee shall pay to Licensor an
annual Guaranteed Minimum Royalty during the initial Term of the Agreement of $
* per Annual Period, with payment of 50% for the first Annual Period due upon
execution hereof and the balance of the Guaranteed Minimum Royalties payable as
specified below:

                                                             TOTAL ANNUAL
        ANNUAL PERIOD         ANNUAL MIN. ROYALTY DUE   GUARANTEED MIN ROYALTY
- ---------------------------   -----------------------   ----------------------
First: Execution to 1/15/07     $ * upon execution;               $ *
                                $ * on 7/15/05
Second: 1/16/07 to 1/15/08          1/16/07                       $ *
Third:  1/16/08 to 1/15/09          1/16/08                       $ *
Fourth: 1/16/09 to 1/15/10          1/16/09                       $ *
Fifth:  1/16/10 to 1/15/11          1/16/10                       $ *

     In the event that the Initial Term of this Agreement is extended for an
additional five-year term (January 16, 2011 through January 15, 2016, the
"Extended Term") the Guaranteed Minimum Royalty for each Annual Period of the
Extended Term shall be $ *.

     The Guaranteed Minimum Royalty payable to Licensor for each Annual Period
in the Extended Term shall be payable upfront on January 16th of the beginning
of each Annual Period in the Extended Term. For example, the Guaranteed Minimum
Royalty

                                     Page 6



payable for the Annual Period from January 16, 2011 through January 15, 2012
shall be payable $ * on January 16, 2011.

     Subject to the exception in Article 9(C) below, the Guaranteed Minimum
Royalty for each Annual Period shall be credited against the Sales Royalty for
only the same Annual Period as provided in Article 9 below.

                                    ARTICLE 9

           SALES ROYALTY; WITHHOLDING TAXES; COMMISSION TO RICK HILTON

     A.   Licensee shall pay to Licensor a Sales Royalty on each Annual Period's
Net Sales of * . The Sales Royalty payable hereunder shall be accounted for and
paid on a quarterly basis within forty-five (45) days after the close of the
prior quarter's sales, along with the Guaranteed Minimum Royalty that may be
due. In other words, the actual Sales Royalty will be paid 45-days in arrears
computed on the basis of Net Sales during the quarter ending 45 days before the
period upon which royalties are being paid, with a credit for any Guaranteed
Minimum Royalty and Sales Royalty payments previously made to Licensor.

     B.   If applicable, Licensee shall compute any payment, on behalf of
Licensor, for all taxes (other than United States Federal, state or local income
taxes) which any governmental authority in the Territory may impose on Licensor
with respect to royalties paid by Licensee to Licensor. The amount of such taxes
shall be deducted from payments of royalties, provided that Licensor is entitled
under applicable law to credit the amount of such taxes against its United
States Federal Income Tax obligations. Licensee shall furnish Licensor with an
official receipt (together with a translation thereof if not in English)
promptly after each such payment of taxes. In the event such taxes are not paid
when due, all resulting penalties and interest shall be borne by Licensee.

     C.   Up to 50% of Sales Royalty for any Annual Period in excess of payments
of Guaranteed Minimum Royalty for the same Annual Period shall be credited
against the Guaranteed Minimum Royalty due to Licensor for any other future
Annual Period if the actual Sales Royalty for that period does not reach such
period's Guaranteed Minimum Sales.

     D.   Payment of the initial Guaranteed Minimum Royalty shall be as follows
in the time frames specified above:

          (1)  $ * to: "Rick Hilton" c/o Ms. Wendy White, 250 North Canon Drive,
               2nd Floor, Beverly Hills, CA 90210; and,

          (2)  $ * to: Paris Hilton Entertainment Inc. c/o Ms. Wendy White, 250
               North Canon Drive, 2nd Floor, Beverly Hills, CA 90210.

                                     Page 7



In other words, upon execution hereof $ * shall be payable to Rick Hilton and $
* shall be payable to Licensor with the balance of such first Annual Period
Guaranteed Minimum Royalties payable on July 15, 2005.

     E.   All other Guaranteed Minimum Royalties and other Royalties shall be
paid as follows:

          (1)  5% of amounts due to: "Rick Hilton" c/o Ms. Wendy White, 250
               North Canon Drive, 2nd Floor, Beverly Hills, CA 90210; and,

          (2)  95% of amounts due to: Paris Hilton Entertainment Inc. c/o Ms.
               Wendy White, 250 North Canon Drive, 2nd Floor, Beverly Hills, CA
               90210.

     F.   In addition to the Sales Royalty and Guaranteed Minimum Royalties that
Licensee is obligated to pay pursuant to the terms hereof, Licensee shall
further pay Mr. Rick Hilton, a commission for negotiating this Agreement of * of
the actual Sales Royalty and Guaranteed Minimum Royalty (paid to Licensor and
Rick Hilton) throughout the term of this Agreement and any extensions thereof.
This * commission shall be paid to Rick Hilton at the time that the Sales
Royalty is due to Licensor. The * commission shall be paid on the initial
Guaranteed Minimum Royalty due upon execution hereof, so that Rick Hilton shall
receive $ * (Guaranteed Minimum Royalty) plus $ * (commission) upon execution
hereof, or $ * (and $ * on July 15, 2005). For the avoidance of doubt, Licensee
shall be paying a total of 105% of the Guaranteed Minimum Royalty and Sales
Royalty hereunder.

                                   ARTICLE 10

                                   ADVERTISING

     Licensee agrees to spend in the United States for "Consumer Advertising"
(as defined below) * of Net Sales during each Annual Period.

     For the other markets in the Territory, Licensee or its distributors will
jointly spend not less than * of Net sales in such markets during each Annual
Period.

     "Consumer Advertising" shall be understood to include newspapers,
magazines, television, radio, billboards (including related artwork and
production charges for these five categories), retailer demonstration charges,
retailer's catalogues, gifts-with-purchase including the gift aspect of value
sets, direct mail, remittance envelopes, billing inserts , product samples,
pamphlets, free goods (including those to Licensor for events and other public
relation activities), window and counter displays (including testers, dummies,
counter cards and other visual aids), special events, contests, publicity and
promotions and cooperative advertising.

                                     Page 8



     Licensor undertakes at Licensee's request to make Ms. Paris Hilton ("PH")
available at reasonable intervals and for reasonable periods (which shall
involve a maximum of three (3) appearances during the first Annual Period and a
maximum of two (2) appearances each Annual Period thereafter) for promotional
tie-ins serving to associate PH with the Articles. Licensee shall also be
entitled to the use of PH's likeness for advertising and promotional purposes
upon Licensor's approval first being obtained in each instance, which approval
shall not be unreasonably withheld or delayed. Licensor shall make every
reasonable effort, in light of PH's busy schedule, at the request of the
Licensee, to arrange for PH's cooperation for publicity photographs, launch
parties, personal appearances and radio and TV interviews (which shall be
included in PH's obligations of three (3) and two (2) appearances discussed
above). Licensee shall reimburse Licensor for the reasonable costs involved in
providing PH plus one other individual, selected by Licensor, plus her Mother
and Father if they wish to attend, with first-class travel, lodging, food and
other related expenses mutually agreed upon in advance of each appearance
attended by PH at Licensee's request, which shall include the cost for hair and
makeup personnel and security personnel. If PH fails to appear for a scheduled
Licensor approved event, Licensee will have the right to deduct up to $20,000 of
its non-refundable out of pocket expenses incurred in connection with each
specific event from the Sales Royalty. The failure to appear at a scheduled
event could have a material adverse effect on the Licensee's ability to market
the Articles.

                                   ARTICLE 11

                   SALES STATEMENT; BOOKS AND RECORDS; AUDITS

     A.   SALES STATEMENT. Licensee shall deliver to Licensor at the time each
Sales Royalty payment is due, a reasonably detailed report signed by a duly
authorized officer of Licensee indicating by quarter the Net Sales and a
computation of the amount of Sales Royalty payable hereunder for said period.
Such statement shall be furnished to Licensor whether or not any Articles have
been sold during the period of which such statement is due.

     Licensee shall deliver to Licensor, not later than ninety (90) days after
the close of each Annual Period during the term of this Agreement (or portion
thereof in the event of prior termination for any reason), a statement signed by
a duly authorized officer relating to said entire Annual Period, setting forth
the same information required to be submitted by Licensee in accordance with the
first paragraph of this Article and also setting forth the information
concerning expenditures for the advertising and promotion of Articles during
such Annual Period required by Article 10 hereof.

     B.   BOOKS AND RECORDS; AUDITS. Licensee shall prepare and maintain, in
such manner as will allow its accountants to audit same in accordance with
generally accepted accounting principles, complete and accurate books of account
and records (specifically including without limitation the originals or copies
of documents supporting entries in the books of account) in which accurate
entries will be made covering all transactions, including advertising
expenditures, arising out of or relating to this Agreement. Licensee shall keep
separate general ledger accounts for such matters that do not include matters or

                                     Page 9



sales related to this Agreement. Licensor and its duly authorized
representatives shall have the right, for the duration of this Agreement and for
one (1) year thereafter, during regular business hours and upon seven (7)
business days advance notice (unless a shorter period is appropriate in the
circumstances), to audit said books of account and records and examine all other
documents and material in the possession or under the control of Licensee with
respect to the subject matter and the terms of this Agreement, including,
without limitation, invoices, credits and shipping documents, and to make copies
of any and all of the above. All such books of account, records, documents and
materials shall be kept available by Licensee for at least two (2) years after
the end of the Annual Period to which they relate. If, as a result of any audit
of Licensee's books and records, it is shown that Licensee's payments were less
than the amount which should have been paid by an amount equal to * or more of
the payments actually made with respect to sales occurring during the period in
question, Licensee shall reimburse Licensor for the cost of such audit and shall
make all payments required to be made to eliminate any discrepancy revealed by
said audit within ten (10) days after Licensor's demand therefore.

                                   ARTICLE 12

                          INDEMNIFICATION AND INSURANCE

     A.   INDEMNIFICATION OF LICENSOR. Licensee hereby agrees to save and hold
Licensor, Paris Hilton and their agents (the "Indemnified Parties") harmless
from and against and to indemnify them against any and all claims, suits,
injuries, losses, liability, demands, damages and expenses (including, subject
to subparagraph D below, Licensor's reasonable attorneys' fees and expenses)
which the Indemnified Parties may incur or be obligated to pay, or for which
either may become liable or be compelled to pay in any action, claim or
proceeding against them, for or by reason of any acts, whether of omission or
commission, that may be committed or suffered by Licensee or any of its
servants, agents or employees in connection with Licensee's performance of this
Agreement, including but not limited to those arising out of the alleged defect
in any Article produced by Licensee under this Agreement, the manufacture,
labeling, sale, distribution or advertisement of any Article by Licensee in
violation of any national, state or local law or regulation or the breach of
Article 5 hereof. The provisions of this paragraph and Licensee's obligations
hereunder shall survive the expiration or termination of this Agreement.

     B.   INSURANCE POLICY. Licensee shall procure and maintain at its own
expense in full force and effect at all times during which Articles are being
sold, with a responsible insurance carrier acceptable to Licensor, a public
liability insurance policy including products liability coverage with respect to
Articles with a limit of liability not less than $3,000,000. It shall be
acceptable if such coverage is provided by a product liability policy and an
additional umbrella policy. Such insurance policies shall be written for the
benefit of Licensee, Licensor and Paris Hilton and shall provide for at least
thirty (30) days prior written notice to said parties of the cancellation or
substantial modification thereof. Licensor shall be a named insured on each such
policy. Such

                                    Page 10



insurance may be obtained by Licensee in conjunction with a policy which covers
products other than Articles.

     C.   EVIDENCE OF INSURANCE. Licensee shall, from time to time upon
reasonable request by Licensor, promptly furnish or cause to be furnished to
Licensor evidence in form and substance satisfactory to Licensor of the
maintenance of the insurance required by subparagraph B above, including, but
not limited to, copies of policies, certificates of insurance (with applicable
riders and endorsements) and proof of premium payments. Nothing contained in
this paragraph shall be deemed to limit in any way the indemnification
provisions of the subparagraph A above.

     D.   NOTICE. Licensor will give Licensee notice of any action, claim, suit
or proceeding in respect of which indemnification may be sought and Licensee
shall defend such action, claim, suit or proceeding on behalf of Licensor. In
the event appropriate action is not taken by Licensee within thirty (30) days
after its receipt of notice from Licensor, then Licensor shall have the right,
but not the obligation, to defend such action, claim, suit or proceeding.
Licensor may, subject to Licensee's indemnity obligation under subparagraph A
above, be represented by its own counsel in any such action, claim, suit or
proceeding. In any case, the Licensor and the Licensee shall keep each other
fully advised of all developments and shall cooperate fully with each other in
all respects in connection with any such defense as is made. Nothing contained
in this paragraph shall be deemed to limit in any way the indemnification
provisions of the subparagraph A above except that in the event appropriate
action is being taken by Licensee by counsel reasonably acceptable to Licensor,
with respect to any not-trademark or intellectual property, action, claim, suit
or proceeding. Licensor shall not be permitted to seek indemnification from
Licensee for attorneys' fees and expenses incurred without the consent of
Licensee. In connection with the aforesaid actions, claims and proceedings, the
parties shall, where no conflict of interest exists, seek to be represented by
common reasonably acceptable counsel. In connection with actions, claims or
proceedings involving trademark or other intellectual property matters which are
subject to indemnification hereunder, Licensor shall at all times be entitled to
be represented by its own counsel, for whose reasonable fees and disbursements
it shall be entitled to indemnification hereunder.

                                   ARTICLE 13

                                THE LICENSED MARK

     A.   Licensee shall not join any name or names with the Licensed Mark so as
to form a new mark, unless and until Licensor consents thereto in writing.
Licensee acknowledges the validity of the Licensed Mark, the secondary meaning
associated with the Licensed Mark, and the rights of Licensor with respect to
the Licensed Mark in the Territory in any form or embodiment thereof and the
goodwill attached or which shall become attached to the Licensed Mark in
connection with the business and goods in relation to which the same has been,
is or shall be used. Sales by Licensee shall be deemed to have been made by
Licensor for purposes of trademark registration and all

                                    Page 11



uses of the Licensed Mark by Licensee shall inure to the benefit of Licensor.
Licensee shall not, at any time, do or suffer to be done, any act or thing which
may in any way adversely affect any rights of Licensor in and to the Licensed
Mark or any registrations thereof or which, directly or indirectly, may reduce
the value of the Licensed Mark or detract from its reputation. Licensee will use
its best efforts to distribute Articles in the proper channels comparable to
those of similarly situated brands as discussed in Article 7 A (i) herein.

     B.   At Licensor's request, Licensee shall execute any documents, including
Registered User Agreements, reasonably required by Licensor to confirm the
respective rights of Licensor and Ms. Paris Hilton in and to the Licensed Mark
in each jurisdiction in the Territory and the respective rights of Licensor and
Licensee pursuant to this Agreement. Licensee shall cooperate with Licensor, in
connection with the filing and the prosecution by Licensor of applications to
register or renew the Licensed Mark for Articles sold hereunder in each
jurisdiction in the Territory where Licensee has reasonably requested the same.
Such filings and prosecution shall be in the name of Licensor or Ms. Paris
Hilton, as they may decide, the expense of which shall be paid for by Licensee.
Nothing contained herein shall obligate Licensor to prosecute any trademark
application outside the U.S. which is opposed or rejected in any country after
the application is filed, provided, however, that any such prosecution shall go
forward if (a) Licensee requests same; (b) Licensee pays for same directly; and
(c) such prosecution is in Licensor's (or Ms. Paris Hilton's) name and directed
by Licensor. Licensor shall cooperate fully with any such prosecution. Licensee
agrees to retain and employ on Licensor's behalf the firm of Tucker & Latifi,
LLP of New York City to file and prosecute the various trademark applications
around the World for the Trademark, as long as such fees charged by Tucker &
Latifi, LLP are competitively priced with other intellectual property law firms.
Tucker & Latifi, LLP shall work with Licensee's paralegal to keep such paralegal
apprised of its progress in connection with the application and registration
work referenced herein. Tucker & Latifi, LLP shall enter into a retainer
agreement with Licensee that is mutually acceptable to Licensee and Tucker &
Latifi, LLP providing, inter alia, that a retainer amount of $5,500 shall be
paid to Tucker & Latifi, LLP for the first 12 months and $3,500 for the second
12 months for work to be done by Tucker & Latifi, LLP in connection with foreign
application work.

     C.   Licensee shall use the Licensed Mark in each jurisdiction in the
Territory strictly in compliance with the legal requirements obtained therein
and shall use such markings in connection therewith as may be required by
applicable legal provisions. Licensee shall cause to appear on all Articles and
on all materials on or in connection with which the Licensed Mark is used, such
legends, markings and notices as may be reasonably necessary in order to give
appropriate notice of any trademark, trade name or other rights therein or
pertaining thereto.

     D.   Licensee shall never challenge the validity of the Licensed Mark or
any application for registration thereof, or any trademark registration hereof,
or any rights of Licensor therein. The foregoing shall not be deemed to prevent
Licensee from asserting, as a defense to a claim of breach of contract brought
against Licensee by Licensor for

                                    Page 12



failure to perform its obligations hereunder, that its ceasing performance under
this Agreement was based upon Licensor's failure to own the Licensed Mark in the
United States of America, provided that it is established in a court of law that
Licensor does not own the Licensed Mark, that the Licensed Mark is owned by a
third party so as to preclude the grant of the license provided herein.

     E.   In the event that Licensee learns of any infringement or imitation of
the Licensed Mark or of any use by any person of a trademark similar to the
Licensed Mark, it promptly shall notify Licensor thereof. In no event, however,
shall Licensor be required to take any action if it deems it inadvisable to do
so.

     F.   Licensor shall not be required to protect, indemnify or hold Licensee
harmless against, or be liable to Licensee for, any liabilities, losses,
expenses or damages which may be suffered or incurred by Licensee as a result of
any infringement or allegation thereof by any other person, firm or corporation,
other than by reason of Licensor's breach of the representations made and
obligations assumed herein. Licensor and Ms. Paris Hilton make no warranties or
representations as to the registrability of the Licensed Mark in the various
trademark offices around the World, except that Licensor warrants and represents
that Ms. Paris Hilton has pending trademark applications as shown on the annexed
Exhibit A.

                                   ARTICLE 14

                              DEFAULTS; TERMINATION

     A.   The following conditions and occurrences shall constitute "Events of
Default" by Licensee:

          1.   the failure to pay Licensor the full amount due it under any of
the provisions of this Agreement by the prescribed date for such payment;

          2.   the failure to deliver full and accurate reports pursuant to any
of the provisions of this Agreement by the prescribed due date therefore;

          3.   the making or furnishing of a knowingly false statement in
connection with or as part of any material aspect of a report, notice or request
rendered pursuant to this Agreement;

          4.   the failure to maintain the insurance required by Article 12;

          5.   the use of the licensed mark in an unauthorized or unapproved
manner;

          6.   Licensee's use of other trademarks or in association with the
Articles, without prior written consent of Licensor;

          7.   the commencement against Licensee of any proceeding in
bankruptcy, or similar law, seeking reorganization, liquidation, dissolution,
arrangement, readjustment, discharge of debt, or seeking the appointment of a
receiver, trustee or custodian of all or any substantial part of Licensee's
property, not dismissed within sixty (60) days, or Licensee's making of an
assignment for the benefit of creditors, filing of a

                                    Page 13



bankruptcy petition, its acknowledgment of its insolvency or inability to pay
debts, or taking advantage of any other provision of the bankruptcy laws;

          8.   the material breach of any other material promise or agreement
made herein.

     B.   In the event Licensee fails to cure (i) an Event of Default within
thirty (30) days after written notice of default is transmitted to Licensee
under Article 14 A.3, A.5, A.6, or A.7; or (ii) Licensee fails to cure any other
Event of Default within sixty (60) days after written notice of default is
transmitted to Licensee or within such further period as Licensor may allow,
this Agreement shall, at Licensor's option, be terminated, on notice to
Licensee, and all the prorated Guaranteed Minimum Royalties for the Annual
Period as in Article 8 above shall become due, without prejudice to Licensor's
right to receive other payments due or owing to Licensor under this Agreement or
to any other right of Licensor, including the right to damages and/or equitable
relief.

     C.   Upon the termination of this Agreement, in the event this Agreement is
not renewed as provided in Article 4 above, or in the event of the termination
or expiration of a renewal term of this Agreement, Licensee, except as specified
below, will immediately discontinue use of the Licensed Mark, will not resume
the use thereof or adopt any colorable imitation of the Licensed Mark or any of
its parts, will promptly deliver and convey to Licensor (free of all liens and
encumbrances) (i) all plates, engravings, silk-screens, or the like used to make
or reproduce the Licensed Mark and the Designs, but not the bottle mold or
tooling which Licensor shall be entitled to purchase or recover as provided
below; and(ii) all items affixed with likeness or reproductions of the Licensed
Mark, whether Articles, labels, bags, hangers, tags or otherwise, and, upon
request by Licensor, will assign to Licensor such rights as Licensee may have
acquired in the Licensed Mark. In the event that this Agreement expires or is
terminated by Licensor due to Licensee's default, Licensor shall have an option,
but not an obligation, to purchase the bottle mold and tooling for the Articles,
free of all liens and other encumbrances, at a price equal to Licensee's cost
for same established by submission of bill(s) from supplier and satisfactory
proof of payment for same. Licensor shall pay such cost as follows: 50% (fifty)
at closing and the balance paid by six (6) equal monthly payments. Licensor
shall, at the time it exercises its purchase option, enter into a security
agreement with Licensee with respect to the mold, which shall entitle Licensee
to foreclose on its security interest in the mold in the event Licensor fails to
make any installment payment due within fifteen (15) days after receiving notice
of default. Licensor shall exercise its aforesaid option within thirty (30) days
after Licensee's submission of documents establishing cost. Notwithstanding the
foregoing, if Licensor has terminated this Agreement due to Licensee's default,
Licensor, at its option, shall be entitled, in exercising its purchase option,
to deduct from the cost price an amount equal to the sales and guaranteed
minimum royalties Licensor is entitled to recover, for which deduction Licensee
shall receive a credit. In the event Licensor exercises its aforesaid option,
Licensee shall be precluded forever from using the bottle molds or tools and
from selling or otherwise transferring or licensing any rights whatsoever in the
molds or tools to any third party. In the event that Licensor does not exercise
its aforesaid option, Licensee shall not use the bottle molds or tools or sell
or otherwise transfer or license any

                                    Page 14



rights whatsoever in the bottle mold or tools to any third party for a period of
two (2) years after the determination of the fair market value. In the event of
any permitted use of the bottle mold and/or tools by Licensee, Licensee shall
not use in connection therewith the Licensed Mark, any trademark confusingly
similar thereto, any trade dress associated with the Articles, any advertising
or promotional materials used in connection with the Articles or any other
markings or materials which would cause a reasonable consumer to believe that
any new items sold using the bottle mold and tools are authorized by Licensor or
in some way associated with the Licensed Mark. Any permitted sale or license of
the bottle mold and/or tools by Licensee shall prohibit in writing the purchaser
or licensee from using the Licensed Mark, and confusingly similar trademark and
any such trade dress, advertising, promotional materials, markings or other
materials and shall expressly make Licensor a third party beneficiary of such
provision.

                                   ARTICLE 15

                       RIGHTS ON EXPIRATION OR TERMINATION

     A.   If this Agreement expires or is terminated, Licensee shall cease to
manufacture Articles (except for work in process or to balance component
inventory) but shall be entitled, for an additional period of twelve (12) months
only, on a non-exclusive basis, to sell and dispose of its inventory subject,
however, to the provisions of paragraph D of this Article. Such sales shall be
made subject to all of the provisions of this agreement and to an accounting for
and the payment of Sales Royalty thereon but not to the payment of Guaranteed
Minimum Royalties. Such accounting and payment shall be made monthly.

     B.   In the event of termination in accordance with Article 14 above,
Licensee shall pay to Licensor, the Sales Royalty then owed to it pursuant to
this Agreement or otherwise.

     C.   Notwithstanding any termination in accordance with Article 14 above,
Licensor shall have and hereby reserve all rights and remedies which it has, or
which are granted to it by operation of law, to enjoin the unlawful or
unauthorized use of the Licensed Mark, and to collect royalties payable by
Licensee pursuant to this Agreement and to be compensated for damages for breach
of this Agreement.

     D.   Upon the expiration or termination of this Agreement, Licensee shall
deliver to Licensor a complete and accurate schedule of Licensee's inventory of
Articles and of related work in process then on hand (including any such items
held by Subsidiaries, Affiliates or others on behalf of Licensee) (hereinafter
referred to as "Inventory). Such schedule shall be prepared as of the close of
business on the date of such expiration or termination and shall reflect
Licensee's cost of each such item. Notwithstanding anything contained to the
contrary in this Agreement, Licensor thereupon shall have the option,
exercisable by notice in writing delivered to Licensee within thirty (30) days
after its receipt of the complete Inventory schedule, to purchase

                                    Page 15



any or all of the Inventory, free of all liens and other encumbrances, for an
amount equal to Licensee's cost plus 20%. In the event such notice is sent by
Licensor, Licensee shall deliver to Licensor or its designee all of the
Inventory referred to therein within thirty (30) days after Licensor's said
notice and, in respect of any Inventory so purchased, assign to Licensor all
then outstanding orders from Licensee to its suppliers and to Licensee from its
customers. Licensor shall pay Licensee for such Inventory within twenty (20)
days after the delivery of such Inventory to Licensor. No Sales Royalty shall be
payable to Licensor with respect to any such inventory purchased by Licensor.

                                   ARTICLE 16

                          SUBLICENSING AND DISTRIBUTION

     A.   (i)    This Agreement and the License or other rights granted
hereunder may be assigned, sublicensed, joint ventured or transferred by
Licensee, upon the approval of Licensor in advance, in writing, which approval
will not be unreasonably denied or delayed. Any transferee shall be required to
prove to Licensor that it is capable of meeting the financial obligations
contained herein.

          (ii)   CONSOLIDATION. Notwithstanding anything contained to the
contrary in this Agreement, this Agreement shall not terminate if Licensee is
merged or otherwise consolidated into another entity which is the surviving
entity of equal or superior financial strength.

     B.   Licensee shall be entitled to use distributors in connection with its
sale of Articles under this Agreement without approval of Licensor. No such
distributor, however, shall be entitled to exercise any of Licensee's rights
hereunder except for the sale of Articles which have been approved by Licensor
hereunder.

                                   ARTICLE 17

                                  MISCELLANEOUS

     A.   REPRESENTATIONS. The parties respectively represent and warrant that
they have full right, power and authority to enter into this Agreement and
perform all of their obligations hereunder and that they are under no legal
impediment which would prevent their signing this Agreement or consummating the
same. Licensor represents and warrants that it has the right to license the
Licensee the Licensed Mark and that Licensor has not granted any other existing
license to use the Licensed Mark on products covered hereunder in the Territory
and that no such license will be granted during the term of this Agreement
except in accordance with the provisions hereof.

     B.   LICENSOR'S RIGHTS. Not withstanding anything to the contrary contained
in this Agreement, Licensor shall not have the right to negotiate or enter into
agreements with third parties pursuant to which it may grant a license to use
the Licensed Mark in connection with the manufacture, distribution and/or sale
of products covered hereunder

                                    Page 16



in the Territory or provide consultation and design services with respect to
such products in the Territory prior to the termination or expiration of this
Agreement.

     C.   LICENSOR'S RETAIL STORES. In the event Licensor (or Ms. Paris Hilton)
opens one or more retail stores or boutiques selling various products bearing
the Licensed Mark, Licensee agrees to sell Articles to Licensor for sale in such
stores at the established U.S. retail price for the specific Article, less an
additional * discount. Licensee further agrees that any sales pursuant to this
paragraph shall be included in the computation of Net Sales for any applicable
Annual Period hereunder.

     D.   GOVERNING LAW; ENTIRE AGREEMENT. This Agreement shall be construed and
interpreted in accordance with the laws of the State of Florida applicable to
agreements made and to be performed in said State, contains the entire
understanding and agreement between the parties hereto with respect to the
subject matter hereof, supersedes all prior oral or written understandings and
agreements relating thereto and may not be modified, discharged or terminated,
nor may any of the provisions hereof be waived, orally.

     E.   NO AGENCY. Nothing herein contained shall be construed to constitute
the parties hereto as partners or as joint venturers, or either as agent of the
other, and Licensee shall have no power to obligate or bind Licensor in any
manner whatsoever.

     F.   NO WAIVER. No waiver by either party, whether express or implied, of
any provision of this Agreement, or of any breach or default thereof, shall
constitute a continuing waiver of such provision or of any other provision of
this Agreement. Acceptance of payments by Licensor shall not be deemed a waiver
by Licensor of any violation of or default under any of the provisions of this
Agreement by Licensee.

     G.   VOID PROVISIONS. If any provision or any portion of any provision of
this Agreement shall be held to be void or unenforceable, the remaining
provisions of this Agreement and the remaining portion of any provision held
void or unenforceable in part shall continue in full force and effect.

     I.   CONSTRUCTION. This Agreement shall be construed without regard to any
presumption or other rule requiring construction against the party causing this
Agreement to be drafted. If any words or phrases in this Agreement shall have
been stricken out or otherwise eliminated, whether or not any other words or
phrases have been added, this Agreement shall be construed as if those words or
phrases were never included in this Agreement, and no implication or inference
shall be drawn from the fact that the words or phrases were so stricken out or
otherwise eliminated.

     H.   FORCE MAJEURE. Neither party hereto shall be liable to the other for
delay in any performance or for the failure to render any performance under the
Agreement (other than payment to any accrued obligation for the payment of
money) when such delay or failure is by reason of lockouts, strikes, riots,
fires, explosions, blockade, civil commotion, epidemic, insurrection, war or
warlike conditions, the elements, embargoes,

                                    Page 17



act of God or the public enemy, compliance with any law, regulation or other
governmental order, whether or not valid, or other similar causes beyond the
control of the party effected. The party claiming to be so affected shall give
notice to the other party promptly after it learns of the occurrence of said
event and of the adverse results thereof. Such notice shall set forth the nature
and extent of the event. The delay or failure shall not be excused unless such
notice is so given. Notwithstanding any other provision of this Agreement,
either party may terminate this Agreement if the other party is unable to
perform any or all of its obligations hereunder for a period of six (6) months
by reason of said event as if the date of termination were the date set forth
herein as the expiration date hereof. If either party elects to terminate this
Agreement under this paragraph, Licensee shall have no further obligations for
the Guaranteed Minimum Royalty beyond the date of termination (which shall be
prorated if less than an Annual Period is involved) and shall be obligated to
pay any Sales Royalty which is then due or becomes due.

     J.   BINDING EFFECT. This Agreement shall inure to the benefit of and shall
be binding upon the parties, their respective successors, Licensor's transferees
and assigns and Licensee's permitted transferees and assigns.

     K.   RESOLUTION OF DISPUTES. Any controversy or claim arising out of, in
connection with, or relating to this Agreement, shall be determined by
arbitration by a three person arbitration panel at the office of the American
Arbitration Association. Both Parties shall share equally the cost of such
arbitration (except each shall bear its own attorney's fees). Any decision
rendered by the arbitrators shall be final and binding, and judgment may be
entered in any court having jurisdiction.

     L.   CONSOLIDATION. Notwithstanding anything contained to the contrary in
this Agreement (a) this Agreement shall not terminate if Licensor is merged or
otherwise consolidated into another entity which is the surviving entity. (b)
Licensor shall be entitled to assign this Agreement to any Corporation to which
the Licensed Mark is assigned.

     M.   SURVIVAL. The provisions of Articles 11, 12A, 12D, 13, 15, 16, and 17
shall survive any expiration or termination of this Agreement.

     N.   PARAGRAPH HEADINGS. The paragraph headings in this Agreement are for
convenience of reference only and shall be given no substantive effect.

                                   ARTICLE 18

                                     NOTICES

     Any notice or other communications required or permitted by this Agreement
to be given to a party will be in writing and will be considered to be duly
given when sent by any recognized overnight courier service to the party
concerned to the following persons or addresses (or to such other persons or
addresses as a party may specify by notice to the other):

                                     Page 18



TO LICENSOR       Ms. Paris Hilton c/o Ms. Wendy White
                  250 North Canon Dr. 2nd Floor,
                  Beverly Hills, CA 90210

WITH A COPY TO:   Robert L. Tucker, Esq., Tucker & Latifi, LLP
                  160 East 84th Street, New York, NY 10028
                  Tel: 212-472-6262; Fax: 212-744-6509.
                  RTucker@TuckerLatifi.com

TO LICENSEE       PARLUX FRAGRANCES, INC.
                  3725 SW 30TH Avenue
                  Ft. Lauderdale, Florida, 33312
                  Attention: Ilia Lekach
                  Chairman & CEO
                  Fax: (954) 316-8155

WITH A COPY TO:   Mitchell Schrage & Associates
                  Tower 56, 126 East 56th Street
                  New York, New York 10022
                  Attn: Mitchell Schrage, Esq.
                  Fax: (212) 758-1616

     Notice of the change of any such address shall be duly given by either
party to the other in the manner herein provided.

     EXECUTED as of the day and year first written above:

                             PARLUX FRAGRANCES, INC.

                          By:   /s/ Frank A. Buttacavoli
                             ------------------------------
           Frank A. Buttacavoli, Executive Vice President / COO / CFO

                         PARIS HILTON ENTERTAINMENT INC.

                              By:   /s/ Paris Hilton
                                 ----------------------
                               Paris Hilton, President

                                    Page 19



     Compliance with the terms of this Agreement shall constitute compliance
with the terms of the Master License. In the event of a termination of the
Master License granted to Licensor, prior to the expiration of this Agreement
(and any extensions thereof) Ms. Paris Hilton warrants and represents that the
successor entity to the rights to the PARIS HILTON trademark shall assume the
obligations and succeed to the rights of the Licensor and the rights of Licensee
shall continue unaffected.

                            ACKNOWLEDGE AND APPROVED:

                                /s/ Paris Hilton
                            -------------------------
                                  Paris Hilton

                                    Page 20

EX-10.74

THROUGHOUT THIS AGREEMENT, WHERE INFORMATION HAS BEEN REPLACED BY AN ASTERISK
(*), THAT INFORMATION HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE
24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE
OMITTED INFORMATION HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.

                                                                   EXHIBIT 10.74

                           HAND BAG LICENSE AGREEMENT

     This HAND BAG LICENSE AGREEMENT ("Agreement") is made and effective as of
the 13TH DAY OF MAY, 2005 (the "effective date"), by and between PARIS HILTON
ENTERTAINMENT INC., with offices at 250 North Canon Drive, 2nd Floor, Beverly
Hills, CA 90210 ("Licensor"), and PARLUX FRAGRANCES, INC., a public Delaware
corporation with offices at 3725 S.W. 30th Avenue, Ft. Lauderdale, Fl. 33312
("Licensee") (together the "Parties").

                              W I T N E S S E T H :

     WHEREAS, by way of a master license (the "Master License") from Ms. Paris
Hilton, an individual with a mailing address of c/o Ms. Wendy White, 250 North
Canon Drive, 2nd Floor, Beverly Hills, CA 90210, to Licensor, Licensor has the
sole and exclusive rights to license the Licensed Mark (as hereinafter defined)
pursuant to the terms hereof; and,

     WHEREAS, the Parties entered into a license agreement on May 21, 2004 in
which Licensor granted Licensee the sole and exclusive rights to manufacture and
distribute fragrances and related products bearing the Licensed Mark(the
"Fragrance License"); and,

     WHEREAS, the Parties entered into a license agreement on January 6, 2005 in
which Licensor granted Licensee the sole and exclusive rights to manufacture and
distribute watches and other timepieces bearing the Licensed Mark (the "Watch
License"); and,

     WHEREAS, Licensee is familiar with the business of manufacturing, promoting
and selling purses, bags and small leather goods and now Licensee desires to
obtain the exclusive right and license to use the Licensed Mark in the Territory
(as hereinafter defined) in connection with the manufacture, promotion,
distribution and sale of such products; and,

     WHEREAS, Licensor is willing to grant the license pursuant to the terms
contained herein.

     NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, the parties hereto covenant and agree as follows:

                                     Page 1



                                    ARTICLE 1

                                   DEFINITIONS

The following definitions shall apply:

     A.   TERRITORY. All countries of the world and all duty-free-shops,
ships, airplanes, military bases and diplomatic missions of every country of the
world, including the world-wide web.

     B.   ARTICLES. Purses, hand bags, bags and small leather goods, which
shall not include luggage or travel-related bags. The parties acknowledge that
Licensor and Paris Hilton have an agreement with Samantha Thavasa Japan Limited,
a copy of which is annexed hereto, that precludes Licensor and Paris Hilton from
promoting any handbags and/or jewelry in Japan other than SAMANTHA
THAVASA-branded handbags and jewelry until October 15, 2006, the termination
date of the Samantha Thavasa Japan Limited agreement.

     C.   LICENSED MARK. The trademark PARIS HILTON and such other trademarks
as are, from time to time, agreed to by Licensor. Licensor's current
applications for the Licensed Mark are detailed on the annexed Exhibit A. In
Germany, Austria, Switzerland and Italy (collectively, the "Restricted
Countries") Licensor and Paris Hilton are precluded from endorsing, selling or
licensing any products that are not sold under the PARIS HILTON trademark. Thus,
in the Restricted Countries, all Articles sold pursuant to this Agreement must
be sold under the PARIS HILTON trademark and none other.

     D.   NET SALES. The sales price at which Licensee or any Subsidiary or
Affiliate (as hereinafter defined) bills its Non-Subsidiary or Affiliate
customers for Articles less: (i) all returns of damaged, defective or other
merchandise, uncollectible accounts, trade and cash discounts and allowances,
and taxes directly applicable to the sale of Articles (such as sales, use, value
added or similar taxes); (ii) all freight and shipping charges, insurance costs
and duties and other governmental charges paid by the Licensee to the extent
stated separately on any invoice; (iii) all receipts from the sale of
discontinued and close-out merchandise (which shall include only Articles sold
at a discount of 25% or more from the normal price charged to that specific
customer and then only to the extent that the aggregate gross sales thereof in
any contract year do not exceed fifteen percent (15%) of total gross sales);
and, (iv) all receipts from the sale of samples, displays, brochures,
gift-with-purchase and similar advertising and promotional materials and
packaging supplies. Notwithstanding the terms of sub-section (iii) above,
Licensee shall not be excused from paying royalties on the sales of the Articles
in which the Licensee receives a minimum gross margin of 25%, in which gross
margin is defined as sales price to the customer less Licensee's cost of goods
and shipping. For purposes of calculating royalties, any sales of Articles that
are not at arms-length shall have a royalty amount charged to them at Licensee's
arms-length cost.

                                     Page 2



     E.   SUBSIDIARY. Any corporation or other entity which is 100% directly or
indirectly owned by Licensee.

     F.   AFFILIATE. Any corporation or other entity which is at least 50% owned
by Licensee.

                                    ARTICLE 2

                             GRANT OF LICENSE RIGHTS

     RIGHTS GRANTED. Upon the terms and conditions of this Agreement, Licensor
hereby grants to Licensee, during the term of this Agreement, the sole and
exclusive right and license to use the Licensed Mark in the Territory as a
trademark in connection with the manufacture, promotion, sale and distribution
solely of the Articles and on all packaging materials, containers and
promotional materials related to the Articles and in connection with the
publicity, sales and advertising of the Articles, including in newspapers,
magazines, radio, television, cinema and similar media presently existing or
that may exist in the future. Articles may be sold through the channels
customarily used to sell similar products of comparable prestige and quality in
the ordinary course of business as described in paragraph A of Article 7 below.
Licensor shall not, during any period this Agreement is in effect, grant any
rights to any third party in connection with the Articles for the Trademark or
any other trademark which includes PARIS HILTON or any derivative thereof.

     Notwithstanding the foregoing, Licensee acknowledges that Licensor and/or
Paris Hilton have an agreement with Samantha Thavasa Japan Limited that
precludes Licensor and/or Paris Hilton from promoting any handbags and/or
jewelry in Japan other than SAMANTHA THAVASA-branded handbags and jewelry until
October 15, 2006, the termination date of the Samantha Thavasa Japan Limited
agreement. Specifically, the Samantha Thavasa Japan Limited agreement provides
that: During the two year period [October 15, 2004 to October 15, 2006]
....Hilton shall not authorize the use of her name or likeness in connection with
the advertising or promotion by any Japanese company that sells handbags and
jewelries in the Japanese market.

                                    ARTICLE 3

                             EXCLUSIVITY OF LICENSE

     Other than as previously disclosed herein, Licensor will not grant any
other license effective during the term of this Agreement for the use of the
Licensed Mark on or in connection with the Articles in the Territory. Licensor
and Ms. Paris Hilton may use or grant others the right to use the Licensed Mark
on or in connection with goods of all other types and descriptions (with the
acknowledgement that Licensor has previously granted various licenses to
Licensee for a variety of goods in the Territory). Licensor acknowledges that
Licensee may manufacture and/or distribute in parts of the Territory goods
similar to the Articles covered by this Agreement which bear other trademarks.

                                     Page 3



Licensor further acknowledges and consents to Licensee obtaining other
additional licenses for the manufacture and/or distribution of other similar
lines of goods during the term of this Agreement. Licensee will not, during the
term of this Agreement and thereafter, attack either Licensor's title in and to
the Licensed Mark or the validity of this License.

     Notwithstanding the foregoing, Licensee acknowledges that Ms. Paris Hilton
has entered into an agreement with the company Guess?, Inc. to act as a model
and spokesperson for their products, some of which may be Articles. Such
agreement terminates on April 30, 2005.

                                    ARTICLE 4

                                TERM OF AGREEMENT

     Subject to the rights of termination set forth in this Agreement, the
initial term of this Agreement shall be for five (5) years commencing on the
execution date above and terminating on January 15, 2011 (the "Initial Term").
Licensee shall have the option to renew this Agreement for an additional
five-year period as long as the Minimum Royalties (as hereinafter defined) for
the Initial Term have been fully paid. Licensee shall notify Licensor of its
intent to either renew or not renew no later than June 30, 2010. Each twelve
(12) month period commencing on each January 16th and ending on January 15th
shall constitute and be referred to herein as an "Annual Period." However, the
initial Annual Period shall commence on the execution date above and shall
terminate on January 15, 2007.

                                    ARTICLE 5

                                 CONFIDENTIALITY

     The Parties acknowledge that all information relating to the business and
operations of Licensor and Licensee which they learn or have learned during or
prior to the term of this Agreement is confidential. The Parties acknowledge the
need to preserve the confidentiality and secrecy of such information and agree
that, both during the term of this Agreement and after the expiration or
termination hereof, they shall not use or disclose same, and shall take all
necessary steps to preserve in all respects such confidentiality and secrecy.
The provisions of this paragraph shall not apply with respect to any information
which has entered the public domain through no fault of Parties. The provisions
of this paragraph shall survive the expiration or termination of this Agreement.

                                    ARTICLE 6

                               DUTIES OF LICENSEE

     A.   BEST EFFORTS. During the term of this Agreement, Licensee will use
its best efforts to exploit the rights herein granted throughout the Territory
and to sell the

                                     Page 4



maximum quantity of Articles therein consistent with the high standards and
prestige represented by the Licensed Mark.

     B.   DESIGN AND SAMPLE MAKING. Licensor shall not be responsible for the
production, design or sample making of the Articles and Licensee shall bear all
costs related thereto.

                                    ARTICLE 7

                                QUALITY STANDARDS

     A.   MANUFACTURE OF ARTICLES; QUALITY CONTROL.

          (i)    The contents and workmanship of Articles shall be at all
times of the highest quality consistent with the reputation, image and prestige
of the Licensed Mark and Articles shall be distributed and sold with packaging
and sales promotion materials appropriate for such high quality Products. The
parties agree that the Articles shall be of such premium quality, prestige and
price similar to that of GUESS, COACH and KATE SPADE-branded products

          (ii)   All Articles shall be manufactured, labeled, sold, distributed
and advertised in accordance with all applicable national, state and local laws
and regulations.

          (iii)  Licensee shall submit to Licensor for approval the
proposed Articles, along with the proposed packaging and other material,
designs, sketches, colors, tags, containers and labels (the "Approval Package")
for Licensor's review, which approval shall not be unreasonably withheld. In the
event that Licensor does not respond to Licensee within 10 days of the receipt
of any and all items within the scope of the Approval Package, any such item
shall be deemed approved.

          (iv)   During the term of this Agreement, upon Licensor's
request, Licensee shall submit, free of charge to Licensor, the then current
production samples of each Article marketed. Production samples submitted by
Licensee for this purpose may be retained by Licensor. Further, Licensee shall
provide Licensor with 100 samples of the various Articles being distributed each
year for Licensor to use for public relations and promotional purposes. All
Articles to be sold hereunder shall be at least equal in quality to the Approval
Package presented to Licensor. Licensor and its duly authorized representatives
shall have the right, upon reasonable advance notice and during normal business
hours, at Licensor's expense, to examine Articles in the process of being
manufactured.

     B.   REQUIRED MARKINGS. Licensee shall cause to appear on all packaging
of Articles, (i) "the trademark, PARIS HILTON" is licensed to "Parlux
Fragrances, Inc."; and such additional legends, markings and notices complying
with the requirements of any law or regulation in the Territory and (ii) such
legends, markings and notices as Licensor, from time to time, may reasonably
request.

                                     Page 5



     C.   DISTRIBUTION. In order to maintain the reputation, image and
prestige of the Licensed Mark, Licensee's normal distribution patterns shall
consist of those retail establishments whose location, merchandising and overall
operations are consistent with the products described in paragraph A (i) of
Article 7 above.

     D.   SALES FORCE. During the term of this Agreement, Licensee shall
maintain a non-exclusive sales force suitable to carry out the purpose of this
Agreement.

                                    ARTICLE 8

                           GUARANTEED MINIMUM ROYALTY

     In consideration of both the license granted and the services to be
performed by Ms. Paris Hilton hereunder, Licensee shall pay to Licensor an
annual Guaranteed Minimum Royalty during the initial Term of the Agreement of $
* per Annual Period, with payment of 50% for the first Annual Period due upon
execution hereof and the balance of the Guaranteed Minimum Royalties payable as
specified below:

                                                            TOTAL ANNUAL
       ANNUAL PERIOD          ANNUAL MIN. ROYALTY DUE   GUARANTEED MIN ROYALTY
- ---------------------------   -----------------------   ----------------------
First: Execution to 1/15/07   $ * upon execution;                $ *
                              $ * on 7/15/05
Second: 1/16/07 to 1/15/08          1/16/07                      $ *
Third:  1/16/08 to 1/15/09          1/16/08                      $ *
Fourth: 1/16/09 to 1/15/10          1/16/09                      $ *
Fifth:  1/16/10 to 1/15/11          1/16/10                      $ *

     In the event that the Initial Term of this Agreement is extended for an
additional five-year term (January 16, 2011 through January 15, 2016, the
"Extended Term") the Guaranteed Minimum Royalty for each Annual Period of the
Extended Term shall be $ *.

     The Guaranteed Minimum Royalty payable to Licensor for each Annual Period
in the Extended Term shall be payable upfront on January 16th of the beginning
of each Annual Period in the Extended Term. For example, the Guaranteed Minimum
Royalty payable for the Annual Period from January 16, 2011 through January 15,
2012 shall be payable $ * on January 16, 2011.

     Subject to the exception in Article 9(C) below, the Guaranteed Minimum
Royalty for each Annual Period shall be credited against the Sales Royalty for
only the same Annual Period as provided in Article 9 below.

                                     Page 6



                                    ARTICLE 9

           SALES ROYALTY; WITHHOLDING TAXES; COMMISSION TO RICK HILTON

     A.   Licensee shall pay to Licensor a Sales Royalty on each Annual Period's
Net Sales of * . The Sales Royalty payable hereunder shall be accounted for and
paid on a quarterly basis within forty-five (45) days after the close of the
prior quarter's sales, along with the Guaranteed Minimum Royalty that may be
due. In other words, the actual Sales Royalty will be paid 45-days in arrears
computed on the basis of Net Sales during the quarter ending 45 days before the
period upon which royalties are being paid, with a credit for any Guaranteed
Minimum Royalty and Sales Royalty payments previously made to Licensor.

     B.   If applicable, Licensee shall compute any payment, on behalf of
Licensor, for all taxes (other than United States Federal, state or local income
taxes) which any governmental authority in the Territory may impose on Licensor
with respect to royalties paid by Licensee to Licensor. The amount of such taxes
shall be deducted from payments of royalties, provided that Licensor is entitled
under applicable law to credit the amount of such taxes against its United
States Federal Income Tax obligations. Licensee shall furnish Licensor with an
official receipt (together with a translation thereof if not in English)
promptly after each such payment of taxes. In the event such taxes are not paid
when due, all resulting penalties and interest shall be borne by Licensee.

     C.   Up to 50% of the Sales Royalty for any Annual Period in excess of
the payment of the Guaranteed Minimum Royalty for the same Annual Period shall
be credited against the Guaranteed Minimum Royalty due to Licensor for any other
future Annual Period if the actual Sales Royalty for that period does not reach
such period's Guaranteed Minimum Sales.

     D.   Payment of the initial Guaranteed Minimum Royalty shall be as follows
in the time frames specified above:

          (1)  $ * to: "Rick Hilton" c/o Ms. Wendy White, 250 North Canon Drive,
               2nd Floor, Beverly Hills, CA 90210; and,

          (2)  $ * to: Paris Hilton Entertainment Inc. c/o Ms. Wendy White, 250
               North Canon Drive, 2nd Floor, Beverly Hills, CA 90210.

In other words, upon execution hereof $ * shall be payable to Rick Hilton and $
* shall be payable to Licensor with the balance of such first Annual Period
Guaranteed Minimum Royalties payable on July 15, 2005.

     E.   All other Guaranteed Minimum Royalties and other Royalties shall be
paid as follows:

                                     Page 7



          (1) 5% of amounts due to: "Rick Hilton" c/o Ms. Wendy White, 250 North
          Canon Drive, 2nd Floor, Beverly Hills, CA 90210; and,

          (2) 95% of amounts due to: Paris Hilton Entertainment Inc. c/o Ms.
          Wendy White, 250 North Canon Drive, 2nd Floor, Beverly Hills, CA
          90210.

     F.   In addition to the Sales Royalty and Guaranteed Minimum Royalties
that Licensee is obligated to pay pursuant to the terms hereof, Licensee shall
further pay Mr. Rick Hilton, a commission for negotiating this Agreement of * of
the actual Sales Royalty and Guaranteed Minimum Royalty (paid to Licensor and
Rick Hilton) throughout the term of this Agreement and any extensions thereof.
This * commission shall be paid to Rick Hilton at the time that the Sales
Royalty is due to Licensor. The * commission shall be paid on the initial
Guaranteed Minimum Royalty due upon execution hereof, so that Rick Hilton shall
receive $ * (Guaranteed Minimum Royalty) plus $ * (commission) upon execution
hereof, or $ * (and $ * on July 15, 2005). For the avoidance of doubt, Licensee
shall be paying a total of 105% of the Guaranteed Minimum Royalty and Sales
Royalty hereunder.

                                   ARTICLE 10

                                   ADVERTISING

     Licensee agrees to spend in the United States for "Consumer Advertising"
(as defined below) * of Net Sales during each Annual Period.

     For the other markets in the Territory, Licensee or its distributors will
jointly spend not less than * of Net sales in such markets during each Annual
Period.

     "Consumer Advertising" shall be understood to include newspapers,
magazines, television, radio, billboards (including related artwork and
production charges for these five categories), retailer demonstration charges,
retailer's catalogues, gifts-with-purchase including the gift aspect of value
sets, direct mail, remittance envelopes, billing inserts , product samples,
pamphlets, free goods (including those to Licensor for events and other public
relation activities), window and counter displays (including testers, dummies,
counter cards and other visual aids), special events, contests, publicity and
promotions and cooperative advertising.

Licensor undertakes at Licensee's request to make Ms. Paris Hilton ("PH")
available at reasonable intervals and for reasonable periods (which shall
involve a maximum of three (3) appearances during the first Annual Period and a
maximum of two (2) appearances each Annual Period thereafter) for promotional
tie-ins serving to associate PH with the Articles. Licensee shall also be
entitled to the use of PH's likeness for advertising and promotional purposes
upon Licensor's approval first being obtained in each instance, which approval
shall not be unreasonably withheld or delayed. Licensor shall make every
reasonable effort, in light of PH's busy schedule, at the request of the
Licensee, to

                                     Page 8



arrange for PH's cooperation for publicity photographs, launch parties, personal
appearances and radio and TV interviews (which shall be included in PH's
obligations of three (3) and two (2) appearances discussed above). Licensee
shall reimburse Licensor for the reasonable costs involved in providing PH plus
one other individual, selected by Licensor, plus her Mother and Father if they
wish to attend, with first-class travel, lodging, food and other related
expenses mutually agreed upon in advance of each appearance attended by PH at
Licensee's request, which shall include the cost of hair and makeup personnel
and security personnel. If PH fails to appear for a scheduled Licensor approved
event, Licensee will have the right to deduct up to $20,000 of its
non-refundable out of pocket expenses incurred in connection with each specific
event from the Sales Royalty. The failure to appear at a scheduled event could
have a material adverse effect on the Licensee's ability to market the Articles.

                                   ARTICLE 11

                   SALES STATEMENT; BOOKS AND RECORDS; AUDITS

     A.   SALES STATEMENT. Licensee shall deliver to Licensor at the time each
Sales Royalty payment is due, a reasonably detailed report signed by a duly
authorized officer of Licensee indicating by quarter the Net Sales and a
computation of the amount of Sales Royalty payable hereunder for said period.
Such statement shall be furnished to Licensor whether or not any Articles have
been sold during the period of which such statement is due.

     Licensee shall deliver to Licensor, not later than ninety (90) days after
the close of each Annual Period during the term of this Agreement (or portion
thereof in the event of prior termination for any reason), a statement signed by
a duly authorized officer relating to said entire Annual Period, setting forth
the same information required to be submitted by Licensee in accordance with the
first paragraph of this Article and also setting forth the information
concerning expenditures for the advertising and promotion of Articles during
such Annual Period required by Article 10 hereof.

     B.   BOOKS AND RECORDS; AUDITS. Licensee shall prepare and maintain, in
such manner as will allow its accountants to audit same in accordance with
generally accepted accounting principles, complete and accurate books of account
and records (specifically including without limitation the originals or copies
of documents supporting entries in the books of account) in which accurate
entries will be made covering all transactions, including advertising
expenditures, arising out of or relating to this Agreement. Licensee shall keep
separate general ledger accounts for such matters that do not include matters or
sales related to this Agreement. Licensor and its duly authorized
representatives shall have the right, for the duration of this Agreement and for
one (1) year thereafter, during regular business hours and upon seven (7)
business days advance notice (unless a shorter period is appropriate in the
circumstances), to audit said books of account and records and examine all other
documents and material in the possession or under the control of Licensee with
respect to the subject matter and the terms of this Agreement, including,
without limitation, invoices, credits and shipping documents, and to make copies
of any and all of the above. All such books of account, records, documents and
materials shall

                                     Page 9



be kept available by Licensee for at least two (2) years after the end of the
Annual Period to which they relate. If, as a result of any audit of Licensee's
books and records, it is shown that Licensee's payments were less than the
amount which should have been paid by an amount equal to * or more of the
payments actually made with respect to sales occurring during the period in
question, Licensee shall reimburse Licensor for the cost of such audit and shall
make all payments required to be made to eliminate any discrepancy revealed by
said audit within ten (10) days after Licensor's demand therefore.

                                   ARTICLE 12

                          INDEMNIFICATION AND INSURANCE

     A.   INDEMNIFICATION OF LICENSOR. Licensee hereby agrees to save and hold
Licensor, Paris Hilton and their agents (the "Indemnified Parties") harmless
from and against and to indemnify them against any and all claims, suits,
injuries, losses, liability, demands, damages and expenses (including, subject
to subparagraph D below, Licensor's reasonable attorneys' fees and expenses)
which the Indemnified Parties may incur or be obligated to pay, or for which
either may become liable or be compelled to pay in any action, claim or
proceeding against them, for or by reason of any acts, whether of omission or
commission, that may be committed or suffered by Licensee or any of its
servants, agents or employees in connection with Licensee's performance of this
Agreement, including but not limited to those arising out of the alleged defect
in any Article produced by Licensee under this Agreement, the manufacture,
labeling, sale, distribution or advertisement of any Article by Licensee in
violation of any national, state or local law or regulation or the breach of
Article 5 hereof. The provisions of this paragraph and Licensee's obligations
hereunder shall survive the expiration or termination of this Agreement.

     B.   INSURANCE POLICY. Licensee shall procure and maintain at its own
expense in full force and effect at all times during which Articles are being
sold, with a responsible insurance carrier acceptable to Licensor, a public
liability insurance policy including products liability coverage with respect to
Articles with a limit of liability not less than $3,000,000. It shall be
acceptable if such coverage is provided by a product liability policy and an
additional umbrella policy. Such insurance policies shall be written for the
benefit of Licensee, Licensor and Paris Hilton and shall provide for at least
thirty (30) days prior written notice to said parties of the cancellation or
substantial modification thereof. Licensor shall be a named insured on each such
policy. Such insurance may be obtained by Licensee in conjunction with a policy
which covers products other than Articles.

     C.   EVIDENCE OF INSURANCE. Licensee shall, from time to time upon
reasonable request by Licensor, promptly furnish or cause to be furnished to
Licensor evidence in form and substance satisfactory to Licensor of the
maintenance of the insurance required by subparagraph B above, including, but
not limited to, copies of policies, certificates of insurance (with applicable
riders and endorsements) and proof of premium payments.

                                    Page 10



Nothing contained in this paragraph shall be deemed to limit in any way the
indemnification provisions of the subparagraph A above.

     D.   NOTICE. Licensor will give Licensee notice of any action, claim,
suit or proceeding in respect of which indemnification may be sought and
Licensee shall defend such action, claim, suit or proceeding on behalf of
Licensor. In the event appropriate action is not taken by Licensee within thirty
(30) days after its receipt of notice from Licensor, then Licensor shall have
the right, but not the obligation, to defend such action, claim, suit or
proceeding. Licensor may, subject to Licensee's indemnity obligation under
subparagraph A above, be represented by its own counsel in any such action,
claim, suit or proceeding. In any case, the Licensor and the Licensee shall keep
each other fully advised of all developments and shall cooperate fully with each
other in all respects in connection with any such defense as is made. Nothing
contained in this paragraph shall be deemed to limit in any way the
indemnification provisions of the subparagraph A above except that in the event
appropriate action is being taken by Licensee by counsel reasonably acceptable
to Licensor, with respect to any not-trademark or intellectual property, action,
claim, suit or proceeding. Licensor shall not be permitted to seek
indemnification from Licensee for attorneys' fees and expenses incurred without
the consent of Licensee. In connection with the aforesaid actions, claims and
proceedings, the parties shall, where no conflict of interest exists, seek to be
represented by common reasonably acceptable counsel. In connection with actions,
claims or proceedings involving trademark or other intellectual property matters
which are subject to indemnification hereunder, Licensor shall at all times be
entitled to be represented by its own counsel, for whose reasonable fees and
disbursements it shall be entitled to indemnification hereunder.

                                   ARTICLE 13

                                THE LICENSED MARK

     A.   Licensee shall not join any name or names with the Licensed Mark so
as to form a new mark, unless and until Licensor consents thereto in writing.
Licensee acknowledges the validity of the Licensed Mark, the secondary meaning
associated with the Licensed Mark, and the rights of Licensor with respect to
the Licensed Mark in the Territory in any form or embodiment thereof and the
goodwill attached or which shall become attached to the Licensed Mark in
connection with the business and goods in relation to which the same has been,
is or shall be used. Sales by Licensee shall be deemed to have been made by
Licensor for purposes of trademark registration and all uses of the Licensed
Mark by Licensee shall inure to the benefit of Licensor. Licensee shall not, at
any time, do or suffer to be done, any act or thing which may in any way
adversely affect any rights of Licensor in and to the Licensed Mark or any
registrations thereof or which, directly or indirectly, may reduce the value of
the Licensed Mark or detract from its reputation. Licensee will use its best
efforts to distribute Articles in the proper channels comparable to those of
similarly situated brands as discussed in Article 7 A (i) herein.

                                    Page 11



     B.   At Licensor's request, Licensee shall execute any documents,
including Registered User Agreements, reasonably required by Licensor to confirm
the respective rights of Licensor and Ms. Paris Hilton in and to the Licensed
Mark in each jurisdiction in the Territory and the respective rights of Licensor
and Licensee pursuant to this Agreement. Licensee shall cooperate with Licensor,
in connection with the filing and the prosecution by Licensor of applications to
register or renew the Licensed Mark for Articles sold hereunder in each
jurisdiction in the Territory where Licensee has reasonably requested the same.
Such filings and prosecution shall be in the name of Licensor or Ms. Paris
Hilton, as they may decide, the expense of which shall be paid for by Licensee.
Nothing contained herein shall obligate Licensor to prosecute any trademark
application outside the U.S. which is opposed or rejected in any country after
the application is filed, provided, however, that any such prosecution shall go
forward if (a) Licensee requests same; (b) Licensee pays for same directly; and
(c) such prosecution is in Licensor's (or Ms. Paris Hilton's) name and directed
by Licensor. Licensor shall cooperate fully with any such prosecution. Licensee
agrees to retain and employ on Licensor's behalf the firm of Tucker & Latifi,
LLP of New York City to file and prosecute the various trademark applications
around the World for the Trademark, as long as such fees charged by Tucker &
Latifi, LLP are competitively priced with other intellectual property law firms.
Tucker & Latifi, LLP shall work with Licensee's paralegal to keep such paralegal
apprised of its progress in connection with the application and registration
work referenced herein. Tucker & Latifi, LLP shall enter into a retainer
agreement with Licensee that is mutually acceptable to Licensee and Tucker &
Latifi, LLP providing, inter alia, that a retainer amount of $5,500 shall be
paid to Tucker & Latifi, LLP for the first 12 months and $3,500 for the second
12 months for work to be done by Tucker & Latifi, LLP in connection with foreign
application work.

     C.   Licensee shall use the Licensed Mark in each jurisdiction in the
Territory strictly in compliance with the legal requirements obtained therein
and shall use such markings in connection therewith as may be required by
applicable legal provisions. Licensee shall cause to appear on all Articles and
on all materials on or in connection with which the Licensed Mark is used, such
legends, markings and notices as may be reasonably necessary in order to give
appropriate notice of any trademark, trade name or other rights therein or
pertaining thereto.

     D.   Licensee shall never challenge the validity of the Licensed Mark or
any application for registration thereof, or any trademark registration hereof,
or any rights of Licensor therein. The foregoing shall not be deemed to prevent
Licensee from asserting, as a defense to a claim of breach of contract brought
against Licensee by Licensor for failure to perform its obligations hereunder,
that its ceasing performance under this Agreement was based upon Licensor's
failure to own the Licensed Mark in the United States of America, provided that
it is established in a court of law that Licensor does not own the Licensed
Mark, that the Licensed Mark is owned by a third party so as to preclude the
grant of the license provided herein.

     E.   In the event that Licensee learns of any infringement or imitation
of the Licensed Mark or of any use by any person of a trademark similar to the
Licensed Mark,

                                    Page 12



it promptly shall notify Licensor thereof. In no event, however, shall Licensor
be required to take any action if it deems it inadvisable to do so.

     F.   Licensor shall not be required to protect, indemnify or hold
Licensee harmless against, or be liable to Licensee for, any liabilities,
losses, expenses or damages which may be suffered or incurred by Licensee as a
result of any infringement or allegation thereof by any other person, firm or
corporation, other than by reason of Licensor's breach of the representations
made and obligations assumed herein. Licensor and Ms. Paris Hilton make no
warranties or representations as to the registrability of the Licensed Mark in
the various trademark offices around the World, except that Licensor warrants
and represents that Ms. Paris Hilton has pending trademark applications as shown
on the annexed Exhibit A.

                                   ARTICLE 14

                              DEFAULTS; TERMINATION

     A.   The following conditions and occurrences shall constitute "Events of
Default" by Licensee:

          1.   the failure to pay Licensor the full amount due it under any of
the provisions of this Agreement by the prescribed date for such payment;

          2.   the failure to deliver full and accurate reports pursuant to any
of the provisions of this Agreement by the prescribed due date therefore;

          3.   the making or furnishing of a knowingly false statement in
connection with or as part of any material aspect of a report, notice or request
rendered pursuant to this Agreement;

          4.   the failure to maintain the insurance required by Article 12;

          5.   the use of the licensed mark in an unauthorized or unapproved
manner;

          6.   Licensee's use of other trademarks or in association with the
Articles, without prior written consent of Licensor;

          7.   the commencement against Licensee of any proceeding in
bankruptcy, or similar law, seeking reorganization, liquidation, dissolution,
arrangement, readjustment, discharge of debt, or seeking the appointment of a
receiver, trustee or custodian of all or any substantial part of Licensee's
property, not dismissed within sixty (60) days, or Licensee's making of an
assignment for the benefit of creditors, filing of a bankruptcy petition, its
acknowledgment of its insolvency or inability to pay debts, or taking advantage
of any other provision of the bankruptcy laws;

          8.   the material breach of any other material promise or agreement
made herein.

     B.   In the event Licensee fails to cure (i) an Event of Default within
thirty (30) days after written notice of default is transmitted to Licensee
under Article 14 A.3, A.5, A.6, or A.7; or (ii) Licensee fails to cure any other
Event of Default within sixty (60) days after written notice of default is
transmitted to Licensee or within such further

                                    Page 13



period as Licensor may allow, this Agreement shall, at Licensor's option, be
terminated, on notice to Licensee, and all the prorated Guaranteed Minimum
Royalties for the Annual Period as in Article 8 above shall become due, without
prejudice to Licensor's right to receive other payments due or owing to Licensor
under this Agreement or to any other right of Licensor, including the right to
damages and/or equitable relief.

     C.   Upon the termination of this Agreement, in the event this Agreement is
not renewed as provided in Article 4 above, or in the event of the termination
or expiration of a renewal term of this Agreement, Licensee, except as specified
below, will immediately discontinue use of the Licensed Mark, will not resume
the use thereof or adopt any colorable imitation of the Licensed Mark or any of
its parts, will promptly deliver and convey to Licensor (free of all liens and
encumbrances) (i) all plates, engravings, silk-screens, or the like used to make
or reproduce the Licensed Mark and the Designs, but not the bottle mold or
tooling which Licensor shall be entitled to purchase or recover as provided
below; and(ii) all items affixed with likeness or reproductions of the Licensed
Mark, whether Articles, labels, bags, hangers, tags or otherwise, and, upon
request by Licensor, will assign to Licensor such rights as Licensee may have
acquired in the Licensed Mark. In the event that this Agreement expires or is
terminated by Licensor due to Licensee's default, Licensor shall have an option,
but not an obligation, to purchase the bottle mold and tooling for the Articles,
free of all liens and other encumbrances, at a price equal to Licensee's cost
for same established by submission of bill(s) from supplier and satisfactory
proof of payment for same. Licensor shall pay such cost as follows: 50% (fifty)
at closing and the balance paid by six (6) equal monthly payments. Licensor
shall, at the time it exercises its purchase option, enter into a security
agreement with Licensee with respect to the mold, which shall entitle Licensee
to foreclose on its security interest in the mold in the event Licensor fails to
make any installment payment due within fifteen (15) days after receiving notice
of default. Licensor shall exercise its aforesaid option within thirty (30) days
after Licensee's submission of documents establishing cost. Notwithstanding the
foregoing, if Licensor has terminated this Agreement due to Licensee's default,
Licensor, at its option, shall be entitled, in exercising its purchase option,
to deduct from the cost price an amount equal to the sales and guaranteed
minimum royalties Licensor is entitled to recover, for which deduction Licensee
shall receive a credit. In the event Licensor exercises its aforesaid option,
Licensee shall be precluded forever from using the bottle molds or tools and
from selling or otherwise transferring or licensing any rights whatsoever in the
molds or tools to any third party. In the event that Licensor does not exercise
its aforesaid option, Licensee shall not use the bottle molds or tools or sell
or otherwise transfer or license any rights whatsoever in the bottle mold or
tools to any third party for a period of two (2) years after the determination
of the fair market value. In the event of any permitted use of the bottle mold
and/or tools by Licensee, Licensee shall not use in connection therewith the
Licensed Mark, any trademark confusingly similar thereto, any trade dress
associated with the Articles, any advertising or promotional materials used in
connection with the Articles or any other markings or materials which would
cause a reasonable consumer to believe that any new items sold using the bottle
mold and tools are authorized by Licensor or in some way associated with the
Licensed Mark. Any permitted sale or license of the bottle mold and/or tools by
Licensee shall prohibit in writing the purchaser

                                    Page 14



or licensee from using the Licensed Mark, and confusingly similar trademark and
any such trade dress, advertising, promotional materials, markings or other
materials and shall expressly make Licensor a third party beneficiary of such
provision.

                                   ARTICLE 15

                       RIGHTS ON EXPIRATION OR TERMINATION

     A.   If this Agreement expires or is terminated, Licensee shall cease to
manufacture Articles (except for work in process or to balance component
inventory) but shall be entitled, for an additional period of twelve (12) months
only, on a non-exclusive basis, to sell and dispose of its inventory subject,
however, to the provisions of paragraph D of this Article. Such sales shall be
made subject to all of the provisions of this agreement and to an accounting for
and the payment of Sales Royalty thereon but not to the payment of Guaranteed
Minimum Royalties. Such accounting and payment shall be made monthly.

     B.   In the event of termination in accordance with Article 14 above,
Licensee shall pay to Licensor, the Sales Royalty then owed to it pursuant to
this Agreement or otherwise.

     C.   Notwithstanding any termination in accordance with Article 14 above,
Licensor shall have and hereby reserve all rights and remedies which it has, or
which are granted to it by operation of law, to enjoin the unlawful or
unauthorized use of the Licensed Mark, and to collect royalties payable by
Licensee pursuant to this Agreement and to be compensated for damages for breach
of this Agreement.

     D.   Upon the expiration or termination of this Agreement, Licensee shall
deliver to Licensor a complete and accurate schedule of Licensee's inventory of
Articles and of related work in process then on hand (including any such items
held by Subsidiaries, Affiliates or others on behalf of Licensee) (hereinafter
referred to as "Inventory). Such schedule shall be prepared as of the close of
business on the date of such expiration or termination and shall reflect
Licensee's cost of each such item. Notwithstanding anything contained to the
contrary in this Agreement, Licensor thereupon shall have the option,
exercisable by notice in writing delivered to Licensee within thirty (30) days
after its receipt of the complete Inventory schedule, to purchase any or all of
the Inventory, free of all liens and other encumbrances, for an amount equal to
Licensee's cost plus 20%. In the event such notice is sent by Licensor, Licensee
shall deliver to Licensor or its designee all of the Inventory referred to
therein within thirty (30) days after Licensor's said notice and, in respect of
any Inventory so purchased, assign to Licensor all then outstanding orders from
Licensee to its suppliers and to Licensee from its customers. Licensor shall pay
Licensee for such Inventory within twenty (20) days after the delivery of such
Inventory to Licensor. No Sales Royalty shall be payable to Licensor with
respect to any such inventory purchased by Licensor.

                                    Page 15



                                   ARTICLE 16

                          SUBLICENSING AND DISTRIBUTION

     A.   (i)    This Agreement and the License or other rights granted
hereunder may be assigned, sublicensed, joint ventured or transferred by
Licensee, upon the approval of Licensor in advance, in writing, which approval
will not be unreasonably denied or delayed. Any transferee shall be required to
prove to Licensor that it is capable of meeting the financial obligations
contained herein.

          (ii)   CONSOLIDATION. Notwithstanding anything contained to the
contrary in this Agreement, this Agreement shall not terminate if Licensee is
merged or otherwise consolidated into another entity which is the surviving
entity of equal or superior financial strength.

     B.   Licensee shall be entitled to use distributors in connection with its
sale of Articles under this Agreement without approval of Licensor. No such
distributor, however, shall be entitled to exercise any of Licensee's rights
hereunder except for the sale of Articles which have been approved by Licensor
hereunder.

                                   ARTICLE 17

                                  MISCELLANEOUS

     A.   REPRESENTATIONS. The parties respectively represent and warrant that
they have full right, power and authority to enter into this Agreement and
perform all of their obligations hereunder and that they are under no legal
impediment which would prevent their signing this Agreement or consummating the
same. Licensor represents and warrants that it has the right to license the
Licensee the Licensed Mark and that Licensor has not granted any other existing
license to use the Licensed Mark on products covered hereunder in the Territory
and that no such license will be granted during the term of this Agreement
except in accordance with the provisions hereof.

     B.   LICENSOR'S RIGHTS. Not withstanding anything to the contrary contained
in this Agreement, Licensor shall not have the right to negotiate or enter into
agreements with third parties pursuant to which it may grant a license to use
the Licensed Mark in connection with the manufacture, distribution and/or sale
of products covered hereunder in the Territory or provide consultation and
design services with respect to such products in the Territory prior to the
termination or expiration of this Agreement.

     C.   LICENSOR'S RETAIL STORES. In the event Licensor (or Ms. Paris Hilton)
opens one or more retail stores or boutiques selling various products bearing
the Licensed Mark, Licensee agrees to sell Articles to Licensor for sale in such
stores at the established U.S. retail price for the specific Article, less an
additional * discount. Licensee further agrees

                                    Page 16



that any sales pursuant to this paragraph shall be included in the computation
of Net Sales for any applicable Annual Period hereunder.

     D.   GOVERNING LAW; ENTIRE AGREEMENT. This Agreement shall be construed and
interpreted in accordance with the laws of the State of Florida applicable to
agreements made and to be performed in said State, contains the entire
understanding and agreement between the parties hereto with respect to the
subject matter hereof, supersedes all prior oral or written understandings and
agreements relating thereto and may not be modified, discharged or terminated,
nor may any of the provisions hereof be waived, orally.

     E.   NO AGENCY. Nothing herein contained shall be construed to constitute
the parties hereto as partners or as joint venturers, or either as agent of the
other, and Licensee shall have no power to obligate or bind Licensor in any
manner whatsoever.

     F.   NO WAIVER. No waiver by either party, whether express or implied, of
any provision of this Agreement, or of any breach or default thereof, shall
constitute a continuing waiver of such provision or of any other provision of
this Agreement. Acceptance of payments by Licensor shall not be deemed a waiver
by Licensor of any violation of or default under any of the provisions of this
Agreement by Licensee.

     G.   VOID PROVISIONS. If any provision or any portion of any provision of
this Agreement shall be held to be void or unenforceable, the remaining
provisions of this Agreement and the remaining portion of any provision held
void or unenforceable in part shall continue in full force and effect.

     I.   CONSTRUCTION. This Agreement shall be construed without regard to any
presumption or other rule requiring construction against the party causing this
Agreement to be drafted. If any words or phrases in this Agreement shall have
been stricken out or otherwise eliminated, whether or not any other words or
phrases have been added, this Agreement shall be construed as if those words or
phrases were never included in this Agreement, and no implication or inference
shall be drawn from the fact that the words or phrases were so stricken out or
otherwise eliminated.

     H.   FORCE MAJEURE. Neither party hereto shall be liable to the other for
delay in any performance or for the failure to render any performance under the
Agreement (other than payment to any accrued obligation for the payment of
money) when such delay or failure is by reason of lockouts, strikes, riots,
fires, explosions, blockade, civil commotion, epidemic, insurrection, war or
warlike conditions, the elements, embargoes, act of God or the public enemy,
compliance with any law, regulation or other governmental order, whether or not
valid, or other similar causes beyond the control of the party effected. The
party claiming to be so affected shall give notice to the other party promptly
after it learns of the occurrence of said event and of the adverse results
thereof. Such notice shall set forth the nature and extent of the event. The
delay or failure shall not be excused unless such notice is so given.
Notwithstanding any other provision of this Agreement, either party may
terminate this Agreement if the other party is unable to

                                    Page 17



perform any or all of its obligations hereunder for a period of six (6) months
by reason of said event as if the date of termination were the date set forth
herein as the expiration date hereof. If either party elects to terminate this
Agreement under this paragraph, Licensee shall have no further obligations for
the Guaranteed Minimum Royalty beyond the date of termination (which shall be
prorated if less than an Annual Period is involved) and shall be obligated to
pay any Sales Royalty which is then due or becomes due.

     J.   BINDING EFFECT. This Agreement shall inure to the benefit of and shall
be binding upon the parties, their respective successors, Licensor's transferees
and assigns and Licensee's permitted transferees and assigns.

     K.   RESOLUTION OF DISPUTES. Any controversy or claim arising out of, in
connection with, or relating to this Agreement, shall be determined by
arbitration by a three person arbitration panel at the office of the American
Arbitration Association. Both Parties shall share equally the cost of such
arbitration (except each shall bear its own attorney's fees). Any decision
rendered by the arbitrators shall be final and binding, and judgment may be
entered in any court having jurisdiction.

     L.   CONSOLIDATION. Notwithstanding anything contained to the contrary in
this Agreement (a) this Agreement shall not terminate if Licensor is merged or
otherwise consolidated into another entity which is the surviving entity. (b)
Licensor shall be entitled to assign this Agreement to any Corporation to which
the Licensed Mark is assigned.

     M.   SURVIVAL. The provisions of Articles 11, 12A, 12D, 13, 15, 16, and 17
shall survive any expiration or termination of this Agreement.

     N.   PARAGRAPH HEADINGS. The paragraph headings in this Agreement are for
convenience of reference only and shall be given no substantive effect.

                                   ARTICLE 18

                                     NOTICES

     Any notice or other communications required or permitted by this Agreement
to be given to a party will be in writing and will be considered to be duly
given when sent by any recognized overnight courier service to the party
concerned to the following persons or addresses (or to such other persons or
addresses as a party may specify by notice to the other):

                                    Page 18



TO LICENSOR       Ms. Paris Hilton c/o Ms. Wendy White
                  250 North Canon Dr. 2nd Floor,
                  Beverly Hills, CA 90210

WITH A COPY TO:   Robert L. Tucker, Esq., Tucker & Latifi, LLP
                  160 East 84th Street, New York, NY 10028
                  Tel: 212-472-6262; Fax: 212-744-6509.
                  RTucker@TuckerLatifi.com

TO LICENSEE:      PARLUX FRAGRANCES, INC.
                  3725 SW 30TH Avenue
                  Ft. Lauderdale, Florida, 33312
                  Attention: Ilia Lekach
                  Chairman & CEO
                  Fax : (954) 316-8155

WITH A COPY TO:   Mitchell Schrage & Associates
                  Tower 56, 126 East 56th Street
                  New York, New York 10022
                  Attention: Mitchell R. Schrage, Esq.
                  Fax: (212) 758-1616

                                    Page 19



Notice of the change of any such address shall be duly given by either party to
the other in the manner herein provided.

     EXECUTED as of the day and year first written above:

                             PARLUX FRAGRANCES, INC.

                          By:   /s/ Frank A. Buttacavoli
                             ------------------------------
           Frank A. Buttacavoli, Executive Vice President / COO / CFO

                         PARIS HILTON ENTERTAINMENT INC.

                              By:   /s/ Paris Hilton
                                 ----------------------
                              Paris Hilton, President

     Compliance with the terms of this Agreement shall constitute compliance
with the terms of the Master License. In the event of a termination of the
Master License granted to Licensor, prior to the expiration of this Agreement
(and any extensions thereof) Ms. Paris Hilton warrants and represents that the
successor entity to the rights to the PARIS HILTON trademark shall assume the
obligations and succeed to the rights of the Licensor and the rights of Licensee
shall continue unaffected.

                            ACKNOWLEDGE AND APPROVED:

                                /s/ Paris Hilton
                            -------------------------
                                  Paris Hilton

                                    Page 20

EX-10.75

                                                                   EXHIBIT 10.75


                              EMPLOYMENT AGREEMENT
                              --------------------

         Agreement (the "Agreement") dated as of June 1, 2005 between Parlux
Fragrances, Inc., a corporation of the State of Delaware with offices located at
3725 S.W. 30th Avenue, Fort Lauderdale, Florida 33312 (hereinafter called the
"Company"), and Ilia Lekach, residing, at 137 Golden Beach Drive, Golden Beach,
Florida 33160 (hereinafter called the "Executive").

                                    WITNESSETH
         WHEREAS, the Company desires to continue the employment of the
Executive and the Executive is willing to be employed by the Company and accepts
such employment;

         WHEREAS, the Company and the Executive (hereinafter sometimes referred
to as "the parties") are parties to an existing Employment Agreement extending
through March 31, 2006, which is hereby terminated without liability to either
party.

         NOW THEREFORE, in consideration of the mutual promises and covenants
herein contained intending to be legally bound, the parties do hereby agree as
follows:

         1. Employment. The Company agrees to employ the Executive and the
Executive hereby accepts the terms and conditions hereinafter set forth, for a
period commencing on June 1, 2005 and ending on March 31, 2009 (the "Initial
Term") (unless terminated as specifically provided for in this Agreement).
Upon expiration of the Initial Term, the Executive's term of employment shall be
extended for an additional three (3) year period, unless either party gives
written notice of its intention not to renew this Agreement at least six (6)
months prior to the expiration of the Initial Term, in which case the
Executive's term of employment shall end upon such expiration.

         2. Position and Duties. The Executive shall serve as Chairman & Chief
Executive Officer and President of the Company and shall have the powers and
duties as may from time to time be prescribed by the Company's Board of
Directors (the "Board"), provided that the Executive's duties are consistent
with the Executive's position as a senior executive officer involved with the
general management of the Company. The Executive shall report to the Board.

         3. Place of Performance. In connection with his employment by the
Company, the Executive shall be based, and the duties to be performed, shall be
performed at the Company's principal executive offices located in Broward County
or Dade County, South Florida. Such office shall not be further relocated
without the Executive's consent.

         4. Compensation and Related Matters.

         (a) Base Salary: The Executive shall receive a base salary, exclusive
of benefits (the "Base Salary"), in substantially equal monthly or bi-weekly
installments as follows:

         (i) For the period commencing June 1, 2005 through March 31, 2006, at
the annual rate of $400,000; for the period commencing on April 1, 2006 and
ending on March 31, 2007, at the annual rate of $475,000; for the period
commencing on April 1, 2007 and ending on March 31, 2008, at the annual rate of
$$525,000 and for the period commencing April 1, 2008 and ending March 31, 2009,
at an annual rate of $600,000.



         (b) Expenses: During the term of his employment under this Agreement,
the Executive shall be entitled to receive prompt reimbursement for all
reasonable business expenses incurred by him in accordance with the policies and
procedures of the Company for reimbursement of business expenses by its senior
executive officers, provided that the Executive accounts for the expenses in
accordance with the Company's policies.

         (c) Other Benefits: The Executive shall be entitled to participate in
or receive benefits under all executive benefit plans and arrangements made
available by the Company at any time to its employees and key management
executives. Nothing paid to the Executive under any plan or arrangement
presently in effect or made available in the future shall be deemed to be in
lieu of the Base Salary or any other obligation payable to the Executive
pursuant to this Agreement.

         (d) Vacations: The Executive shall be entitled to the number of paid
vacation days in each fiscal year determined by the Company from time to time
for its senior executive officers, but not less than four weeks in any fiscal
year.

(e) Perquisites: The Executive shall be entitled to receive all perquisites and
fringe benefits provided or available to senior executive officers of the
Company in accordance with present practice and as may be changed from time to
time with respect to all senior executive officers of the Company.

         (f) Stock Options: There are no stock options (warrants) granted with
this Agreement. The rights of the Executive with respect to any stock options
(warrants) previously granted to the Executive shall be determined exclusively
by the plans and agreements relating to the options (warrants) and this
Agreement shall not affect in any way the rights and obligations of the plans
and agreements.

         5. Non-competition; unauthorized disclosure:

         (a) No material competition: Except with respect to services performed
under this Agreement on behalf of the Company, and subject to the obligations of
the Executive as an officer of the Company and the employment obligations of the
Executive under this Agreement, the Executive agrees that at no time during the
term of this Agreement or, for a period of one year immediately following any
termination of this Agreement for any reason other than a change in control as
defined in Section 6 (d) of this Agreement, will he engage in any business if,
within thirty (30) days of the Executive advising the Company in writing of his
proposed business activity, the Board determines in good faith that such
proposed business activity is directly competitive with a material part of the
business of the Company and its subsidiaries (both present and future) and
such competitive business activity is reasonably likely to materially affect in
an adverse manner the consolidated sales, profits or financial condition of the
Company.

         (b) Unauthorized disclosures: During the period of his employment under
this Agreement, the Executive shall not, without the written consent of the
Board or a person authorized by the Board, disclose to any person, other than an
Executive of the Company or person to whom disclosure is reasonably necessary or
appropriate in connection with the performance by the Executive of his duties as
an executive of the company, any material confidential information obtained by
him while in the employ of the company with respect to any of the Company's

                                       2



customers, suppliers, creditors, lenders, investment bankers or methods of
marketing, the disclosure of which he knows will materially damage the Company;
provided, however, that confidential information shall not include any
information known generally to the public (other than as a result of
unauthorized disclosure by the Executive) or any information of a type not
otherwise considered confidential by persons engaged in the same business or a
business similar to that conducted by the Company. For the period ending one
year following the termination of employment under this Agreement for any
reason, the Executive shall not disclose any confidential information of the
type described above except as determined by him to be reasonably necessary in
connection with any business or activity in which he is then engaged.

                                       2



         (c) Certain Provisions: The limitations of Section 5 (a) shall
terminate if upon termination of this Agreement for any reason the Company does
not fulfill its obligations as required by Section 7 of this Agreement; however,
such termination shall not affect the rights of the Executive to receive all
payments he is entitled to receive under Section 7. The provisions of Section 5
shall apply during the time the Executive is receiving any payments from the
Company as a result of a termination of this Agreement pursuant to Section 6
(b).

         6. Termination. The Company may terminate the Executive's employment
under this Agreement prior to the expiration of the term set forth in Section 1
only under the following circumstances:

         (a) Death. Upon the Executive's death.

         (b) Disability. If , as a result of the Executive's incapacity due to
physical or mental illness, the Executive shall have been absent from his duties
under this Agreement on a full time basis for 120 calendar days during any
calendar year, then 30 days after written notice of termination is given to the
Executive (which may only be given after the end of the 120 day period),
provided that he has not returned to his duties under this Agreement on a full
time basis.

         (c) Cause. For Cause. The Company shall have "Cause" to terminate the
Executive's employment under this Agreement upon (A) the willful and continued
failure by the Executive to substantially perform his duties under this
Agreement (other than any failure resulting from the Executive's incapacity due
to physical or mental illness) for thirty (30) days after written demand for
substantial performance is delivered by the Company specifically identifying the
manner in which the Company believes the Executive has not substantially
performed his duties, or (B) the willful engaging by the Executive in misconduct
(including embezzlement and criminal fraud) which is materially injurious to
the Company, or (C) the willful violation by the Executive of Section 5 of this
Agreement, provided that the violation results in material injury to the
Company, or (D) the conviction of the Executive of a felony. For purposes of
this paragraph, no act, or failure to act, by the Executive shall be considered
"willful" unless done or omitted to be done, by him not in good faith and
without reasonable belief that his action or omission was in the interest of the
Company. The Executive shall not be deemed to have been terminated for Cause
unless and until there shall have been delivered to the Executive a copy of a
resolution, duly adopted by the affirmative vote of a majority of the entire
membership of the Board at a meeting of the Board called and held for such
purpose (after a reasonable notice to the Executive and an opportunity for him,
together with his counsel, to be heard before the Board), finding that in the

                                       3



good faith opinion of the Board the Executive was guilty of conduct set forth
above in clause (A), (B), (C) or (D) and specifying the particulars of the
conduct in detail.

         (d) Termination by the Executive. The Executive may terminate his
employment under this Agreement (i) for Good Reason (as defined below) or (ii)
if his health should become impaired to any extent that makes the continued
performance of his duties under this Agreement hazardous to his physical or
mental health or his life, provided that the Executive shall have furnished the
Company with a written statement from a qualified doctor to that effect and
provided further that at the Company's request and expense the Executive shall
submit to an examination by a doctor selected by the Company, and the doctor
shall have concurred in the conclusion of the Executive's doctor.

         "Good Reason" means the Company has (through its Board or otherwise)
(A) limited the powers of the Executive in any manner not contemplated by
Section 2, (B) failed to comply with Section 3 or 4, (C) failed to cause any
successor as contemplated in Section 8 of this Agreement to assume this
Agreement, or (D) a change in control. The Executive shall give the Company 30
days prior written notice of his intent to terminate this Agreement as a result
of clause (A), (B), (C) or (D) and the Company shall have the right to cure
within the 30 day period. For purposes of this Agreement, a change in control
means the occurrence of one or more of the following events (whether or not
approved by the Board): (i) an event or series of events by which any person or
other entity or group of persons or other entities acting in concert as
determined in accordance with Section 13 (d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), whether or not applicable, together
with its or their affiliates or associates shall, as a result of a tender offer
or exchange offer, open market purchases, privately negotiated purchases, merger
or otherwise (including pursuant to receipt of revocable proxies) (A) be or
become directly or indirectly the beneficial owner (within the meaning of Rule
13d-3 and Rule 13d-5 under the Exchange Act, whether or not applicable, except
that a person shall be deemed to have beneficial ownership of all securities
that such person has the right to acquire whether such right is exercisable
immediately or only after the passage of time) of more than 30% of the combined
voting power of the then outstanding common stock of the Company or (B)
otherwise have the ability to elect, directly or indirectly, a majority of the
members of the Board.

         (e) Notice of Termination. Any termination of the Executive's
employment by the Company or by the Executive (other than termination pursuant
to subsection (a) above) shall be communicated by written Notice of Termination
to the other party of this Agreement. "Notice of Termination" means a notice
which indicates the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under the
provision so indicated.

         (f) Date of Termination. Date of termination means (i) if the
Executive's employment is terminated by his death, the date of his death, (ii)
if the Executive's employment is terminated pursuant to subsection (b) above, 30
days after Notice of Termination is given (provided that the Executive shall
not have returned to the performance of his duties on a full-time basis during
the 30 day period), (iii) if the Executive's employment is terminated pursuant
to subsection (c) above, the date specified in the Notice of Termination after
the expiration of any cure periods, and (iv) if the Executive's employment is
terminated for any other reason, the date on which Notice of Termination is
given.

                                       4



         7. Compensation Upon Termination or During Disability:

         (a) Upon the Executive's death, the Company shall pay to the person
designated by the Executive in a notice filed with the Company or, if no person
is designated, to his estate as a lump sum death benefit, his full Base Salary
for a period of six months after the date of his death in addition to any
payments the Executive's spouse, beneficiaries or estate may be entitled to
receive pursuant to any pension, stock option or Executive benefit plan or life
insurance policy or similar plan or policy then maintained by the Company. Upon
full payment of all amounts required to be paid under this subsection, the
Company shall have no further obligation under this Agreement.

         (b) During any period that the Executive fails to perform his duties
under this Agreement as a result of incapacity due to physical or mental
illness, the Executive shall continue to receive his full base salary until the
Executive's employment is terminated pursuant to Section 6 (b) of this
Agreement, or until the Executive terminates his employment pursuant to Section
6 (d) (ii) of this Agreement, whichever comes first. After termination, the
Executive shall receive in equal monthly installments 100% of his base salary at
the rate in effect at the time Notice of Termination is delivered for one year,
plus any disability payments otherwise payable by or pursuant to plans provided
by the Company ("Disability Payments")

         (c) If the Executive's employment is terminated for Cause, the Company
shall pay the Executive his full base salary through the date of termination at
the rate in effect at the time Notice of Termination is delivered and the
Company shall have no further obligation to the Executive under this Agreement.

         (d) If (A) in breach of this Agreement, the Company shall terminate the
Executive's employment other than pursuant to Sections 6 (b) or 6 (c) (it being
understood that a purported termination pursuant to Sections 6 (b) or 6 (c)
which is disputed and finally determined not to have been proper shall be a
termination by the Company in breach of this Agreement), or (B) the Executive
shall terminate his employment for Good Reason, then

         (i) The Company shall pay the Executive his full base salary through
the date of termination at the rate then in effect at the time Notice of
Termination is given;

         (ii) in lieu of any further salary payments to the Executive for
periods subsequent to the Date of Termination and in consideration of the rights
of the Company under Section 5 of this Agreement, the Company shall pay
severance pay to the Executive on the fifth day following the date of
termination, in a lump sum amount equal to the entire salary due until the end
of the term of this Agreement based on an annual base salary at the highest rate
in effect during the twelve (12) months immediately preceding the date of
Termination.

(iii) In the event of a change in control of the Company as defined in Section 6
(d), the Company shall pay in a lump sum payment (or in monthly installments at
the option of the Executive) the greater of twice the amount of severance pay
required in Section 7 (d) (ii) above, or three times the annual base salary at
the highest rate in effect during the twelve (12) months immediately preceding
the date of the termination.

                                       5



         (iv) In the event of a change in control of the Company as defined in
Section 6 (d) above, the total number of outstanding unexercised options
(warrants) granted to the Executive under this Agreement or any previous
employment or other agreements, shall be doubled in quantity while retaining the
original exercise price.

         (v) The Company shall pay all reasonable legal fees and expenses
incurred by the Executive in contesting or disputing any such termination or in
seeking to obtain or enforce any right or benefit in this Agreement.

         (e) Unless the Executive is terminated for Cause, the Company shall
maintain in full force and effect, for the continued benefit of the Executive
for the greater of the remaining term of this Agreement or eighteen (18)
months after termination of this Agreement, all Executive health and
hospitalization plans and programs in which the Executive was entitled to
participate in immediately prior to the Date of Termination, provided that the
Executive's continued participation is possible under the general terms and
provisions of the plans and programs. If the Executive's participation in any
plan or program is barred, the Company shall arrange to provide the Executive
with benefits substantially similar to those which the Executive would otherwise
have been entitled to receive under the plan and program from which his
continued participation is barred.

         (f) The Executive shall not be required to mitigate the amount of any
payment provided for in this Section 7 by seeking other employment or otherwise,
however, the amount of any payment provided for in this Section 7 shall not be
reduced by any compensation earned by the Executive as the result of employment
by another employer after the Date of Termination.

         (g) In the event of a termination of this Agreement by the Executive
for Good Reason as a result of a change in control, the amount to be utilized in
Section 7 (d) (ii) shall be changed to the average compensation of the Executive
during this Agreement for the taxable years prior to such termination (all as
determined to compute the base amount for purposes of Section 280G of the
Internal Revenue Code of 1984, as amended).

         8. Successors; Binding Agreement:

         (a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, to expressly assume and agree
to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain an assumption of this Agreement prior to or
simultaneously with the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as he would be entitled to
under this Agreement if he terminated his employment for Good Reason, except for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the date of termination. As used in this
Agreement, "Company" shall mean the Company as previously defined and any
successor to its business and/or assets which executes and delivers the
agreement provided for in this Section 8 or which otherwise becomes bound by all
the terms and provisions of this Agreement by operation of law.

                                       6



         (b) This Agreement and all rights of the Executive under this Agreement
shall inure to the benefit of and be enforceable by the Executive's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while any
amounts would still be payable to him under this Agreement, including all
payments payable under Section 7, if he had continued to live, all such amounts
shall be paid in accordance with the terms of this Agreement to the Executive's
devisee, legatee, or other designee or, if there is no such designee, the
Executive's estate.

9. Notice: For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed as
follows:



             If to the Executive:            Mr. Ilia Lekach
                                             137 Golden Beach Drive
                                             Golden Beach, Florida 33160

             If to the Company:              Parlux Fragrances, Inc.
                                             3725 S.W. 30th Avenue
                                             Fort Lauderdale, Florida 33312
                                             Attention: Board of Directors

or to such other address as any party may have furnished to the others in
writing in accordance herewith, except with notices of change of address which
shall be effective only upon receipt.

         10. Entire Agreement: No provisions of this Agreement may be modified,
waived or discharged unless such is signed by the Executive and the officer of
the Company which is specifically designated by the Board. No Agreements or
representations, oral or otherwise, expressed or implied, with respect to the
subject matter of this Agreement have been made by either party which are not
set forth expressly in this Agreement and this Agreement supersedes any other
employment agreement between the Company and the Executive.

         11. Waiver of Breach: No waiver by either party to this Agreement of,
or compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of any other provision or condition
at any prior or subsequent time.
         12. Headings: The section headings contained in this Agreement have
been inserted only as a matter of convenience or reference and in no way define,
limit or describe the scope or intent of any provisions of this Agreement nor in
any way affect any of these provisions.

         13. Governing Law: The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Florida, without giving effect to conflict of law principles.

         14. Severability: The invalidity or unenforceability of any provision
or provisions of this Agreement shall not effect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force and
effect.


                                       7




         IN WITNESS WHEREOF, the parties have executed this Agreement on the
date and year first above written.

ATTEST:                                          PARLUX FRAGRANCES, INC.


s/s Esther Egozi Choukroun                       By: s/s David Stone
- ---------------------------                          ---------------------------
        WITNESS                                      David Stone, Chairman,
                                                     Compensation Committee

s/s Glenn H. Gopman                                  s/s Ilia Lekach
- ---------------------------                          ---------------------------
        WITNESS                                      Ilia Lekach, Executive



























                                       8

EX-10.76

                                                                   EXHIBIT 10.76


                              EMPLOYMENT AGREEMENT
                              --------------------

         Agreement (the "Agreement") dated as of June 1, 2003 between Parlux
Fragrances, Inc., a corporation of the State of Delaware with offices located at
3725 S.W. 30th Avenue, Fort Lauderdale, Florida 33312 (hereinafter called the
"Company"), and Frank A. Buttacavoli, residing at 5451 Alton Road, Miami Beach,
Florida 33140 (hereinafter called the "Executive").

                                    WITNESSETH

         WHEREAS, the Company desires to continue the employment of the
Executive and the Executive is willing to be employed by the Company and accepts
such employment;

         WHEREAS, the Company and the Executive (hereinafter sometimes referred
to as "the parties") are parties to an existing Employment Agreement extending
through March 31, 2006, which is hereby terminated without liability to either
party.

         NOW THEREFORE, in consideration of the mutual promises and covenants
herein contained intending to be legally bound, the parties do hereby agree as
follows:

         1. Employment. The Company agrees to employ the Executive and the
Executive hereby accepts the terms and conditions hereinafter set forth, for a
period commencing on June 1, 2005 and ending on March 31, 2009 (the "Initial
Term") (unless terminated as specifically provided for in this Agreement).
Upon expiration of the Initial Term, the Executive's term of employment shall be
extended for an additional three (3) year period, unless either party gives
written notice of its intention not to renew this Agreement at least six (6)
months prior to the expiration of the Initial Term, in which case the
Executive's term of employment shall end upon such expiration.

         2. Position and Duties. The Executive shall serve as Executive Vice
President, Chief Operating Officer and Chief Financial Officer of the Company
and shall have the powers and duties as may from time to time be prescribed by
the Company's Chief Executive Officer and Board of Directors (the "Board"),
provided that the Executive's duties are consistent with the Executive's
position as a senior executive officer involved with the general management of
the Company. The Executive shall report to the Chief Executive Officer.

         3. Place of Performance. In connection with his employment by the
Company, the Executive shall be based, and the duties to be performed, shall be
performed at the Company's principal executive offices located in Broward County
or Dade County, South Florida. Such office shall not be further relocated
without the Executive's consent.

         4. Compensation and Related Matters.

         (a) Base Salary: The Executive shall receive a base salary, exclusive
of benefits (the "Base Salary"), in substantially equal monthly or bi-weekly
installments as follows:

         (i) For the period commencing June 1, 2005 through March 31, 2006, at
the annual rate of $285,000; for the period commencing on April 1, 2006 and
ending on March 31, 2007, at the annual rate of $325,000; for the period
commencing on April 1, 2007 and ending on March 31, 2008, at the annual rate of
$350,000; and for the period commencing on April 1, 2008 and ending on March 31,
2009, at the annual rate of $400,000.



         (b) Expenses: During the term of his employment under this Agreement,
the Executive shall be entitled to receive prompt reimbursement for all
reasonable business expenses incurred by him in accordance with the policies and
procedures of the Company for reimbursement of business expenses by its senior
executive officers, provided that the Executive accounts for the expenses in
accordance with the Company's policies.

         (c) Other Benefits: The Executive shall be entitled to participate in
or receive benefits under all executive benefit plans and arrangements made
available by the Company at any time to its employees and key management
executives. Nothing paid to the Executive under any plan or arrangement
presently in effect or made available in the future shall be deemed to be in
lieu of the Base Salary or any other obligation payable to the Executive
pursuant to this Agreement.

         (d) Vacations: The Executive shall be entitled to the number of paid
vacation days in each fiscal year determined by the Company from time to time
for its senior executive officers, but not less than four weeks in any fiscal
year.

(e) Perquisites: The Executive shall be entitled to receive all perquisites and
fringe benefits provided or available to senior executive officers of the
Company in accordance with present practice and as may be changed from time to
time with respect to all senior executive officers of the Company.

         (f) Stock Options: There are no stock options (warrants) granted with
this Agreement. The rights of the Executive with respect to any stock options
(warrants) previously granted to the Executive shall be determined exclusively
by the plans and agreements relating to the options (warrants) and this
Agreement shall not affect in any way the rights and obligations of the plans
and agreements.

         5. Non-competition; unauthorized disclosure:

         (a) No material competition: Except with respect to services performed
under this Agreement on behalf of the Company, and subject to the obligations of
the Executive as an officer of the Company and the employment obligations of the
Executive under this Agreement, the Executive agrees that at no time during the
term of this Agreement or, for a period of one year immediately following any
termination of this Agreement for any reason other than a change in control as
defined in Section 6 (d) of this Agreement, will he engage in any business if,
within thirty (30) days of the Executive advising the Company in writing of his
proposed business activity, the Board determines in good faith that such
proposed business activity is directly competitive with a material part of the
business of the Company and its subsidiaries (both present and future) and such
competitive business activity is reasonably likely to materially affect in an
adverse manner the consolidated sales, profits or financial condition of the
Company.

                                       2



         (b) Unauthorized disclosures: During the period of his employment under
this Agreement, the Executive shall not, without the written consent of the
Board or a person authorized by the Board, disclose to any person, other than an
Executive of the Company or person to whom disclosure is reasonably necessary or
appropriate in connection with the performance by the Executive of his duties as
an executive of the company, any material confidential information obtained by
him while in the employ of the company with respect to any of the Company's
customers, suppliers, creditors, lenders, investment bankers or methods of
marketing, the disclosure of which he knows will materially damage the Company;
provided, however, that confidential information shall not include any
information known generally to the public (other than as a result of
unauthorized disclosure by the Executive) or any information of a type not
otherwise considered confidential by persons engaged in the same business or a
business similar to that conducted by the Company. For the period ending one
year following the termination of employment under this Agreement for any
reason, the Executive shall not disclose any confidential information of the
type described above except as determined by him to be reasonably necessary in
connection with any business or activity in which he is then engaged.

         (c) Certain Provisions: The limitations of Section 5 (a) shall
terminate if upon termination of this Agreement for any reason the Company does
not fulfill its obligations as required by Section 7 of this Agreement; however,
such termination shall not affect the rights of the Executive to receive all
payments he is entitled to receive under Section 7. The provisions of Section 5
shall apply during the time the Executive is receiving any payments from the
Company as a result of a termination of this Agreement pursuant to Section 6
(b).

         6. Termination. The Company may terminate the Executive's employment
under this Agreement prior to the expiration of the term set forth in Section 1
only under the following circumstances:

         (a) Death. Upon the Executive's death.

         (b) Disability. If, as a result of the Executive's incapacity due to
physical or mental illness, the Executive shall have been absent from his duties
under this Agreement on a full time basis for 120 calendar days during any
calendar year, then 30 days after written notice of termination is given to the
Executive (which may only be given after the end of the 120 day period),
provided that he has not returned to his duties under this Agreement on a full
time basis.

         (c) Cause. For Cause. The Company shall have "Cause" to terminate the
Executive's employment under this Agreement upon (A) the willful and continued
failure by the Executive to substantially perform his duties under this
Agreement (other than any failure resulting from the Executive's incapacity due
to physical or mental illness) for thirty (30) days after written demand for
substantial performance is delivered by the Company specifically identifying the
manner in which the Company believes the Executive has not substantially
performed his duties, or (B) the willful engaging by the Executive in misconduct
(including embezzlement and criminal fraud) which is materially injurious to
the Company, or (C) the willful violation by the Executive of Section 5 of this
Agreement, provided that the violation results in material injury to the
Company, or (D) the conviction of the Executive of a felony. For purposes of

                                       3



this paragraph, no act, or failure to act, by the Executive shall be considered
"willful" unless done or omitted to be done, by him not in good faith and
without reasonable belief that his action or omission was in the interest of the
Company. The Executive shall not be deemed to have been terminated for Cause
unless and until there shall have been delivered to the Executive a copy of a
resolution, duly adopted by the affirmative vote of a majority of the entire
membership of the Board at a meeting of the Board called and held for such
purpose (after a reasonable notice to the Executive and an opportunity for him,
together with his counsel, to be heard before the Board), finding that in the
good faith opinion of the Board the Executive was guilty of conduct set forth
above in clause (A), (B), (C) or (D) and specifying the particulars of the
conduct in detail.

         (d) Termination by the Executive. The Executive may terminate his
employment under this Agreement (i) for Good Reason (as defined below) or (ii)
if his health should become impaired to any extent that makes the continued
performance of his duties under this Agreement hazardous to his physical or
mental health or his life, provided that the Executive shall have furnished the
Company with a written statement from a qualified doctor to that effect and
provided further that at the Company's request and expense the Executive shall
submit to an examination by a doctor selected by the Company, and the doctor
shall have concurred in the conclusion of the Executive's doctor.

         "Good Reason" means the Company has (through its Board or otherwise)
(A) limited the powers of the Executive in any manner not contemplated by
Section 2, (B) failed to comply with Section 3 or 4, (C) failed to cause any
successor as contemplated in Section 8 of this Agreement to assume this
Agreement, or (D) a change in control. The Executive shall give the Company 30
days prior written notice of his intent to terminate this Agreement as a result
of clause (A), (B), (C) or (D) and the Company shall have the right to cure
within the 30 day period. For purposes of this Agreement, a change in control
means the occurrence of one or more of the following events (whether or not
approved by the Board): (i) an event or series of events by which any person or
other entity or group of persons or other entities acting in concert as
determined in accordance with Section 13 (d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), whether or not applicable, together
with its or their affiliates or associates shall, as a result of a tender offer
or exchange offer, open market purchases, privately negotiated purchases, merger
or otherwise (including pursuant to receipt of revocable proxies) (A) be or
become directly or indirectly the beneficial owner (within the meaning of Rule
13d-3 and Rule 13d-5 under the Exchange Act, whether or not applicable, except
that a person shall be deemed to have beneficial ownership of all securities
that such person has the right to acquire whether such right is exercisable
immediately or only after the passage of time) of more than 30% of the combined
voting power of the then outstanding common stock of the Company or (B)
otherwise have the ability to elect, directly or indirectly, a majority of the
members of the Board.

         (e) Notice of Termination. Any termination of the Executive's
employment by the Company or by the Executive (other than termination pursuant
to subsection (a) above) shall be communicated by written Notice of Termination
to the other party of this Agreement. "Notice of Termination" means a notice
which indicates the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under the
provision so indicated.

                                       4



         (f) Date of Termination. Date of termination means (i) if the
Executive's employment is terminated by his death, the date of his death, (ii)
if the Executive's employment is terminated pursuant to subsection (b) above, 30
days after Notice of Termination is given (provided that the Executive shall
not have returned to the performance of his duties on a full-time basis during
the 30 day period), (iii) if the Executive's employment is terminated pursuant
to subsection (c) above, the date specified in the Notice of Termination after
the expiration of any cure periods, and (iv) if the Executive's employment is
terminated for any other reason, the date on which Notice of Termination is
given.

         7. Compensation Upon Termination or During Disability:

         (a) Upon the Executive's death, the Company shall pay to the person
designated by the Executive in a notice filed with the Company or, if no person
is designated, to his estate as a lump sum death benefit, his full Base Salary
for a period of six months after the date of his death in addition to any
payments the Executive's spouse, beneficiaries or estate may be entitled to
receive pursuant to any pension, stock option or Executive benefit plan or life
insurance policy or similar plan or policy then maintained by the Company. Upon
full payment of all amounts required to be paid under this subsection, the
Company shall have no further obligation under this Agreement.

         (b) During any period that the Executive fails to perform his duties
under this Agreement as a result of incapacity due to physical or mental
illness, the Executive shall continue to receive his full base salary until the
Executive's employment is terminated pursuant to Section 6 (b) of this
Agreement, or until the Executive terminates his employment pursuant to Section
6 (d) (ii) of this Agreement, whichever comes first. After termination, the
Executive shall receive in equal monthly installments 100% of his base salary at
the rate in effect at the time Notice of Termination is delivered for one year,
plus any disability payments otherwise payable by or pursuant to plans provided
by the Company ("Disability Payments")

         (c) If the Executive's employment is terminated for Cause, the Company
shall pay the Executive his full base salary through the date of termination at
the rate in effect at the time Notice of Termination is delivered and the
Company shall have no further obligation to the Executive under this Agreement.

         (d) If (A) in breach of this Agreement, the Company shall terminate the
Executive's employment other than pursuant to Sections 6 (b) or 6 (c) (it being
understood that a purported termination pursuant to Sections 6 (b) or 6 (c)
which is disputed and finally determined not to have been proper shall be a
termination by the Company in breach of this Agreement), or (B) the Executive
shall terminate his employment for Good Reason, then

         (i) The Company shall pay the Executive his full base salary through
the date of termination at the rate then in effect at the time Notice of
Termination is given;

                                       5



         (ii) in lieu of any further salary payments to the Executive for
periods subsequent to the Date of Termination and in consideration of the rights
of the Company under Section 5 of this Agreement, the Company shall pay
severance pay to the Executive on the fifth day following the date of
termination, in a lump sum amount equal to the entire salary due until the end
of the term of this Agreement based on an annual base salary at the highest rate
in effect during the twelve (12) months immediately preceding the date of
Termination.

         (iii) In the event of a change in control of the Company as defined in
Section 6 (d), the Company shall pay in a lump sum payment (or in monthly
installments at the option of the Executive) the greater of twice the amount of
severance pay required in Section 7 (d) (ii) above, or three times the annual
base salary at the highest rate in effect during the twelve (12) months
immediately preceding the date of the termination.

         (iv) In the event of a change in control of the Company as defined in
Section 6 (d) above, the total number of outstanding unexercised options
(warrants) granted to the Executive under this Agreement or any previous
employment or other agreements, shall be doubled in quantity while retaining the
original exercise price.

         (v) The Company shall pay all reasonable legal fees and expenses
incurred by the Executive in contesting or disputing any such termination or in
seeking to obtain or enforce any right or benefit in this Agreement.

         (e) Unless the Executive is terminated for Cause, the Company shall
maintain in full force and effect, for the continued benefit of the Executive
for the greater of the remaining term of this Agreement or eighteen (18)
months after termination of this Agreement, all Executive health and
hospitalization plans and programs in which the Executive was entitled to
participate in immediately prior to the Date of Termination, provided that the
Executive's continued participation is possible under the general terms and
provisions of the plans and programs. If the Executive's participation in any
plan or program is barred, the Company shall arrange to provide the Executive
with benefits substantially similar to those which the Executive would otherwise
have been entitled to receive under the plan and program from which his
continued participation is barred.

         (f) The Executive shall not be required to mitigate the amount of any
payment provided for in this Section 7 by seeking other employment or otherwise,
however, the amount of any payment provided for in this Section 7 shall not be
reduced by any compensation earned by the Executive as the result of employment
by another employer after the Date of Termination.

         (g) In the event of a termination of this Agreement by the Executive
for Good Reason as a result of a change in control, the amount to be utilized in
Section 7 (d) (ii) shall be changed to the average compensation of the Executive
during this Agreement for the taxable years prior to such termination (all as
determined to compute the base amount for purposes of Section 280G of the
Internal Revenue Code of 1984, as amended).


                                       6




         8. Successors; Binding Agreement:

         (a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, to expressly assume and agree
to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain an assumption of this Agreement prior to or
simultaneously with the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as he would be entitled to
under this Agreement if he terminated his employment for Good Reason, except for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the date of termination. As used in this
Agreement, "Company" shall mean the Company as previously defined and any
successor to its business and/or assets which executes and delivers the
agreement provided for in this Section 8 or which otherwise becomes bound by all
the terms and provisions of this Agreement by operation of law.

         (b) This Agreement and all rights of the Executive under this Agreement
shall inure to the benefit of and be enforceable by the Executive's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while any
amounts would still be payable to him under this Agreement, including all
payments payable under Section 7, if he had continued to live, all such amounts
shall be paid in accordance with the terms of this Agreement to the Executive's
devisee, legatee, or other designee or, if there is no such designee, the
Executive's estate.
9. Notice: For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed as
follows:

               If to the Executive:           Mr. Frank A. Buttacavoli
                                              5451 Alton Road
                                              Miami Beach, Florida 33140

               If to the Company:             Parlux Fragrances, Inc.
                                              3725 S.W. 30th Avenue
                                              Fort Lauderdale, Florida 33312
                                              Attention: Board of Directors

or to such other address as any party may have furnished to the others in
writing in accordance herewith, except with notices of change of address which
shall be effective only upon receipt.

         10. Entire Agreement: No provisions of this Agreement may be modified,
waived or discharged unless such is signed by the Executive and the officer of
the Company which is specifically designated by the Board. No Agreements or
representations, oral or otherwise, expressed or implied, with respect to the
subject matter of this Agreement have been made by either party which are not
set forth expressly in this Agreement and this Agreement supersedes any other
employment agreement between the Company and the Executive.

                                       7




         11. Waiver of Breach: No waiver by either party to this Agreement of,
or compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of any other provision or condition
at any prior or subsequent time.

         12. Headings: The section headings contained in this Agreement have
been inserted only as a matter of convenience or reference and in no way define,
limit or describe the scope or intent of any provisions of this Agreement nor in
any way affect any of these provisions.

         13. Governing Law: The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Florida, without giving effect to conflict of law principles.

         14. Severability: The invalidity or unenforceability of any provision
or provisions of this Agreement shall not effect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force and
effect.

         IN WITNESS WHEREOF, the parties have executed this Agreement on the
date and year first above written.

ATTEST:                                      PARLUX FRAGRANCES, INC.

s/s Esther Egozi Choukroun                   By: s/s David Stone
- ---------------------------------                ------------------------------
        Witness                                  David Stone, Chairman,
                                                 Compensation Committee

s/s Glen H. Gopman                               s/s Frank A. Buttacavoli
- ---------------------------------                ------------------------------
        Witness                                  Frank A. Buttacavoli, Executive


















                                       8

EX-10.77

                                                                   EXHIBIT 10.77

                              CONSULTING AGREEMENT
                              --------------------

This Consulting Agreement (hereinafter "Agreement") dated as of June 1, 2005,
between PARLUX FRAGRANCES, INC., a corporation organized and existing under the
laws of the State of Delaware (hereinafter "Corporation") and COSMIX, INC. 175
East 62nd Street, New York, New York 10021 (hereinafter "Consultant"), and
Frederick E. Purches (hereinafter "Purches"), the President of Consultant
residing at 175 East 62nd Street, New York, New York 10021. Collectively
hereinafter referred to as "Parties".

WHEREAS, Corporation, Consultant and Purches are parties to a Consulting
Agreement extending through March 31, 2006 which is hereby terminated without
liability to either party.

WHEREAS, the parties wish to enter into a new Consulting Agreement under revised
terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the mutual understanding set forth herein,
the Parties agree as follows:

1.     Consultant's Duties: The Corporation hereby engages the Consultant as its
       business and financial consultant. Subject at all times to the control
       and direction of the Corporation's Chief Executive Officer, Chief
       Operating Officer and Chief Financial Officer (hereinafter Management),
       the Consultant shall have the duties as the general advisor and
       consultant to Management on all matters pertaining to the business and to
       render all other services relevant thereto. The Consultant, by Purches,
       shall perform all other duties that may be reasonably assigned to it by
       Management provided said duties be consistent with the prestige and
       responsibility of Purches's position. The Consultant shall, through its
       agents, servants and employees, devote its best efforts at all times
       necessary to perform its duties and to advance the Corporation's best
       interests, subject to reasonable vacations. The Consultant and the
       Corporation acknowledge that the Consultant and its agents, servants and
       employees have other business interests and shall not be required to
       devote its exclusive time and attention to the performance of its duties
       hereunder.

2.     Term: Unless sooner terminated as provided in Section 7 below, this
       Agreement shall be for a term of three (3) years and ten (10) months
       commencing as of June 1, 2005 and ending on March 31, 2009; provided
       however, that the term of this Agreement shall be automatically extended
       on the same terms and conditions for a one year period and from year to
       year thereafter unless either the Corporation or the Consultant shall
       give written notice of the termination of this Agreement to the other at
       least six (6) months prior to the expiration of said term or extended
       term.




CONSULTING AGREEMENT
Page 2 of 2


3.     Compensation: For all services rendered by the Consultant under this
       Agreement, the Corporation shall pay to Consultant as compensation the
       sum of $125,000 per annum, payable in equal bi-weekly installments of
       $4,807.69.

4.     Health and Life Insurance: The Corporation shall, at no cost to the
       Consultant or Purches, provide Purches with full health insurance, basic,
       major medical and dental as well as group life insurance. Said coverage
       shall be identical to that afforded the Corporation's Management.

5.     Expenses: Consultant will be reimbursed by the Corporation for all
       reasonable business expenses incurred by the Consultant in the
       performance of its duties. Said reimbursement shall be made no less
       frequently than monthly upon submission by the Consultant of a written
       request for same.

6.     Stock Options (Warrants): There are no stock options (warrants) being
       granted with this agreement. The rights of Purches with respect to any
       stock option (warrant) previously granted to Purches shall be determined
       exclusively by the plans and agreements relating to the options
       (warrants) and this Agreement shall not affect, in any way the rights and
       obligations of the plans and agreements.

7.     Early Termination: The Corporation may terminate the Consultant's
       relationship under this Agreement prior to the expiration of the term set
       forth in Section 2 above only under the following circumstances:

       (i)    Death. Upon the death of Purches.

       (ii)   Disability. If, as a result of Purches's incapacity due to
              physical or mental illness, Purches having been unable to perform
              his duties under this Agreement for a period of six consecutive
              calendar months, then thirty (30) days after written notice of
              termination is given to Consultant (which may only be given after
              the end of the six consecutive calendar month period) provided
              that Purches has not returned to his duties under this Agreement.

       (iii)  Cause. For Cause. The Corporation shall have "Cause" to terminate
              this Agreement upon

              (a)    the willful and continued failure by Consultant to
                     substantially perform its duties under this Agreement
                     (other than any failure resulting from Purches's incapacity
                     due to physical or mental illness) for thirty (30) days
                     after written demand for substantial performance is
                     delivered by the Corporation specifically identifying the
                     manner in which the Corporation believes Consultant has not
                     substantially performed its duties, or (b) the willful
                     engaging by Consultant or Purches in misconduct (including
                     embezzlement and criminal fraud) which is



CONSULTING AGREEMENT
Page 3 of 3


                     materially injurious to the Corporation, or (c) the
                     conviction of Purches of a felony. For purposes of this
                     paragraph, no act, or failure to act, by the Consultant
                     shall be considered "willful" unless done or omitted to be
                     done, by Consultant not in good faith and without
                     reasonable belief that its action or omission was in the
                     interest of the Corporation. Consultant shall not be deemed
                     to have been terminated for Cause unless and until there
                     shall have been delivered to Consultant a copy of a
                     resolution, duly adopted by the affirmative vote of a
                     majority of the entire membership of the Board of Directors
                     (Board) at a meeting of the Board called and held for such
                     purpose (after a reasonable notice to the Consultant and an
                     opportunity for Consultant, together with its counsel, to
                     be heard before the Board), finding that in the good faith
                     opinion of the Board, Consultant was guilty of conduct set
                     forth above and specifying the particulars of the conduct
                     in detail.

       (iv)   Termination by Consultant or Purches. Consultant or Purches may
              terminate this Agreement (a) for Good Reason (as defined below) or
              (b) Purches's health should become impaired to any extent that
              makes the performance of his duties under this Agreement hazardous
              to his physical or mental health or his life, provided that
              Purches shall have furnished the Corporation with a written
              statement from a qualified doctor to that effect and provided
              further that at the Corporation's request and expense Purches
              shall submit to an examination by a doctor selected by the
              Corporation, and the doctor shall have concurred in the conclusion
              of Purches's doctor. Consultant shall give the Corporation thirty
              (30) days prior written notice of its intent to terminate this
              agreement.

              "Good Reason" means the Corporation has had a Change in Control.
              For purposes of this Agreement, a Change in Control means the
              occurrence of an event or series of events (whether or not
              approved by the Board) by which any person or other entity or
              group of persons or other entities acting in concert as determined
              in accordance with Section 12 (d) of the Securities Exchange Act
              of 1934, as amended (the "Exchange Act"), whether or not
              applicable, together with its or their affiliates or associates
              shall, as a result of a tender offer or exchange offer, open
              market purchases, privately negotiated purchases, merger or
              otherwise (including pursuant to receipt of revocable proxies) (a)
              be or become directly or indirectly the beneficial owner (within
              the meaning of Rule 13d-3 and Rule 13d-5 under the Exchange Act,
              whether or not applicable, except that a person shall be deemed to
              have beneficial ownership of all securities that such person has
              the right to acquire whether such right is exercisable immediately
              or only after the passage of time) of more than (30) percent of
              the combined voting power of the then outstanding common stock of
              the Corporation or (b) otherwise have the ability to elect,
              directly or indirectly, a majority of the Board.



CONSULTING AGREEMENT
Page 4 of 4


       (v)    Notice of Termination. Any termination of this Agreement shall be
              communicated by written Notice of Termination to the other party
              of this Agreement. "Notice of Termination" means a notice which
              indicates the specific termination provision in this Agreement
              relied upon and shall set forth in reasonable detail the facts and
              circumstances claimed to provide a basis for the termination of
              the Consultant's retention under the provision so indicated.

       (vi)   Date of Termination. Date of termination means (a) if the
              Agreement is terminated by Purches's death, the date of his death,
              (b) if the Consultant's retention is terminated pursuant to
              subsection 7(iii) (a) above, thirty (30) days after Notice of
              Termination is given provided that Purches shall not have returned
              to the performance of his duties during the thirty (30) day
              period, (c) if the Consultant's retention is terminated pursuant
              to subsection 7(iii) (c) above, the date specified in the Notice
              of Termination after the expiration of any cure periods, and (d)
              if the Consultant's retention is terminated for any other reason,
              the date on which Notice of Termination is given.


8.     Compensation Upon Termination or During Disability:

       (i)    Upon Purches's death, the Corporation shall pay to the person
              designated by Consultant in a notice filed with the Corporation
              or, if no person is designated, to Purches's estate as a lump sum
              death benefit, Consultant's full compensation for a period of six
              (6) months after the date of Purches's death. Upon full payment of
              amounts required to be paid under this subsection, the Corporation
              shall have no further obligation under this Agreement.

       (ii)   During any period that Purches fails to perform his duties under
              this Agreement as a result of incapacity due to physical or mental
              illness, Consultant shall continue to receive its full
              compensation until the Consultant's relationship is terminated
              pursuant to Section 7(ii) of this Agreement, or until Consultant
              shall receive a lump sum of six months' compensation.

       (iii)  If the Consultant's retention is terminated for Cause as defined
              in subsection 7(iii), the Corporation shall pay the Consultant its
              compensation through the date of termination at the rate in effect
              at the time Notice of Termination is delivered and the Corporation
              shall have no further obligation to Consultant under this
              Agreement.



CONSULTING AGREEMENT
Page 5 of 5


       (iv)   If (a) in breach of this Agreement, the Corporation shall
              terminate the Consulting relationship other than pursuant to
              Sections 7(iii) (b) or 7 (iii) (c) (it being understood that a
              purported termination pursuant to Sections 7(iii) (b) or 7(iii)
              (c) which is disputed and finally determined not to have been
              proper shall be a termination by the Corporation in breach of this
              Agreement), or (b) the Consultant shall terminate the relationship
              for Good Reason, then

              (1)    The Corporation shall pay the Consultant its full
                     compensation through the date of termination at the rate
                     then in effect at the time Notice of Termination is given
                     through the end of the Term;

              (2)    In the event of a Change in Control as defined in Section
                     7(iv), the Corporation shall pay Consultant, in a lump sum,
                     an amount equal to the greater of (a) twice the amount then
                     due through the end of the Term; or (b) two times the
                     annual compensation paid to Consultant.

              (3)    In the event of a Change in Control of the Corporation as
                     defined in Section 7(iv) above, the total number of
                     outstanding unexercised options (warrants) granted to
                     Consultant under this Agreement as well as any previous
                     employment, consultant or other agreements, shall be
                     doubled in quantity while retaining the original exercise
                     price.

              (4)    The Corporation shall pay all reasonable legal fees and
                     expenses incurred by Consultant in contesting or disputing
                     any such termination or in seeking to obtain or enforce any
                     right or benefit in this Agreement.

       (v)    Unless the Consultant is terminated for Cause, the Corporation
              shall maintain in full force and effect, for the continued benefit
              of Consultant for the greater of the remaining term of this
              Agreement or eighteen (18) months after termination of this
              Agreement, all health and hospitalization plans and programs in
              which Consultant was entitled to participate in immediately prior
              to the Date of Termination as defined in Section 4 of this
              Agreement, provided that Consultant's continued participation is
              possible under the general terms and provisions of the plans and
              programs. If Consultant's participation in any plan or program is
              barred, the Corporation shall arrange to provide the Consultant
              with benefits substantially similar to those which Consultant
              would otherwise have been entitled to receive under the plan and
              program from which his continued participation is barred.



CONSULTING AGREEMENT
Page 6 of 6


9.     Savings Clause: The determination that any provision of this Agreement is
       unenforceable shall not terminate this Agreement or otherwise affect the
       other provisions of this Agreement, it being the intention of the parties
       hereto that this Agreement shall be construed to permit the equitable
       reformation of such provision to permit the enforcement thereof, if
       possible, and otherwise to permit the enforcement of the remaining
       provisions of this Agreement as if such unenforceable provision were not
       included herein.

10.    Equitable Relief: The parties hereto agree and declare that legal
       remedies may be inadequate to enforce the provisions of this Agreement
       and that equitable relief, including specific performance and injunctive
       relief, may be used to enforce the provisions of this Agreement.

11.    Notice: Any notice required or permitted to be given under this Agreement
       shall be in writing and shall be deemed to have been given and received
       on the date when personally delivered or deposited in the United States
       Mail, registered postage prepaid, addressed:

                     a.     if to the Corporation to: Mr. Ilia Lekach Parlux
                            Fragrances, Inc. 3725 S.W. 30th Avenue Fort
                            Lauderdale, FL 33312
                     b.     if to the Consultant or Purches to: Mr. Frederick
                            Purches 175 East 62nd Street, New York, NY 10021

       or to such other address as the Corporation or the Consultant may
       designate in writing.

12.    Amendments: This Agreement may be amended or modified only by a writing.

13.    Governing Law: This Agreement shall be governed and construed under the
       laws of the State of Florida.

14.    Entire Agreement: This Agreement constitutes the entire Agreement between
       the Consultant, Purches and the Corporation, with respect to its subject
       matter, and all prior and other agreements between them, oral or written
       concerning the same subject matter are merged into this Agreement and
       thus extinguished.

15.    Survival of Covenants: Any of the provisions in this Agreement which
       would by their terms continue after the termination of this Agreement
       shall be deemed to survive such termination.

16.    Assignability and Binding Effect: This Agreement shall be binding upon
       and inure to the benefit of the Corporation and its successors and
       assigns. This Agreement may not be assigned by either party without the
       written consent of the other party hereto.





CONSULTING AGREEMENT
Page 7 of 7


IN WITNESS WHEREOF, the parties have hereunto set their hands and seals as of
the date first written above.

PARLUX FRAGRANCES, INC.


By: s/s Ilia Lekach
    -------------------------------------
Ilia Lekach, Chief Executive Officer


Consultant
COSMIX INC.


By:  s/s Frederick E. Purches
     ------------------------------------
Frederick E. Purches, President
and Frederick E. Purches
Individually

Attested to by:

s/s Frank A. Buttacavoli
- -----------------------------------------
Frank A. Buttacavoli
COO, CFO, Executive Vice President

EX-10.78

                                                                  EXHIBIT  10.78


                              CONSULTING AGREEMENT
                              --------------------


This Consulting Agreement (hereinafter "Agreement") dated as of June 1, 2005,
between PARLUX FRAGRANCES, INC., a corporation organized and existing under the
laws of the State of Delaware (hereinafter "Corporation") and CAMBRIDGE
DEVELOPMENT CORPORATION, 14 Vanderventer Avenue, Port Washington, New York 11050
(hereinafter "Consultant"), and Albert F. Vercillo (hereinafter "Vercillo"), the
President of Consultant residing at 74 Summit Road, Port Washington, New York
11050. Collectively hereinafter referred to as "Parties".

WHEREAS, Corporation, Consultant and Vercillo are parties to a Consulting
Agreement dated November 1, 1999 extending through May 31, 2006 and as amended
by Amendment No 1 dated April 1, 2005, which is hereby terminated without
liability to either party.

WHEREAS, the parties wish to enter into a new Consulting Agreement under revised
terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the mutual understanding set forth herein,
the Parties agree as follows:

1.     Consultant's Duties: The Corporation hereby engages the Consultant as its
       business and financial consultant. Subject at all times to the control
       and direction of the Corporation's Chief Executive Officer, Chief
       Operating Officer and Chief Financial Officer (hereinafter Management),
       the Consultant shall have the duties as the general advisor and
       consultant to Management on all matters pertaining to the business and to
       render all other services relevant thereto. The Consultant, by Vercillo,
       shall perform all other duties that may be reasonably assigned to it by
       Management provided said duties be consistent with the prestige and
       responsibility of Vercillo's position. The Consultant shall, through its
       agents, servants and employees, devote its best efforts at all times
       necessary to perform its duties and to advance the Corporation's best
       interests, subject to reasonable vacations. The Consultant and the
       Corporation acknowledge that the Consultant and its agents, servants and
       employees have other business interests and shall not be required to
       devote its exclusive time and attention to the performance of its duties
       hereunder.

2.     Term: Unless sooner terminated as provided in Section 7 below, this
       Agreement shall be for a term of three (3) years and ten (10) months
       commencing as of June 1, 2005 and ending on March 31, 2009; provided
       however, that the term of this Agreement shall be automatically extended
       on the same terms and conditions for a one year period and from year to
       year thereafter unless either the Corporation or the Consultant shall
       give written notice of the termination of this Agreement to the other at
       least six (6) months prior to the expiration of said term or extended
       term.




CONSULTING AGREEMENT
Page 2 of 2


3.     Compensation: For services rendered by the Consultant under this
       Agreement, the Corporation shall pay to Consultant as follows:

       (i)    For the period commencing June 1, 2005 through March 31, 2007, at
              the annual rate of $150,000, payable in equal bi-weekly
              installments of $5,769.23.

       (ii)   For the period extending from April 1, 2007 through March 31,
              2008, at the annual rate of $125,000, payable in equal bi-weekly
              installments of $4,807.69 and,

       (iii)  For the period extending from April 1, 2008 through March 31, 2009
              at the annual rate of $100,000, payable in equal bi-weekly
              installments of $3,846.15.

4.     Health and Life Insurance: The Corporation shall, at no cost to the
       Consultant or Vercillo, provide Vercillo with full health insurance,
       basic, major medical and dental as well as group life insurance. Said
       coverage shall be identical to that afforded the Corporation's
       Management.

5.     Expenses: Consultant will be reimbursed by the Corporation for all
       reasonable business expenses incurred by the Consultant in the
       performance of its duties. Said reimbursement shall be made no less
       frequently than monthly upon submission by the Consultant of a written
       request for same.

6.     Stock Options (Warrants): There are no stock options (warrants) being
       granted with this agreement. The rights of Vercillo with respect to any
       stock option (warrant) previously granted to Vercillo shall be determined
       exclusively by the plans and agreements relating to the options
       (warrants) and this Agreement shall not affect, in any way, the rights
       and obligations of the plans and agreements.

7.     Early Termination: The Corporation may terminate the Consultant's
       relationship under this Agreement prior to the expiration of the term set
       forth in Section 2 above only under the following circumstances:

       (i)    Death. Upon the death of Vercillo.

       (ii)   Disability. If, as a result of Vercillo's incapacity due to
              physical or mental illness, Vercillo having been unable to perform
              his duties under this Agreement for a period of six consecutive
              calendar months, then thirty (30) days after written notice of
              termination is given to Consultant (which may only be given after
              the end of the six consecutive calendar month period) provided
              that Vercillo has not returned to his duties under this Agreement.



CONSULTING AGREEMENT
Page 3 of 3


       (iii)  For Cause. The Corporation shall have "Cause" to terminate this
              Agreement upon

              (a)    the willful and continued failure by Consultant to
                     substantially perform its duties under this Agreement
                     (other than any failure resulting from Vercillo's
                     incapacity due to physical or mental illness) for thirty
                     (30) days after written demand for substantial performance
                     is delivered by the Corporation specifically identifying
                     the manner in which the Corporation believes Consultant has
                     not substantially performed its duties, or (b) the willful
                     engaging by Consultant or Vercillo in misconduct (including
                     embezzlement and criminal fraud) which is materially
                     injurious to the Corporation, or (c) the conviction of
                     Vercillo of a felony. For purposes of this paragraph, no
                     act, or failure to act, by the Consultant shall be
                     considered "willful" unless done or omitted to be done, by
                     Consultant not in good faith and without reasonable belief
                     that its action or omission was in the interest of the
                     Corporation. Consultant shall not be deemed to have been
                     terminated for Cause unless and until there shall have been
                     delivered to Consultant a copy of a resolution, duly
                     adopted by the affirmative vote of a majority of the entire
                     membership of the Board of Directors (Board) at a meeting
                     of the Board called and held for such purpose (after a
                     reasonable notice to the Consultant and an opportunity for
                     Consultant, together with its counsel, to be heard before
                     the Board), finding that in the good faith opinion of the
                     Board, Consultant was guilty of conduct set forth above and
                     specifying the particulars of the conduct in detail.

       (iv)   Termination by Consultant or Vercillo. Consultant or Vercillo may
              terminate this Agreement (a) for Good Reason (as defined below) or
              (b) Vercillo's health should become impaired to any extent that
              makes the performance of his duties under this Agreement hazardous
              to his physical or mental health or his life, provided that
              Vercillo shall have furnished the Corporation with a written
              statement from a qualified doctor to that effect and provided
              further that at the Corporation's request and expense Vercillo
              shall submit to an examination by a doctor selected by the
              Corporation, and the doctor shall have concurred in the conclusion
              of Vercillo's doctor. Consultant shall give the Corporation thirty
              (30) days prior written notice of its intent to terminate this
              agreement.

              "Good Reason" means the Corporation has had a Change in Control.
              For purposes of this Agreement, a Change in Control means the
              occurrence of an event or series of events (whether or not
              approved by the Board) by which any person or other entity or
              group of persons or other entities acting in concert as determined



CONSULTING AGREEMENT
Page 4 of 4


              in accordance with Section 12 (d) of the Securities Exchange Act
              of 1934, as amended (the "Exchange Act"), whether or not
              applicable, together with its or their affiliates or associates
              shall, as a result of a tender offer or exchange offer, open
              market purchases, privately negotiated purchases, merger or
              otherwise (including pursuant to receipt of revocable proxies) (a)
              be or become directly or indirectly the beneficial owner (within
              the meaning of Rule 13d-3 and Rule 13d-5 under the Exchange Act,
              whether or not applicable, except that a person shall be deemed to
              have beneficial ownership of all securities that such person has
              the right to acquire whether such right is exercisable immediately
              or only after the passage of time) of more than (30) percent of
              the combined voting power of the then outstanding common stock of
              the Corporation or (b) otherwise have the ability to elect,
              directly or indirectly, a majority of the Board.

       (v)    Notice of Termination. Any termination of this Agreement shall be
              communicated by written Notice of Termination to the other party
              of this Agreement. "Notice of Termination" means a notice which
              indicates the specific termination provision in this Agreement
              relied upon and shall set forth in reasonable detail the facts and
              circumstances claimed to provide a basis for the termination of
              the Consultant's retention under the provision so indicated.

       (vi)   Date of Termination. Date of termination means

              (a)    if the Agreement is terminated by Vercillo's death, the
                     date of his death, (b) if the Consultant's retention is
                     terminated pursuant to subsection 7(iii) (a) above, thirty
                     (30) days after Notice of Termination is given provided
                     that Vercillo shall not have returned to the performance of
                     his duties during the thirty (30) day period, (c) if the
                     Consultant's retention is terminated pursuant to subsection
                     7(iii) (c) above, the date specified in the Notice of
                     Termination after the expiration of any cure periods, and
                     (d) if the Consultant's retention is terminated for any
                     other reason, the date on which Notice of Termination is
                     given.

8.     Compensation Upon Termination or During Disability:

       (i)    Upon Vercillo's death, the Corporation shall pay to the person
              designated by Consultant in a notice filed with the Corporation
              or, if no person is designated, to Vercillo's estate as a lump sum
              death benefit, Consultant's full compensation for a period of six
              (6) months after the date of Vercillo's death. Upon full payment
              of amounts required to be paid under this subsection, the
              Corporation shall have no further obligation under this Agreement.



CONSULTING AGREEMENT
Page 5 of 5


       (ii)   During any period that Vercillo fails to perform his duties under
              this Agreement as a result of incapacity due to physical or mental
              illness, Consultant shall continue to receive its full
              compensation until the Consultant's relationship is terminated
              pursuant to Section 7(ii) of this Agreement, or until Consultant
              shall receive a lump sum of six months' compensation.

       (iii)  If the Consultant's retention is terminated for Cause as defined
              in subsection 7(iii), the Corporation shall pay the Consultant its
              compensation through the date of termination at the rate in effect
              at the time Notice of Termination is delivered and the Corporation
              shall have no further obligation to Consultant under this
              Agreement.

       (iv)   If (a) in breach of this Agreement, the Corporation shall
              terminate the Consulting relationship other than pursuant to
              Sections 7(iii) (b) or 7 (iii) (c) (it being understood that a
              purported termination pursuant to Sections 7(iii) (b) or 7(iii)
              (c) which is disputed and finally determined not to have been
              proper shall be a termination by the Corporation in breach of this
              Agreement), or (b) the Consultant shall terminate the relationship
              for Good Reason, then

              (1)    The Corporation shall pay the Consultant its full
                     compensation through the date of termination at the rate
                     then in effect at the time Notice of Termination is given
                     through the end of the Term;

              (2)    In the event of a Change in Control as defined in Section
                     7(iv), the Corporation shall pay Consultant, in a lump sum,
                     an amount equal to the greater of (a) twice the amount then
                     due through the end of the Term; or (b) two times the
                     annual compensation paid to Consultant.

              (3)    In the event of a Change in Control of the Corporation as
                     defined in Section 7(iv) above, the total number of
                     outstanding unexercised options (warrants) granted to
                     Consultant under this Agreement as well as any previous
                     employment, consultant or other agreements, shall be
                     doubled in quantity while retaining the original exercise
                     price.

              (4)    The Corporation shall pay all reasonable legal fees and
                     expenses incurred by Consultant in contesting or disputing
                     any such termination or in seeking to obtain or enforce any
                     right or benefit in this Agreement.



CONSULTING AGREEMENT
Page 6 of 6


       (v)    Unless the Consultant is terminated for Cause, the Corporation
              shall maintain in full force and effect, for the continued benefit
              of Consultant for the greater of the remaining term of this
              Agreement or eighteen (18) months after termination of this
              Agreement, all health and hospitalization plans and programs in
              which Consultant was entitled to participate in immediately prior
              to the Date of Termination as defined in Section 4 of this
              Agreement, provided that Consultant's continued participation is
              possible under the general terms and provisions of the plans and
              programs. If Consultant's participation in any plan or program is
              barred, the Corporation shall arrange to provide the Consultant
              with benefits substantially similar to those which Consultant
              would otherwise have been entitled to receive under the plan and
              program from which his continued participation is barred.

9.     Savings Clause: The determination that any provision of this Agreement is
       unenforceable shall not terminate this Agreement or otherwise affect the
       other provisions of this Agreement, it being the intention of the parties
       hereto that this Agreement shall be construed to permit the equitable
       reformation of such provision to permit the enforcement thereof, if
       possible, and otherwise to permit the enforcement of the remaining
       provisions of this Agreement as if such unenforceable provision were not
       included herein.

10.    Equitable Relief: The parties hereto agree and declare that legal
       remedies may be inadequate to enforce the provisions of this Agreement
       and that equitable relief, including specific performance and injunctive
       relief, may be used to enforce the provisions of this Agreement.

11.    Notices: Any notice required or permitted to be given under this
       Agreement shall be in writing and shall be deemed to have been given and
       received on the date when personally delivered or deposited in the United
       States Mail, registered postage prepaid, addressed:


                     a.     if to the Corporation to: Mr. Ilia Lekach Parlux
                            Fragrances, Inc. 3725 S.W. 30th Avenue Fort
                            Lauderdale, FL 33312

                     b.     if to the Consultant or Vercillo to: Mr. Albert
                            Vercillo 74 Summit Road Port Washington, NY 11050

       or to such other address as the Corporation or the Consultant may
       designate in writing.

12.    Amendments: This Agreement may be amended or modified only by a writing.

13.    Governing Law: This Agreement shall be governed and construed under the
       laws of the State of Florida.

14.    Entire Agreement: This Agreement constitutes the entire Agreement between
       the Consultant, Vercillo and the Corporation, with respect to its subject
       matter, and all prior and other agreements between them, oral or written
       concerning the same subject matter are merged into this Agreement and
       thus extinguished.




CONSULTING AGREEMENT
Page 7 of 7

15.    Survival of Covenants: Any of the provisions in this Agreement which
       would by their terms continue after the termination of this Agreement
       shall be deemed to survive such termination.

16.    Assignability and Binding Effect: This Agreement shall be binding upon
       and inure to the benefit of the Corporation and its successors and
       assigns. This Agreement may not be assigned by either party without the
       written consent of the other party hereto.

IN WITNESS WHEREOF, the parties have hereunto set their hands and seals as of
the date first written above.


PARLUX FRAGRANCES, INC.


By: s/s Ilia Lekach
    --------------------------------------
Ilia Lekach, Chief Executive Officer


Consultant
CAMBRIDGE DEVELOPMENT CORPORATION



By: s/s  Albert F. Vercillo
    ---------------------------------------
Albert F. Vercillo, President
and Albert F. Vercillo
Individually


Attested to by:

s/s Frank A. Buttacavoli
- ------------------------------
Frank A. Buttacavoli
COO, CFO, Executive Vice President

EX-23.1

                                                                    EXHIBIT 23.1



CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statements No.
333-95657 on Form S-8 and No. 333-112472 on Form S-3 of Parlux Fragrances, Inc.
of our report dated June 24, 2005 (which report expresses an unqualified opinion
and includes an explanatory paragraph relating to transactions with related
parties as described in Note 2), appearing in this Annual Report on Form 10-K of
Parlux Fragrances, Inc. for the year ended March 31, 2005.

Deloitte & Touche LLP

Certified Public Accountants

Fort Lauderdale, Florida
July 8, 2005

EX-31.1

                                                                    EXHIBIT 31.1

                                 CERTIFICATIONS

I, Ilia Lekach, certify that:

1. I have reviewed this annual report on Form 10-K of Parlux Fragrances, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant, and have:

a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.

Dated: July 8, 2005                     /s/ Ilia Lekach
                                        ---------------
                                        Ilia Lekach,
                                        Chairman and Chief Executive Officer

EX-31.2

                                                                    EXHIBIT 31.2
                                 CERTIFICATIONS

I, Frank A. Buttacavoli, certify that:

1. I have reviewed this annual report on Form 10-K of Parlux Fragrances, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant, and have:

a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.

Dated: July 8, 2005                            /s/  Frank A. Buttacavoli
                                               -------------------------
                                               Frank A. Buttacavoli,
                                               Executive Vice President,
                                               Chief Operating Officer
                                               and Chief Financial Officer

EX-32.1

                                                                    EXHIBIT 32.1

CERTIFICATIONS PURSUANT TO CHAPTER 63 OF TITLE 18 U.S.C. SECTION 1350 AS ADOPTED
            PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Parlux Fragrances, Inc. (the "Company")
on Form 10-K for the period ending March 31, 2005 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, Ilia Lekach, Chief
Executive Officer of the Company, certify, pursuant to Chapter 63 of Title 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that, to my knowledge:

1.   The Report fully complies with the requirements of Section 13(a) or 15(d)
     of the Securities Exchange Act of 1934; and

2.   The information contained in the Report fairly presents, in all material
     respects, the financial condition and results of operations of the Company.




                                       By:      /s/ Ilia Lekach
                                                -----------------------
                                                Ilia Lekach
                                                Chief Executive Officer
                                                July 8, 2005

The foregoing certification is being furnished solely pursuant to section 906 of
the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter
63 of Title 18, United States Code) and is not being filed as part of the Form
10-K or as a separate disclosure document.

A signed original of the written statement required by Section 906 has been
provided to Parlux Fragrances, Inc. and will be retained by Parlux Fragrances,
Inc. and furnished to the Securities and Exchange Commission or its staff upon
request.

EX-32.2

                                                                    EXHIBIT 32.2

CERTIFICATIONS PURSUANT TO CHAPTER 63 OF TITLE 18 U.S.C. SECTION 1350 AS ADOPTED
            PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Parlux Fragrances, Inc. (the "Company")
on Form 10-K for the period ending March 31, 2005 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, Frank A.
Buttacavoli, Chief Operating Officer and Chief Financial Officer of the Company,
certify, pursuant to Chapter 63 of Title 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my
knowledge:

1.   The Report fully complies with the requirements of Section 13(a) or 15(d)
     of the Securities Exchange Act of 1934; and

2.   The information contained in the Report fairly presents, in all material
     respects, the financial condition and results of operations of the Company.




                        By:  /s/ Frank A. Buttacavoli
                             ------------------------
                             Frank A. Buttacavoli
                             Chief Operating Officer and Chief Financial Officer
                             July 8, 2005

The foregoing certification is being furnished solely pursuant to section 906 of
the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter
63 of Title 18, United States Code) and is not being filed as part of the Form
10-K or as a separate disclosure document.

A signed original of the written statement required by Section 906 has been
provided to Parlux Fragrances, Inc. and will be retained by Parlux Fragrances,
Inc. and furnished to the Securities and Exchange Commission or its staff upon
request.