10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

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FORM 10-Q

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(Mark One)

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

For the quarterly period ended: SEPTEMBER 30, 2007

Or

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

For the transition period from ________ to ________

PARLUX FRAGRANCES, INC.

(Exact name of registrant as specified in its charter)

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DELAWARE	0-15491	22-2562955
(State or other jurisdiction of incorporation or organization)	(Commission file number)	(IRS employer identification no.)

3725 S.W. 30th Avenue, Ft. Lauderdale, FL 33312

(Address of principal executive offices) (Zip code)

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

_______________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

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 whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. Large accelerated filer ¨ Accelerated filer ý Non-accelerated filer ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

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

Class	Outstanding at November 8, 2007
[Common Stock, $0.01 par value per share]	19,644,912 shares

PART I. – FINANCIAL INFORMATION

UNAUDITED

Item 1.

Financial Statements

See pages 16 to 32.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Parlux Fragrances, Inc. is a manufacturer and international distributor of prestige products. It holds licenses for Paris Hilton fragrances, watches, cosmetics, sunglasses, handbags and other small leather accessories in addition to licenses to manufacture and distribute the designer fragrance brands of GUESS?, Jessica Simpson, Nicole Miller, XOXO, Ocean Pacific (OP), Maria Sharapova, Andy Roddick, babyGund, and Fred Hayman Beverly Hills.

Certain statements within this Form 10-Q, which are not historical in nature, including those that contain the words, “anticipate”; “believe”; “plan”; “estimate”; “expect”; “should”; “intend”; and other similar expressions, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All forward-looking statements are based on current expectations. Investors are cautioned that forward-looking statements involve many risks and uncertainties, which may affect our business and prospects, including economic, competitive, governmental and other factors included in our filings with the Securities and Exchange Commission, including the Risk Factors included in our Annual Report on Form 10-K, for the year ended March 31, 2007. Accordingly, actual results may differ materially from those expressed in the forward-loo king 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. We do not undertake any obligation to update the forward-looking information herein, which speaks only as of this date.

On May 17, 2006, we announced a two-for-one stock split of common stock in the form of a dividend, for stockholders of record on May 31, 2006 (the “Stock Split”). The Stock Split was effected on June 16, 2006 and did not include shares held in treasury. In connection with the Stock Split, we modified outstanding warrants. See Note 1 (B) to the accompanying condensed consolidated financial statements for further discussion of the effect of the modification of warrants in connection with the Stock Split and the related non-cash share-based compensation expense recorded during the six months ended September 30, 2006.

Recent Developments

Jessica Simpson Fragrance License

On June 21, 2007, we entered into an exclusive license agreement with VCJS, LLC, to develop, manufacture and distribute prestige fragrances and related products under the Jessica Simpson name. The initial term of the agreement expires five years from the date of the first product sales and is renewable for an additional five years if certain sales levels are met. We must pay a minimum royalty, whether or not any product sales are made, and spend minimum amounts for advertising based upon sales volume. We anticipate that the first fragrance under this agreement will be launched during late summer 2008.

Nicole Miller Fragrance License

On August 1, 2007, we entered into an exclusive license agreement with Kobra International, Ltd., to develop, manufacture and distribute prestige fragrances and related products under the Nicole Miller name. The initial term of the agreement expires on September 30, 2013 and is renewable for two additional terms of three years each, if certain sales levels are met. We must pay a minimum royalty, whether or not any product sales are made, and spend minimum amounts for advertising based upon sales volume. We anticipate launching a new fragrance under this license in the fall of 2008, as well as resuming the manufacturing and distribution of previously developed Nicole Miller fragrances.

Critical Accounting Policies and Estimates

In the ordinary course of business, we have made a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ significantly from those estimates under different assumptions and conditions. We have included in our Annual Report on Form 10-K for the year ended March 31, 2007 a discussion of our most critical accounting policies, which

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are those that are most important to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We have not made any changes in these critical accounting policies, nor have we made any material change in any of the critical accounting estimates underlying these accounting policies, since the Form 10-K filing, discussed above, except for the adoption of Financial Accounting Standards Board (“FASB”) Interpretation 48 (“FIN 48”) Accounting for Income Tax Uncertainties, discussed below.

On April 1, 2007, we adopted the provisions of FIN 48, which clarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance with FASB Statement of Financial Accounting Standards No. 109 Accounting for Income Taxes. FIN 48 prescribes a recognition threshold of more-likely-than-not and a measurement attribute on all tax positions taken or expected to be taken in a tax return in order to be recognized in the financial statements. In making this assessment, a company must determine whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based solely on the technical merits of the position and must assume that the tax position will be examined by appropriate taxing authority that would have full knowledge of all relevant information. Once the recognition threshold is met, the tax position is then measured to determine the actual amount of benefit to recognize in the financial statements. In addition, the recognition threshold of more-likely-than-not must continue to be met in each reporting period to support continued recognition of the tax benefit. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the financial reporting period in which that threshold is no longer met. As a result of the implementation of FIN 48, we did not recognize a liability for unrecognized tax benefits or adjust any recorded liabilities for uncertain tax positions and, accordingly, we were not required to record any cumulative effect adjustment to beginning of year retained earnings. As of both the date of adoption and September 30, 2007, there was no material liability for income tax associated with unrecognized tax benefits. We do not anticipate any material adjustments relating to unrecognized tax benefits within the next twelve months, however, the outcome of tax matters is uncertain and unforeseen results can occur.

New Accounting Pronouncements

In September 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measures (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measures required under other accounting pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. We are currently reviewing the provisions of SFAS No. 157 to determine the impact, if any, on our condensed consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB No. 115 ("SFAS No. 159"). SFAS No. 159 permits companies to choose to measure many financial instruments and certain other items at fair value in order to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 is effective for our fiscal year ending March 31, 2009. We are currently assessing the impact, if any, of this statement on our condensed consolidated financial statements.

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, fragrance 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 conti nue. If one or more of our new product introductions would be unsuccessful, or if the appeal of the celebrity would diminish, it could result in a substantial reduction in profitability and operating cash flows.

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We cannot accurately predict what affect, if any, the current economic instability will have on the upcoming holiday selling season. In addition, certain U.S. department store retailers have consolidated operations resulting in the closing of retail stores as well as implementing various inventory control initiatives. We expect that these store closings and the inventory control initiatives will continue to affect our sales in the short term.

Results of Operations

As more fully discussed in Note O to the condensed consolidated financial statements, on December 6, 2006, we sold the Perry Ellis fragrance brand license back to Perry Ellis International (“PEI”) at a price of approximately $63 million, including approximately $21 million for inventory and promotional products relating to the brand. Beginning with our third quarter ended December 31, 2006, the Perry Ellis brand activity has been presented as discontinued operations. Prior period statements of operations have been retrospectively adjusted. The discussion on results of operations that follow are based upon the results from continuing operations and exclude any discussion of discontinued operations, unless specifically noted.

We do business with fragrance distributors owned/operated by individuals related to our former Chairman and CEO. Through June 30, 2007, these sales were included as related party sales in the accompanying condensed consolidated statements of operations.  As of June 30, 2007, the former Chairman and CEO’s beneficial ownership interest in the Company was approximately 7.6%.  During the quarter ended September 30, 2007 his beneficial ownership declined to less than 5%.  Accordingly, the Company’s management determined that, effective as of July 1, 2007, transactions with such parties will no longer be reported as related party transactions.

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, since we allocate a portion of these distribution costs to costs of goods sold and include the remaining unallocated amounts as selling and distribution expenses. Selling and distribution expenses for the six months ended September 30, 2007 and 2006 include approximately $1,768,000 and $2,235,000 respectively ($446,000 and $1,286,000 for the three months ended September 30, 2007 and 2006), 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 costs is allocated to inventory in accordance with generally accepted accounting principles.

In addition, our sales tend to fluctuate with the seasons, as we experience increased sales during holiday gift giving periods.

Comparison of the three-month period ended September 30, 2007 with the three-month period ended September 30, 2006

Net Sales

During the three months ended September 30, 2007, net sales from continuing operations increased 38% to $37,353,423 as compared to $27,120,626 for the same period in the prior year. The increase is mainly attributable to an increase of $14,330,497 in gross sales of Paris Hilton brand fragrances, in particular, Paris Hilton Heiress and Heir fragrances, which began shipping domestically in the fall of 2006 and internationally shortly thereafter, along with the recent launch of the new Can Can fragrance which began shipping in September 2007. This was partially offset by a decrease in gross sales of GUESS? fragrances in the amount of $4,338,506, primarily to our international distributors, due to restrictions placed upon us by GUESS?, Inc. These restrictions are more fully discussed in Note J to our condensed consolidated financial statements.

Net sales to unrelated customers, which represented 48% of our total net sales for the three months ended September 30, 2007, increased 16% to $17,870,152 as compared to $15,455,123 for the same period in the prior year, mainly as a result of the Paris Hilton and GUESS? brand sales discussed above. In addition, effective as of July 1, 2007, sales to certain distributors, that were previously reported as related parties, are now included as unrelated international customer sales. Net sales to the U.S. department store sector decreased 4% to $5,760,384 for the three months ended September 30, 2007 as compared to $6,007,781 for the same period in the prior year, while net sales to unrelated international distributors increased 28% to $12,109,768 from $9,447,342. The increase in international net sales was primarily a result of growth in the Paris Hilton brand fragrances, particularly Paris Hil ton Heiress and Heir fragrances which began shipping domestically in the fall of 2006 and internationally shortly thereafter. This was partially offset by reduced sales of GUESS? fragrance brands due to the distribution restrictions placed by GUESS? on international shipments. Sales to related parties (See Note F to the condensed consolidated

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financial statements for further discussion of related parties) increased 67% to $19,483,271 for the three months ended September 30, 2007, compared to $11,665,503 for the same period in the prior year, mainly as a result of an increase of $10,200,418 in Paris Hilton fragrance brands partially offset by a decrease of $2,493,764 in GUESS? fragrances. As discussed further in Note F to our condensed consolidated financial statements, certain international distributers formerly reported as related parties are no longer considered as such. As sales to these parties have decreased, our sales to Perfumania have increased. We anticipate that this trend will continue as sales to Perfumania increase as a result of increased access to its distribution channels. As discussed above, effective July 1, 2007, related party sales include only sales to Perfumania, as sales to certain distributors, that were previously reported as related parties, are now included as unrelated international customer sales.

Cost of Goods Sold

Our overall cost of goods sold increased as a percentage of net sales to 55% for the three months ended September 30, 2007, compared to 51% for the comparable prior year period. Cost of goods sold as a percentage of net sales to unrelated customers and related parties approximated 60% and 51%, respectively, for the current year period, as compared to 52% and 50%, respectively, for the same period in the prior year. The current year period includes a higher percentage of sales to international distributors, which sales have lower margins than sales of these products to U.S. department store customers, which generally reflect a higher margin.   As is common in the industry, we offer international customers more generous discounts which are generally offset by reduced advertising expenditures for those sales, as the international distributors are responsible for advertising in their own territories.  Internatio nal distributors have no rights to return merchandise.

Total Operating Expenses

Total operating expenses decreased by 9% compared to the same period in the prior year to $13,725,114, from $15,139,974, decreasing as a percentage of net sales from 56% to 37%. The decrease is due to lower advertising and promotional expenses offset by increased general and administrative expenses. An analysis of individual components of our operating expenses are discussed below.

Advertising and Promotional Expenses

Advertising and promotional expenses decreased 39% to $4,232,824, compared to $6,883,033 in the comparable prior year period, decreasing as a percentage of net sales from 25% to 11%. The current period reflects a targeted effort on the part of management to control such expenses in the current year.  During the current year period, although we commenced the launch of Paris Hilton Can Can, related advertising costs will not be incurred until the product reaches the retail stores, which began in October 2007. During the prior year period we incurred promotional costs in connection with the continued roll out of Paris Hilton fragrances for women and men on a worldwide basis and the launch of the GUESS? men’s and GUESS GOLD women’s fragrance mainly in U.S. department stores.

Selling and Distribution Costs

Selling and distribution costs decreased 8% to $2,639,344 compared to $2,873,718 in the comparable prior year period, decreasing as a percentage of sales from 11% to 7%. The decrease was mainly attributable to the centralization of all distribution activities in our New Jersey facility, resulting in a decrease of staff in our Florida warehouse facility.

Royalties

Royalties increased by 21% in the current period, to $3,226,721 from $2,657,219 in the corresponding prior year period, decreasing as a percentage of net sales to 9% for the current year period from 10% in the prior year period. The higher rate in comparison to actual rates under our various license agreements is due to provisions for minimum royalties related to licensed accessory products (primarily our sunglass and cosmetics licenses).

General and Administrative Expenses

General and administrative expenses increased 29% compared to the prior year period, from $2,188,075 to $2,819,260, but remained at 8% of sales. The increase is due to a targeted increase in accounting and financial resources and audit fees in order to address and remediate the material weaknesses reported in our Annual Report on Form 10-K, for the year ended March 31, 2007, as well as additional reserves for uncollectible accounts receivable

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of $530,000 during the quarter ended September 30, 2007. Barring unforeseen circumstances, we do not anticipate this trend to continue.

Depreciation and Amortization

Depreciation and amortization increased 50% in the current year period from $537,929 to $806,965 but remained constant as a percentage of sales at 2%. The increased expense reflects the depreciation and amortization of equipment and leasehold improvements related to our New Jersey facility, which were placed in service in September 2006.

Operating Income (Loss)

As a result of the aforementioned factors, we generated operating income from continuing operations of $3,074,676 for the current period, compared to an operating loss from continuing operations of ($1,930,384) for the comparable period in the prior year.

Other Income and Gain on Sale of Investment

During the three months ended September 30, 2007, we reported other income of $498,000. This amount was primarily a gain on an insurance recovery resulting from an inventory theft, which was in excess of the recorded value of the stolen inventory. The prior year period includes a gain from the sale of our investment in E Com Ventures, Inc. (“ECMV”) in the amount of $1,774,624 (See Note F to our condensed consolidated financial statements for further discussion).

Interest expense

Interest expense (including bank charges, and net of interest income) decreased 52% to $407,658 in the current period as compared to net interest expense of $844,949 for the same period in the prior year, as we utilized less of our line of credit to finance receivables and inventory.

Income (Loss) from Continuing Operations Before Income Taxes, Income Taxes, Discontinued Operations and Net Income

Income from continuing operations before income taxes for the current period was $3,164,279 compared to a loss from continuing operations before income taxes of $1,000,709 in the same period of the prior year.

Our tax provision reflects an estimated effective rate of 38% for the current year period and a benefit for the comparable prior year period. The benefit in the prior period resulted from the sale of our shares in ECMV which resulted in a loss of $1,083,823 for income tax purposes due to a difference in basis (See Notes F and I to our condensed consolidated financial statements for further discussion).

As a result, income from continuing operations was $1,961,852 for the current year period compared to  $465,771 in the comparable period of the prior year.

Income from discontinued operations, net of the tax effect, was $69,646 in the current year period due to sales of inventory from product returns processed during this quarter, along with certain promotional costs related to Perry Ellis, compared to income of $3,183,539 in the same period of the prior year (See Note O to our condensed consolidated financial statements for further discussion).

As a result, net income for the three months ended September 30, 2007 was $2,031,498 as compared to net income of $3,649,310 in the corresponding prior year period.

Comparison of the six-month period ended September 30, 2007 with the six-month period ended September 30, 2006

Net Sales

During the six months ended September 30, 2007, net sales from continuing operations increased 24% to $68,733,891 as compared to $55,368,805 for the same period for the prior year. The increase is mainly attributable to an increase of $25,707,949 in gross sales of Paris Hilton fragrance brands as a result of the launch of Paris Hilton Heiress and Heir fragrances, which launched domestically in the fall of 2006 and internationally shortly thereafter, along with the recent launch of the new Can Can fragrance which began shipping in September 2007. This was

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offset by a decrease of $12,585,008 in gross sales of GUESS? fragrances, primarily to our international distributors, due to restrictions placed upon us by GUESS?, Inc. These restrictions are more fully discussed in Note J to our condensed consolidated financial statements.

Net sales to unrelated customers, which represented 44% of our total net sales for the six-month period ended September 30, 2007, decreased 15% to $30,438,659 compared to $35,638,606 for the same period in the prior year, mainly as a result of a decrease of $6,865,289 in gross sales of the GUESS? fragrances, offset by an increase of $3,310,197 in gross sales of Paris Hilton fragrances. Net sales to the U.S. department store sector increased 2% from $11,399,108 to $11,664,343, while net sales to international distributors decreased 23% from $24,239,498 to $18,774,316. The decrease in international net sales was primarily a result of reduced sales of GUESS? fragrance brands, as is more fully discussed in Note J to our condensed consolidated financial statements. This was offset by the growth in the Paris Hilton brand fragrances, particularly Paris Hilton Heiress and Heir fragrances which launched internationally in the spring of 2007. Sale s to related parties increased 94% to $38,295,232 compared to $19,730,199 for the same period in the prior year. The increase was attributable to increases of $22,397,752 in Paris Hilton brand gross sales, partially offset by reductions of $5,719,719 in GUESS? Brand gross sales. Sales increases of $1,887,002 for various other brands resulted in the net increase in sales to related parties. We anticipate that this trend will continue as sales to Perfumania increase as a result of increased access to its distribution channels parties (See Note F to the condensed consolidated financial statements for further discussion of related parties).

Effective July 1, 2007, related party sales include only sales to Perfumania, as sales to certain distributors, that were previously reported as related parties, are now included as unrelated international customer sales.

Cost of Goods Sold

Our overall cost of goods sold decreased slightly as a percentage of net sales to 52% for the current six months ended September 30, 2007, compared to 53% for the comparable prior year period. Cost of goods sold as a percentage of net sales to unrelated customers and related parties approximated 54% and 51%, respectively, for the current period, as compared to 53% and 52%, respectively, for the same period in the prior year. The current year period includes a higher percentage of sales to international distributors, which sales have a lower margin than sales of these products to U.S. department store customers, which generally reflect a higher margin. As is common in the industry, the Company offers international customers more generous discounts which are generally offset by reduced advertising expenditures for those sales, as the international distributors are responsible for advertising in their own territories.  I nternational distributors have no rights to return merchandise.

Total Operating Expenses

Total operating expenses decreased by 38% compared to the same period in the prior year from $47,368,628 to $29,327,917, decreasing as a percentage of net sales from 86% to 43%. However, certain individual components of our operating expenses discussed below experienced more significant changes than others.

Advertising and Promotional Expenses

Advertising and promotional expenses decreased 30% to $11,233,144, compared to $16,097,518 in the prior year period, decreasing as a percentage of net sales from 29% to 16%.  The current year period reflects a targeted effort on the part of management to control such expenses in the current year. During the current year period, although we commenced the launch of Paris Hilton Can Can, related advertising costs will not be incurred until the product reaches the retail stores, which began in October 2007.  During the prior year period we incurred promotional costs in connection with the continued roll out of Paris Hilton fragrances for women and men on a worldwide basis and the launch of the GUESS? men’s and GUESS? GOLD for women fragrances mainly in U.S. department stores.

Selling and Distribution Costs

Selling and distribution costs decreased 9% to $5,217,394 compared to $5,703,008 in the prior year period, decreasing as a percentage of net sales from 10% to 8%. The decrease was mainly attributable to the centralization of all distribution activities in our New Jersey facility, resulting in a decrease of staff in our Florida warehouse facility.

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Royalties

Royalties increased by 40% in the current period, from $4,252,813 to $5,939,062, increasing as a percentage of net sales from 8% to 9%. We anticipate that this percentage will remain relatively constant at 9% or increase slightly for the remainder of the fiscal year ending March 31, 2008, as additional sales of licensed non-fragrance products increase but minimum royalties for such products are only partially absorbed by sales.

General and Administrative Expenses

General and administrative expenses decreased 73% compared to the same period in the prior year, from $20,300,330 to $5,524,449, decreasing as a percentage of net sales from 37% to 8%. The decreased amount was attributable to a share-based compensation charge in the prior year period of $16,201,950 relating to the modification of warrants in connection with the Stock Split (See Note B to our condensed consolidated financial statements for further discussion), partially offset by targeted additions to our accounting staff  and increased audit fees to focus our remediation efforts and mitigate the material weaknesses in our internal controls, as well as additional reserves for uncollectible accounts receivable of $450,000 recorded in the quarter ended September 30, 2007.

Depreciation and Amortization

Depreciation and amortization increased 39% over the prior year period from $1,014,959 to $1,413,868, remaining constant at 2% of net sales.  The increased expense reflects the depreciation and amortization of equipment and leasehold improvements related to our New Jersey facility which were placed in service in September 2006.

Gain on Sale of Property Held for Sale

The prior year period included a gain from the sale of a warehouse facility in Sunrise, Florida. See Note M to our condensed consolidated financial statements for further discussion.

Operating Income (Loss)

As a result of the above factors, we generated operating income from continuing operations of $3,442,655 for the current period, compared to an operating loss from continuing operations of ($20,831,241) for the same period in the prior year.

Other income and Gain on Sale of Investment

During the six months ended September 30, 2007, we reported other income primarily related to a $498,000 gain on an insurance recovery resulting from an inventory theft, which was in excess of the recorded value of the stolen inventory. The prior year period includes a gain from the sale of our investment in an affiliate in the amount of $1,774,624. (See Note F to our condensed consolidated financial statements for further discussion).

Interest expense

Interest expense (including bank charges, and net of interest income) decreased 44% to $854,420 in the current period as compared to $1,534,222 for the same period in the prior year, as we utilized less of our line of credit to finance receivables and inventory.

Income (Loss) from Continuing Operations Before Income Taxes, Income Taxes, Discontinued Operations and Net Income (Loss)

Net income from continuing operations before taxes for the current period was $3,084,257 compared to a net loss from continuing operations before taxes of $20,576,508 in the same period for the prior year. Our tax provision for the current year period reflects an estimated effective rate of 38%. The effective rate in the prior period reflects (1) a limitation on the estimated deferred tax benefit that was expected to result from the share-based compensation charge related to the warrant modification, and (2) the $1,083,823 loss for income tax purposes resulting from the sale of our investment in an affiliate (See Note F to our condensed consolidated financial statements for further discussion).  The benefit from the share-based compensation charge was limited by the maximum allowable annual compensation deduction for corporate officers under Section 162 (m) of the Internal Revenue Code. Consequently, the benefit recorded in the prio r period reflected management’s best estimate at that

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time, based upon assumptions regarding the timing and market value of our common stock upon exercise of the warrants and the amount and nature of other forms of compensation to be paid to the holders of the warrants using the method in which cash compensation (salary and bonus) of the related individuals takes priority over the share-based compensation in determining the annual limitation. In February 2007, our former Chairman and CEO resigned. The estimated limitation on the deferred tax benefit that was expected to result from the share-based compensation charge related to the warrant modification was reviewed and adjusted accordingly at the time we reported our results of operations for the year ended March 31, 2007.

As a result, net income from continuing operations is $1,912,239 for the current period compared to a net loss of ($16,769,932) in the comparable period of the prior year.

Income from discontinued operations net of the tax effect, was $21,631 in the current year period due to sales of inventory from product returns processed during this quarter, along with certain promotional costs related to Perry Ellis, compared to income of $6,298,284 in the same period of the prior year operations (See Note O to the accompanying condensed consolidated financial statements for further discussion).

As a result, net income for the six months ended September 30, 2007 is $1,933,870 as compared to a net loss of ($10,471,648) in the corresponding prior year period.

Liquidity and Capital Resources

Working capital increased to $88,959,662 as of September 30, 2007, compared to $79,459,920 at March 31, 2007, primarily as a result of the reduction in non-current inventory and the issuance of common stock in connection with the exercise of warrants.

During the six months ended September 30, 2007, net cash provided by operating activities was $7,705,809 compared to net cash used in operating activities of $27,006,830 during the comparable prior year period. The current year activity reflects an increase in trade receivables, along with a decrease accounts payable and accrued expenses, offset by a refund of income taxes paid in the prior year, decreases in inventories and prepaid expenses and receipt of the remaining balance due from the sale of the Perry Ellis fragrance license. The prior year activity includes significant increases in inventory balances, as well as increases in trade receivables and prepaid expenses and an increase in accounts payable.

For the six months ended September 30, 2007, net cash provided by investing activities was $140,931 as compared to net cash provided by investing activities of $21,115,187 in the prior comparable period. The prior year amount includes proceeds of  $17,935,850 from the sale of the Sunrise facility sold in 2006  (See Note M to our condensed consolidated financial statements for further discussion) and our investment in our affiliate, partially offset by purchases of equipment and leasehold improvements for our New Jersey distribution facility. The prior year period also included an additional $4,488,502 change in restricted cash pending transfer to our lender (the current period had a decrease of $522,643 while the prior year period had a decrease of $5,011,145).

During the six months ended September 30, 2007, net cash used by financing activities was $7,846,007 compared to cash provided by financing activities of $8,155,918 in the prior year comparable period. The current period reflects the repayments of our credit facility, while the prior year period includes increases in our credit facility offset by the repayment of the mortgage on our Sunrise, Florida facility.  

As of September 30, 2007 and 2006, our ratios of the number of days sales in accounts receivable and number of days cost of sales in inventory, on an annualized basis, were as follows:

	September 30,
	2007		2006
Trade accounts receivable:
Unrelated (1)		102		107
Related:
Perfumania		121		217
Other related		N/A		70
Total		110		110
Inventories		337		444

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(1)

Calculated on gross trade receivables excluding allowances for doubtful accounts, sales returns and advertising allowances of approximately $4,051,000 and $3,618,000 in 2007 and 2006, respectively.

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The decrease in the number of days from 2006 to 2007 for unrelated customers was mainly attributable to improved collections. Due to restrictions on sales of GUESS? products and delays in receiving GUESS? products, certain international distributors exceeded their payment terms. We anticipate collection of these past due balances over the next few months. The terms for international distributors range from 60 to 90 days, compared to between 30 and 60 days for U.S. department store customers. We anticipate the number of days for the unrelated customer group will range between 75 and 90 days during the balance of fiscal 2008.

The number of days sales in trade receivables from Perfumania, Inc. (“Perfumania”) historically exceed those of our other customers, due mainly to our long-term relationship and their seasonal cash flow (See Note F to the accompanying condensed consolidated financial statements for further discussion of our relationship with Perfumania). Management closely monitors our activity with Perfumania and holds periodic discussions with Perfumania management in order to review their anticipated payments for each quarter.

As noted in Note F to our condensed consolidated financial statements, effective as of July 1, 2007, transactions with such parties formerly identified as related, through their affiliation with our former Chairman and CEO, will no longer be reported as related party transactions. Their number of days sales are included with unrelated parties in the current period, and as other related for 2006.

Due to the significant number of new product launches during fiscal year 2007, and the forecasted sales increases for these products, in particular, the GUESS? branded products, the number of days sales in inventory  increased during the prior year. During the six months ended September 30, 2007, the number of days sales in inventory decreased. We anticipate that this trend will continue to improve over the next year, as these launched products reach full distribution and GUESS? approves additional international distribution channels (See Note J to our condensed consolidated financial statements for further discussion). As of September 30, 2007, approximately $13,489,000 of our inventory, including approximately $11,610,000 related to GUESS? brand products, has been classified as non-current. As of March 31, 2007, $17,392,000 of our inventory, including $16,150,000 related to GUESS? brand products had been classified as non-curren t. However, if inventory levels remain relatively high, additional inventory write-downs may be necessary. We have revised our production and purchasing forecasts in order to improve our inventory management and believe that the carrying value of our inventory at September 30, 2007, based on current conditions, is stated at the lower of cost or market.

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

On January 10, 2006, the Loan Agreement was amended, increasing the loan amount to $30,000,000, with an additional $5,000,000 available at our option, while extending the maturity to July 20, 2008. The interest was reduced to .25% below the prime rate. During May 2006, we exercised our option and increased the line to $35,000,000.

At September 30, 2007, based on the borrowing base at that date, the credit line amounted to $35,000,000, of which $8,819,208 was outstanding. Accordingly, we had $26,180,792 available under the credit line. Restricted cash represents collections of trade accounts receivable deposited with our bank and pending transfer to GMACCC. As of September 30, 2007, $751,253 ($1,273,896 as of March 31, 2007) was on deposit with our bank pending transfer.

Substantially all of our assets, excluding our New Jersey warehouse equipment, collateralize our credit line 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. As of March 31, 2007, we were not in compliance with the fixed charge covenant. We requested an amendment of the Loan Agreement from our lender, which was granted on June 27, 2007, and which revised such covenant through March 31, 2008. As of September 30, 2007, we were not in compliance with our minimum earnings before income taxes, depreciation and amortization (“EBITDA”) requirements. We requested an amendment of our agreement from our lender, which was granted on November 9, 2007, and which revised such covenant at S eptember 30, 2007. The Loan Agreement, as

10

amended, also contains certain financial covenants relating to net worth, interest coverage and other financial ratios, which we were in compliance with as of September 30, 2007.

As of September 30, 2007, we did not have any “off-balance sheet” arrangements as that term is defined in Regulation S-K 303, nor do we 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 were to expand operations through acquisitions, new licensing arrangements or both, we may need to obtain financing. There is no assurance that we could obtain such financing or what the terms of such financing, if available, would be. In addition, the current business environment may increase the difficulty of obtaining new financing, if needed.

Contractual Obligations

There were no material changes during the quarter ended September 30, 2007 in our contractual obligations previously disclosed in our Annual Report on Form 10-K for the year ended March 31, 2007.

Item 3.

Quantitative and Qualitative Disclosures About Market Risks

During the quarter ended September 30, 2007, there have been no material changes to our exposures to market risks since March 31, 2007. Please refer to our Annual Report on Form 10-K for the year ended March 31, 2007 for a complete discussion of our exposures to market risk.

Item 4.

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, material weaknesses existed in our internal controls over financial reporting and consequently, the Company’s disclosure controls and procedures were not effective as of the end of the period covered by this Quarterly Report.

In light of the material weaknesses described below, in preparing our financial statements as of and for the quarter ended September 30, 2007, we performed additional procedures to ensure that such financial statements were fairly presented in all material respects in accordance with generally accepted accounting principles. Notwithstanding the material weaknesses described below, management believes that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, the Company’s financial condition, results of operations and cash flows for the periods and dates presented. Based upon their assessment, the material weaknesses identified by our Chief Executive Officer and Chief Financial Officer are summarized as follows:

1.

Lack of sufficient resources in our accounting and finance organization − The Company did not maintain a sufficient complement of personnel to maintain an appropriate accounting and financial reporting structure to support the activities of the Company. As of March 31, 2007, the Company had an insufficient number of personnel with clearly delineated and fully documented responsibilities in order to timely prepare and file its yearend financial statements and Annual Report on Form 10−K. In addition, the Company’s former Chief Financial Officer was responsible for preparing or compiling certain critical portions of the quarterly and annual financial information and was often responsible for performing the final review of this information. These represent a material weakness in design of internal controls over financial reporting. Due to the potential pervasive effect on the financial statements and disclosures and the absence of other mitigating controls there is a more than remote likelihood that a material misstatement of the interim and annual financial statements could occur and not be prevented or detected. This material weakness has also contributed to the next two material weaknesses below.

2.

Lack of sufficient resources to provide for suitable segregation of duties − In connection with the lack of sufficient accounting and finance resources described above, certain financial and accounting personnel had incompatible duties that permitted creation, review, processing and potential management override of certain financial data without independent review and authorization. The increase in the Company’s administrative staffing has not been commensurate with the growth in the volume of business transactions. These represent a material

11

weakness in design of internal controls over financial reporting. Due to the potential pervasive effect on the financial statements and disclosures and the absence of other mitigating controls there is a more than remote likelihood that a material misstatement of the interim and annual financial statements could occur and not be prevented or detected.

3.

Inadequate access controls with regard to computer master file information − Certain of the Company’s personnel in accounts payable and accounts receivable had access and could make changes to master files without approval. This represents a material weakness in design of internal controls over financial reporting. Due to the potential pervasive effect on the financial statements and disclosures and the absence of other mitigating controls there is a more than remote likelihood that a material misstatement of the interim and annual financial statements could occur and not be prevented or detected.

4.

Inadequate controls over the processing of certain credits to accounts receivable − The Company receives chargebacks from its customers for a variety of items. The internal controls were not adequately designed or operating in a manner to effectively support the requirements of the sales and expenditure cycles. This material weakness is the result of aggregate deficiencies in internal control activities and could result in a material misstatement of trade receivables and advertising and promotional cost that would not be prevented or detected.

5.

Inadequate controls over the processing of certain expenses, most notably, advertising and promotional expenses − Costs relating to the advertisement and promotion of the Company’s products are a significant cost of operations. The internal controls were not adequately designed or operating in a manner to establish specific controls to ensure that all advertising and promotional expenses were approved and processed on a timely basis. This material weakness is the result of aggregate deficiencies in internal control activities and could result in a material misstatement of accounts payable, accrued expenses and advertising and promotional cost that would not be prevented or detected.

6.

Inadequate controls over the processing of adjustments to accounts payable − The internal controls over accounts payable were not adequately designed or operating in a manner to effectively support the expenditure cycle. Certain adjustments were not processed timely and with proper approval. This material weakness is the result of aggregate deficiencies in internal control activities and could result in a material misstatement of accounts payable, accrued expenses and operating expenditures that would not be prevented or detected.

7.

Inadequate controls related to the inventory cycle - The internal controls over inventories were not adequately designed or operating in a manner to ensure timely review and approval of changes to the inventory master files; the completeness and accuracy of inventory stored at third party locations including updating of accounting records for inventory movement and receipts; and accuracy of costing and valuation of inventory. This material weakness is the result of aggregate deficiencies in internal control activities and could result in a material misstatement of inventory and cost of sales balances that would not be prevented and detected.

Changes In Internal Control Over Financial Reporting – Management’s Remediation Of The Material Weaknesses

Our management has discussed the material weaknesses described above and other deficiencies with our Audit Committee. In an effort to remediate the identified material weaknesses and other deficiencies, we have implemented and continue to implement a number of changes to our internal control over financial reporting including the following:

1.

A number of Executive Management changes were made effective February 2007 in order to address the weaknesses identified in the Company’s internal control procedures identified as of March 31, 2007. The Board of Directors was reorganized and a new Chairman and Chief Executive Officer was appointed. The Company appointed a new Chief Financial Officer in May 2007, to segregate duties previously performed by the Company’s Executive Vice President and Chief Operating Officer, who previously served as the Chief Financial Officer. Management developed an Audit Committee Review File which is provided to the Chair of the Audit Committee prior to the finalization of the Company’s Annual and Quarterly Reports on Forms 10-K and 10-Q. This file provides supporting documentation for all significant areas where estimates and the potential for management override exist.

2.

The Company hired additional employees in finance and accounting, and revised duties within accounts payable and accounts receivable to segregate incompatible functions.

3.

Access to master files has been restricted and the Company implemented procedures whereby computer generated reports are prepared daily, listing all changes to the accounts payable and accounts receivable

12

master files. These reports are reviewed by a designated employee independent of the respective department’s activities.

4.

The Company implemented procedures whereby all charge-backs for demonstration costs must be approved by the Vice President of Domestic Sales.

5.

The Company is enhancing its procedure documentation for Accounts Payable and is in the process of implementing procedures whereby advertising expenditures will be reviewed as part of the month end closing process to determine that billings have been received or accrued during that reporting period.

6.

The Company has implemented specific procedures for processing adjustments to Accounts Payable, including potential credits thereto.

7.

The Company implemented procedures whereby computer generated reports, listing all changes to the inventory master files are prepared daily. These reports are reviewed by a designated employee independent of the respective department’s activity. Additional personnel have been added to the department and the Company has implemented a procedure to reconcile significant inventory balances at third party locations on a periodic basis.

The Company was unable to fully test and assess the effectiveness of the internal control improvements that were implemented during the three months ended September 30, 2007.

13

PART II. – OTHER INFORMATION

Item 1.

Legal Proceedings

Litigation

On June 21, 2006, we were served with a stockholder derivative action (the “Derivative Action”) filed in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida by NECA-IBEW Pension Fund, purporting to act derivatively on behalf of the Company.

The Derivative Action named Parlux Fragrances, Inc. as a defendant, along with Ilia Lekach, Frank A. Buttacavoli, Glenn Gopman, Esther Egozi Choukroun, David Stone, Jaya Kader Zebede and Isaac Lekach, each of whom at that date was one of our directors. The Derivative Action related to the proposal from PF Acquisition of Florida LLC (“PFA”), which was owned by Ilia Lekach, to acquire all of our outstanding shares of common stock for $29.00 ($14.50 after the Stock Split) per share in cash (the “Proposal”).

The Derivative Action seeks to remedy the alleged breaches of fiduciary duties, waste of corporate assets, and other violations of law and seeks injunctive relief from the Court appointing a receiver or other truly neutral third party to conduct and/or oversee any negotiations regarding the terms of the Proposal, or any alternative transaction, on behalf of Parlux and its public shareholders, and to report to the Court and plaintiff’s counsel regarding the same. The Derivative Action alleges that the unlawful plan to attempt to buy out the public shareholders of Parlux without having proper financing in place, and for inadequate consideration, violates applicable law by directly breaching and/or aiding the other defendants’ breaches of their fiduciary duties of loyalty, candor, due care, independence, good faith and fair dealing, causing the complete waste of corporate assets, and constituting an abuse of control by the defendants. Before any response to the original complaint was due, counsel for plaintiffs indicated that an amended complaint would be filed. That First Amended Complaint (the "Amended Complaint") was served to our counsel on August 17, 2006.

The Amended Complaint continues to name the then Board of Directors as defendants along with Parlux, as a nominal defendant. The Amended Complaint is largely a collection of claims previously asserted in a 2003 derivative action, which the plaintiffs in that action, when provided with additional information, simply elected not to pursue. It adds to those claims, assertions regarding a 2003 buy-out effort and the recently abandoned buy-out effort of PFA. It also contains allegations regarding the prospect that the Company's stock might be delisted because of a delay in meeting Securties and Exchange Commission (“SEC”) filing requirements. It relies in large measure on a bevy of media articles rather than facts known to the plaintiffs.

We and the other defendants engaged Florida securities counsel, including the counsel who successfully represented us in the previous failed derivative action, and on September 18, 2006, moved to dismiss the Amended Complaint. A Second Amended Complaint was filed on October 26, 2006, which added alleged violations of securities laws, which we moved to dismiss on December 1, 2006. A hearing on the dismissal was held on March 8, 2007. On March 22, 2007, the motion to dismiss was denied and the defendants were provided twenty (20) days to respond, and a response was filed on March 29, 2007. Plaintiffs have conducted a very preliminary discovery.  Based on the allegations in the Second Amended Complaint and the information collected in the earlier litigation and presently known to us, it is believed that the Second Amended Complaint is without merit.

Victory Litigation

On August 16, 2006, we entered into a letter of intent to sell our Perry Ellis fragrance rights to Victory International (USA) LLC (“Victory”) for a total of up to $140 million: $120 million for the fragrance rights, payable in sixty (60) monthly installments of $2 million, without interest, and up to $20 million for inventory due at closing. The letter of intent was subject to the execution of a definitive agreement and the approvals associated therewith, including approval by the licensor, PEI. On October 9, 2006, PEI informed us that they would not consent to the assignment of the rights. Victory had paid a deposit of $1 million to us in connection with the letter of intent, which was refunded during October 2006.

On December 6, 2006, we entered into an agreement to sell the Perry Ellis fragrance rights and related assets, including inventory, molds and other intangible assets related thereto, to PEI, at a price of approximately $63 million, subject to final inventory valuations which are still pending. The closing took place shortly thereafter. We recorded a pre-tax gain of approximately $34.3 million on the sale for the year ended March 31, 2007.

14

On March 2, 2007, Parlux, Ilia Lekach and Frank Buttacavoli were named as defendants, along with Perry Ellis International, Inc. and its Chairman and CEO, George Feldenkreis, Rene Garcia, Quality King Distributors, Inc., E Com Ventures, Perfumania, Model Reorg, Inc., Glenn Nussdorf, DFA Holdings, Inc., Duty Free Americas, Inc., Falic Fashion Group, LLC, Simon Falic and Jerome Falic. This action by plaintiff Victory relates to PEI’s failure to consent to the assignment by us of its contractual license to the Perry Ellis brand of perfumes. The plaintiff is alleging that PEI unreasonably withheld its consent and, instead, conspired with a variety of people to prevent Victory from obtaining this license. No direct allegations are made against us. The allegations against Messrs. Lekach and Buttacavoli relate to the recent attempt by Glenn Nussdorf to replace all of our directors with his nominees. The First Amended Complaint alleges that Mr. Nussdorf and certain affiliates are among the alleged co-conspirators with PEI to prevent Victory from obtaining the license.

On May 18, 2007, we filed a motion to dismiss on behalf of Parlux, Messrs. Lekach and Buttacavoli on the basis that the complaint fails to state a cause of action against any of them.

To the best of our knowledge, there are no other proceedings threatened or pending against us, which, if determined adversely to us, would have a material effect on our financial position or results of operations and cash flows.

Item 1A.

Risk Factors

There were no material changes during the quarter ended September 30, 2007 in the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended March 31, 2007.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.

Defaults on Senior Securities

None.

Item 4.

Submission of Matters to a Vote of Security Holders

The Company did not submit any actions for shareholder approval during the quarter ended September 30, 2007.

Item 5.

Other Information

None.

Item 6.

Exhibits

Exhibit #	Description
10.1	Executive Employment Agreement, dated July 26, 2007, between Parlux Fragrances Inc. and Neil J. Katz (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed on July 30, 2007).*
10.2	Executive Employment Agreement, dated July 26, 2007, between Parlux Fragrances Inc. and Raymond J. Balsys (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K, filed on July 30, 2007).*
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.
32.1	Certification of Chief Executive Officer Pursuant to §906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer Pursuant to §906 of the Sarbanes-Oxley Act of 2002.

———————

*     Exhibits 10.1 and 10.2 are management contracts or compensatory plans, contracts or arrangements.

15

PARLUX FRAGRANCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2007			March 31, 2007
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	15,004		$	14,271
Restricted cash		751,253			1,273,896
Trade receivables, net of allowance for doubtful accounts, sales returns and advertising allowances of approximately $4,051,000 and $6,155,000, respectively		19,826,720			11,508,224
Trade receivables from related parties		20,065,292			14,032,462
Income tax receivable		3,081,041			8,820,296
Receivable from sale of fragrance brand		23,671			2,295,904
Inventories		52,798,421			56,183,036
Prepaid expenses and other current assets, net		10,986,756			15,006,230
Deferred tax assets, net		4,930,555			4,930,555
TOTAL CURRENT ASSETS		112,478,713			114,064,874
Inventories, non-current		13,489,138			17,392,000
Equipment and leasehold improvements, net		3,787,589			4,286,194
Trademarks and licenses, net		3,379,233			3,912,783
Deferred tax assets, net		2,375,867			4,823,091
Other		310,255			417,489
TOTAL ASSETS	$	135,820,795		$	144,896,431
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Borrowings, current portion	$	9,775,212		$	17,697,616
Accounts payable		11,868,419			14,496,090
Accrued expenses		1,875,420			2,411,248
TOTAL CURRENT LIABILITIES		23,519,051			34,604,954
Borrowings, less current portion		1,048,703			1,536,959
TOTAL LIABILITIES		24,567,754			36,141,913
COMMITMENTS AND CONTINGENCIES (Note L)
STOCKHOLDERS' EQUITY :
Preferred stock, $0.01 par value, 5,000,000 shares authorized, no shares issued and outstanding at September 30, 2007 and March 31, 2007		—			—
Common stock, $0.01 par value, 30,000,000 shares authorized, 29,977,289 and 29,417,289 shares issued as of September 30, 2007 and March 31, 2007, respectively		299,773			294,173
Additional paid-in capital		101,421,328			102,018,217
Retained earnings		45,542,662			45,618,841
		147,263,763			147,931,231
Less - 10,332,377 and 11,347,377 shares of common stock in treasury, at cost, at September 30, 2007 and March 31, 2007, respectively		(36,010,722	)		(39,176,713	)
TOTAL STOCKHOLDERS' EQUITY		111,253,041			108,754,518
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	135,820,795		$	144,896,431

See notes to condensed consolidated financial statements.

16

PARLUX FRAGRANCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,						Six Months Ended September 30,
	2007			2006			2007			2006
Net sales:
Unrelated customers, including licensing fees of $18,750 and $37,500 for the three and six months ended September 30, 2007 and 2006, respectively	$	17,870,152		$	15,455,123		$	30,438,659		$	35,638,606
Related parties		19,483,271			11,665,503			38,295,232			19,730,199
		37,353,423			27,120,626			68,733,891			55,368,805
Cost of goods sold:
Unrelated customers		10,659,401			8,106,081			16,524,506			19,019,537
Related parties		9,894,232			5,804,955			19,438,813			10,306,346
		20,553,633			13,911,036			35,963,319			29,325,883
Operating expenses:
Advertising and promotional		4,232,824			6,883,033			11,233,144			16,097,518
Selling and distribution		2,639,344			2,873,718			5,217,394			5,703,008
Royalties		3,226,721			2,657,219			5,939,062			4,252,813
General and administrative, (including share-based compensation expense of $16,201,950 for the six months ended September 30, 2006)		2,819,260			2,188,075			5,524,449			20,300,330
Depreciation and amortization		806,965			537,929			1,413,868			1,014,959
Total operating expenses		13,725,114			15,139,974			29,327,917			47,368,628
Gain on sale of property held for sale		—			—			—			494,465
Operating income (loss)		3,074,676			(1,930,384	)		3,442,655			(20,831,241	)
Other income (expense):
Interest income		—			5,664			93			17,271
Interest expense and bank charges		(407,658	)		(850,613	)		(854,420	)		(1,551,493	)
Gain on sale of investment in affiliate		—			1,774,624			—			1,774,624
Other income		497,771			—			497,771			—
Foreign exchange (loss) gain		(510	)		—			(1,842	)		14,331
Income (loss) from continuing operations before income taxes		3,164,279			(1,000,709	)		3,084,257			(20,576,508	)
Income tax (provision) benefit		(1,202,427	)		1,466,480			(1,172,018	)		3,806,576
Net income (loss) from continuing operations		1,961,852			465,771			1,912,239			(16,769,932	)
Discontinued operations (Note P):
Income from operations of Perry Ellis fragrance brand		112,331			5,134,741			34,888			10,158,523
Income tax provision related to Perry Ellis brand		(42,685	)		(1,951,202	)		(13,257	)		(3,860,239	)
Income from discontinued operations		69,646			3,183,539			21,631			6,298,284
Net income (loss)	$	2,031,498		$	3,649,310		$	1,933,870		$	(10,471,648	)
Income (loss) per common share:
Basic:
Continuing operations	$	0.10		$	0.03		$	0.10		$	(0.93)
Discontinued operations	$	0.00		$	0.17		$	0.00		$	0.35
Total	$	0.10		$	0.20		$	0.10		$	(0.58	)
Diluted:
Continuing operations	$	0.10		$	0.02		$	0.09		$	(0.93	)
Discontinued operations	$	0.00		$	0.16		$	0.00		$	0.35
Total	$	0.10		$	0.18		$	0.09		$	(0.58	)

See notes to condensed consolidated financial statements.

17

PARLUX FRAGRANCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

SIX MONTHS ENDED SEPTEMBER 30, 2007

(Unaudited)

	Common Stock										Treasury Stock
	Number Issued		Par Value		Additional Paid-In Capital			Retained Earnings			Number of Shares			Cost			Total
Balance at April 1, 2007		29,417,289	$	294,173	$	102,018,217		$	45,618,841			11,347,377		$	(39,176,713	)	$	108,754,518
Net income									1,933,870									1,933,870
Excess tax deficiency						(1,187,177	)											(1,187,177	)
Issuance of common stock upon exercise of warrants		560,000		5,600		590,288												595,888
Issuance of common stock from treasury shares upon exercise of warrants									(2,010,049	)		(1,015,000	)		3,165,991			1,155,942
Balance at September 30, 2007		29,977,289	$	299,773	$	101,421,328		$	45,542,662			10,332,377		$	(36,010,722	)	$	111,253,041

See notes to condensed consolidated financial statements.

18

PARLUX FRAGRANCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended September 30,
	2007			2006
Cash flows from operating activities:
Net income (loss)	$	1,933,870		$	(10,471,648	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Share-based compensation expense		—			16,201,950
Gain on sale of property held for sale		—			(494,465	)
Gain on sale of investment in affiliate		—			(1,774,624	)
Depreciation and amortization		1,413,868			1,014,959
Provision for doubtful accounts		628,719			180,000
Write downs of prepaid promotional supplies and inventories		570,000			570,000
Deferred income tax benefit		—			(1,058,034	)
Changes in assets and liabilities:
Increase in trade receivables - customers		(8,947,215	)		(2,144,753	)
Increase in trade receivables - related parties		(6,032,830	)		(5,141,084	)
Decrease in receivable from sale of fragrance brand		2,272,233			—
Decrease in income tax receivable		5,739,255			—
Decrease (increase) in inventories, current		2,934,615			(28,747,628	)
Decrease (increase) in prepaid expenses and other current assets		3,899,474			(4,630,549	)
Decrease in inventories, non-current		3,902,862			—
Decrease in deferred tax asset		2,447,224			—
Decrease (increase) in other non-current assets		107,234			(190,263	)
Increase (decrease) in accounts payable		(2,627,672	)		10,202,633
Increase in accrued expenses and income taxes payable		(535,828	)		(523,324	)
Total adjustments		5,771,939			(16,535,182	)
Net cash provided by (used in) operating activities		7,705,809			(27,006,830	)
Cash flows from investing activities:
Redemption of certificate of deposit		—			1,026,534
Net decrease in restricted cash		522,643			5,011,145
Purchases of equipment and leasehold improvements, net		(195,986	)		(3,670,963	)
Purchases of trademarks		(185,726	)		(187,379	)
Net proceeds from the sale of property held for sale		—			14,512,703
Net proceeds from the sale of investment in affiliate		—			3,423,147
Deposit on brand sale		—			1,000,000
Net cash provided by investing activities		140,931			21,115,187
Cash flows from financing activities:
(Repayments) proceeds - line of credit with GMACCC, net		(7,956,110	)		17,791,236
Proceeds - capital leases with Provident Equipment Leasing, net		—			2,761,266
Repayment - mortgage payable on property held for sale		—			(12,661,124	)
Repayments on capital leases		(454,550	)		—
Excess tax deficiency resulting from exercise of warrants		(1,187,177	)		—
Proceeds from issuance of common stock		595,888			264,540
Proceeds from issuance of common stock from treasury shares		1,155,942			—
Net cash (used in) provided by financing activities		(7,846,007	)		8,155,918
Effect of exchange rate changes on cash		—			(53	)
Net increase in cash and cash equivalents		733			2,264,222
Cash and cash equivalents, beginning of period		14,271			49,822
Cash and cash equivalents, end of period	$	15,004		$	2,314,044

See notes to condensed consolidated financial statements.

19

PARLUX FRAGRANCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

A.

Basis of Presentation

Parlux Fragrances, Inc. is a manufacturer and international distributor of prestige products. It holds licenses for Paris Hilton fragrances, watches, cosmetics, sunglasses, handbags and other small leather accessories in addition to licenses to manufacture and distribute the designer fragrance brands of GUESS?, Jessica Simpson, Nicole Miller, XOXO, Ocean Pacific (OP), Maria Sharapova, Andy Roddick, babyGund, and Fred Hayman Beverly Hills.

The accompanying condensed 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 balances and transactions have been eliminated in consolidation.

On May 17, 2006, the Company announced a two-for-one stock split of common stock in the form of a dividend, for stockholders of record on May 31, 2006 (the “Stock Split”). The Stock Split was effected on June 16, 2006 and did not include shares held in treasury. The par value of the common stock remains at $0.01 per share.

The Company generated a significant net loss from continuing operations in the year ended March 31, 2007. The Company’s business plan for the year ended March 31, 2008 includes spending reductions, including consolidation of its warehouse and distribution activities to its New Jersey facility, moving from its present office/warehouse facility into smaller, less expensive corporate offices and close monitoring of all advertising and promotional expenditures. The Company has revised its production and purchasing procedures in order to reduce inventory levels. Certain low margin, multiple product value sets, previously sold to international distributors, have been eliminated or modified to reduce their cost of goods. Based on the Company’s business plan for 2008, the Company believes that its current cash and cash equivalents, availability from its revolving credit facility (see Note E) and expected cash from operations will b e sufficient to fund its operations and capital expenditures for at least the next twelve months. There can be no assurance, however, that the Company’s business plan will be accomplished and will generate sufficient cash flows to meet the Company’s cash requirements and working capital needs. The current business environment may increase the difficulty of obtaining new financing, if needed.

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“United States” or “US”) have been omitted pursuant to those rules and regulations, although the Company believes that the disclosures made herein are adequate to make the information presented not misleading. The financial information presented herein, which is not necessarily indicative of results to be expected for the current fiscal year, reflects all adjustments (consisting only of normal recurring accruals), which, in the opinion of management, are necessary for a fair presentation of the interim unaudited condensed consolidated financial statements. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2007 as filed with the SEC on July 11, 2007.

B.

Share-Based Compensation

The Company has two stock option plans which provide for equity-based awards to its employees other than its directors and officers (collectively, the "Plans"). Under the Plans, the Company reserved 1,000,000 shares of common stock; 466,174 options (including 97,900 granted during August 2007 discussed below) were granted of which 368,274 were exercised. All stock options had an exercise price that was equal to the fair market value of the Company's stock on the date the options were granted. The term of the stock option awards is five years from the date of grant. In addition, the Company had previously issued 3,440,000 warrants to certain officers, employees, consultants and directors (1,419,000 of which are outstanding at September 30, 2007), all of which were granted at or in excess of the market value of the underlying shares at the date of grant, and are exercisable for a ten-year period.

Effective April 1, 2006, the beginning of the Company's first quarter of fiscal 2007, the Company became subject to the fair value recognition provisions of Statement of Financial Accounting Standards ("SFAS") No. 123R "Share Based Payment" (“SFAS No. 123R”), using the modified-prospective transition method. Under this

20

transition method, share based compensation expense is required to be recognized in the consolidated financial statements for stock options and warrants which are granted, modified or vested subsequent to April 1, 2006. As of March 31, 2006, all options and warrants were fully vested, and as such, adopting SFAS No. 123R on April 1, 2006, did not have an effect on the Company’s results of operations or financial position. The compensation expense recognized will include the estimated expense for stock options granted, based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123R.

Concurrent with the Stock Split, effected on June 16, 2006, the Company modified the outstanding warrants, doubling the number of warrants and reducing the exercise price in half to reflect the Stock Split. Since the warrant terms did not contain an anti-dilution provision, during the six months ended September 30, 2006, the Company was required to record share-based compensation in the amount of $16,201,950, reflecting the change in the warrants’ fair value before and after the Stock Split. This non-cash charge was previously included as a separate component in operating expenses for the six months ended September 30, 2006 and has been included in general and administrative expenses for the current period presentation. The Company also recorded a deferred tax benefit of $1,058,034 as a result of the charge, which reduced income tax expense for the period. See Note I for further discussion of this tax benefit.

The fair value of the warrants at the date of the modification was estimated using a Black-Scholes option pricing model with the following weighted average assumptions:

Expected life (years)	4-7
Expected volatility	65	%
Risk-free interest rate	6	%
Dividend yield	0	%

The expected life of the warrants represented the estimated period of time until exercise and was based on historical experience of similar awards, giving consideration to the remaining contractual terms and expectations of future employee behavior. The expected volatility was estimated using the historical volatility of the Company's stock which management believes is the best indicator at this time. The risk-free interest rate was based on the implied yield available on U.S. Treasury zero coupon issues with an equivalent term. The Company has not paid dividends in the past and does not intend to in the foreseeable future.

On August 22, 2007, the Company granted, to various employees, options under the Plan to acquire 97,900 shares of common stock at $3.30 per share, the closing price of the stock on August 21, 2007.  These options have a life of five years from the date of grant (or thirty days after termination for any reason), and vest 25% after each of the first two years, and 50% after the third year. The fair value of the options was determined to be $162,328, which will be expensed as share-based compensation over a three year period in accordance with the vesting period of the options.

The fair value of these options at the date of grant was estimated using a Black-Scholes option pricing model with the following weighted average assumptions.

Expected life (years)	3
Expected volatility	70	%
Risk-free interest rates	6	%
Dividend yield	0	%

The expected life of the options represented the estimated period of time until exercise based on historical experience of similar awards, giving consideration to the remaining contractual terms and expectations of future employee behavior. The expected volatility was estimated using the historical volatility of the Company's stock which management believes is the best indicator at this time. The risk-free interest rate was based on the implied yield available on U.S. Treasury zero coupon issues with an equivalent term. The Company has not paid dividends in the past and does not intend to in the foreseeable future.

21

A summary of stock option and warrant activity during the six months ended September 30, 2007 follows:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
Outstanding as of March 31, 2007		2,994,000		$	1.14		4.10	$	13,302,145
Granted		97,900			3.30		5.00		—
Exercised		(1,575,000	)		1.11		3.93		4,638,020
Forfeited		—			—		—		—
Outstanding as of September 30, 2007		1,516,900		$	1.30		3.84	$	3,925,121
Exercisable as of September 30, 2007		1,419,000		$	1.16		3.50	$	3,867,360

Except for the 97,900 options granted during the six months ended September 30, 2007, all warrants outstanding as of September 30, 2007 were fully vested. Prior to July 24, 2007, upon exercise of the warrants, the Company issued previously authorized but unissued common stock to the warrant holders. Commencing July 24, 2007, upon the exercise of the warrants the Company issued shares from treasury shares to the warrant holders.  Of the 1,575,000 warrants exercised during the six months ended September 30, 2007, 1,015,000 shares were issued from treasury shares. The difference between the original cost of the treasury shares ($3,165,991) and the proceeds received from the warrant holders ($1,155,942) was recorded as a reduction in retained earnings.

The intrinsic value of the warrants exercised during the six months ended September 30, 2007 was approximately $4,638,000 and the tax benefit from the exercise of such warrants is expected to approximate $1,660,000 for income tax purposes. As of March 31, 2007, a deferred tax benefit of approximately $2,867,000 was provided on these warrants in connection with the share-based compensation charge discussed above. As of September 30, 2007, the Company adjusted the deferred tax asset and reduced additional paid-in capital by $1,187,177 as a result of the exercise.

The following table summarizes information about the options and warrants outstanding at September 30, 2007, of which 1,419,000 are exercisable:

	Options and Warrants Outstanding
Range of Exercise Prices	Amount		Weighted Average Exercise Price	Weighted Average Remaining Life	Aggregate Intrinsic Value
$0.93 - $1.22		1,399,000	$1.16	3.5	$	3,825,560
$1.80		20,000	$1.80	5.5		41,800
$3.30		97,900	$3.30	5.0		57,761
		1,516,900	$1.30	3.8	$	3,925,121

On October 11, 2007, the Company’s shareholders approved the Parlux Fragrances, Inc. 2007 Stock Incentive Plan (the “2007 Plan”), which reserved an additional 1,500,000 shares of common stock for equity-based awards to employees, officers, directors, consultants and/or independent contractors of the Company.  The 2007 Plan was adopted by the Board of Directors on June 20, 2007, subject to shareholder approval.  As of September 30, 2007, no awards had been granted under the 2007 Plan.

On October 11, 2007, the Company granted 240,000 options under the 2007 Plan to certain executives in connection with their July 2007 employment agreements, and 75,000 (15,000 each) to its five non-employee directors, to acquire common stock during a five-year period at $4.60 per share, the closing price of stock on October 11, 2007. The directors’ options vested on the grant date, while the executives’ options vest over a three-year period at the annual rate of 40,000, 80,000 and 120,000, respectively.  The Company anticipates recording share-based compensation expense totaling approximately $729,000 relating to the October 11, 2007 grants, which will be expensed over a three year period in accordance with the applicable vesting periods of the respective options.

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C.

Inventories

The components of inventories are as follows:

	September 30, 2007		March 31, 2007
Finished products:
Fragrances	$	42,363,821	$	48,857,570
Watches		1,655,948		1,164,864
Handbags		418,856		31,359
Components and packaging material:
Fragrances		18,685,385		20,352,274
Watches		25,628		24,241
Raw material		3,137,921		3,144,728
		66,287,559		73,575,036
Less non-current portion		13,489,138		17,392,000
Current portion	$	52,798,421	$	56,183,036

The cost of inventories includes product costs and handling charges, including an allocation of the Company’s applicable overhead in the approximate amount of $5,259,000 and $4,333,000 at September 30, 2007 and March 31, 2007, respectively.

As is more fully described in Note J, one of the Company’s licensors, GUESS? Inc., brought an action against the Company alleging that GUESS? fragrance products were being sold in unauthorized retail channels. The Company subsequently entered into a settlement agreement with GUESS? that, among other things, requires pre-approval of each international customer to whom the Company sells GUESS? fragrances. If the Company were to be found in breach of its agreement with GUESS?, Inc. at any point in the future, termination or modification of the license agreement could occur.

As of September 30, 2007, our inventories of GUESS? products totaled approximately $26.0 million, of which approximately $11.6 million has been classified as non-current (approximately $30.8 million and $16.5 million, respectively, at March 31, 2007). If the licensing agreement were to be terminated or modified at any time in the future, the Company may be required to record charges to operations to reduce the recorded value of such inventories to the amounts which would be realized upon their sale or liquidation.

D.

Trademarks and Licenses

Trademarks and licenses are attributable to the following brands:

	September 30, 2007			March 31, 2007			Estimated Life (in years)
XOXO	$	4,485,495		$	4,670,727		5
Fred Hayman Beverly Hills (“FHBH”)		2,820,361			2,820,361		10
Paris Hilton		654,417			468,691		5
Other		216,546			216,546		5-25
		8,176,819			8,176,325
Less – accumulated amortization		(4,797,586	)		(4,263,542	)
	$	3,379,233		$	3,912,783

During the year ended March 31, 2007, the Company recorded an impairment charge of $1,129,273 in connection with the XOXO license as the estimated future net cash flows for the remaining period of the license were determined to be less than the license’s carrying value.  During the quarter ended September 30, 2007, the Company recorded an additional impairment of $185,232.

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E.

Borrowings

The composition of borrowings is as follows:

	September 30, 2007		March 31, 2007
Revolving credit facility payable to GMAC Commercial Credit LLC, interest at LIBOR plus 2.75% or prime minus .25% (7.50% at September 30, 2007) at the Company’s option.	$	8,819,208	$	16,775,318
Capital leases payable to Provident Equipment Leasing, collateralized by certain equipment and leasehold improvements, payable in equal quarterly installments of $257,046, including interest, through July 2009.		1,907,262		2,342,069
Capital lease payable to IBM, collateralized by certain computer equipment, payable in equal monthly installments of $3,648, including interest, through December 2009.		97,445		117,188
		10,823,915		19,234,575
Less: long-term portion		1,048,703		1,536,959
Borrowings, current portion	$	9,775,212	$	17,697,616

On July 20, 2001, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with GMAC Commercial Credit LLC (“GMACCC”). On January 4, 2005, the Loan Agreement was extended through July 20, 2006. Under the Loan Agreement, the Company was able to borrow, depending on the availability of a borrowing base, on a revolving basis, 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.

On January 10, 2006, the Loan Agreement was amended, increasing the loan amount to $30,000,000 with an additional $5,000,000 available at the Company’s option. In addition, the maturity was extended through July 20, 2008, and the interest rate was reduced to 0.25% below the prime rate. During May 2006, the Company exercised its option and increased the line of credit to $35,000,000.

On September 13, 2006, the Loan Agreement was further amended, temporarily increasing the loan amount to $40,000,000 until December 13, 2006, at which time the maximum loan amount reverted back to $35,000,000.

At September 30, 2007, based on the borrowing base at that date, available borrowing under the credit line amounted to $35,000,000, of which $8,819,208 ($16,775,318 as of March 31, 2007) was utilized. Restricted cash represents collections of trade accounts receivable deposited with our bank and pending transfer to GMACCC. As of September 30, 2007, $751,253 ($1,273,896 as of March 31, 2007) was on deposit with our bank pending transfer.

Substantially all of the assets of the Company, excluding the New Jersey warehouse equipment discussed below, collateralize the credit line 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.

Although the Company substantially exceeded the net worth covenant, it was not in compliance with the fixed charge covenant as of March 31, 2007. An amendment to the agreement was requested from the lender, which was granted on June 27, 2007, and which revised such covenant through March 31, 2008.

As of September 30, 2007, we were not in compliance with our minimum EBITDA requirements.  We requested an amendment of our agreement from our lender, which was granted on November 9, 2007, and which revised such covenant at September 30, 2007. The Loan Agreement, as amended, also contains certain financial covenants relating to net worth, interest coverage and other financial ratios, which we were in compliance with as of September 30, 2007.

On August 16, 2004, GMACCC approved a continuation of the Company’s common stock buyback program not to exceed $8,000,000. During December 2006, the Company effectively completed this program with approximately $198,000 remaining.

24

During May 2006, the Company entered into an agreement with Provident Equipment Leasing (“Provident”) covering approximately $2,761,000 of certain warehouse equipment and leasehold improvements to be purchased for the Company’s new leased distribution center in New Jersey. Provident advanced, on behalf of the Company, progress payments to various suppliers based on the work completed. In accordance with the terms of the agreement, the advances bore interest at a rate of 1% per month until all payments were made, at which time the arrangement converted to a thirty-six month lease, which has been classified as a capital lease. The Company has an option to purchase the equipment and leasehold improvements at the end of the lease term for $1.

On December 15, 2006, the Company entered into a lease agreement with International Business Machines (“IBM”) covering approximately $124,000 of computer equipment which has been classified as a capital lease. The Company has an option to purchase the computer equipment at the end of the lease term for $1.

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

F.

Related Party Transactions

Related party transactions include the following balances:

	September 30, 2007		March 31, 2007
Accounts receivable from related parties:
Perfumania	$	20,065,292	$	6,101,456
Other related parties		—		7,931,006
	$	20,065,292	$	14,032,462
	Three Months Ended September 30,				Six Months Ended September 30,
	2007		2006		2007		2006
Sales from continuing operations to related parties:
Perfumania	$	19,483,271	$	4,159,960	$	30,290,318	$	5,282,242
Other related parties		—		7,505,543		8,004,914		14,447,957
	$	19,483,271	$	11,665,503	$	38,295,232	$	19,730,199

The Company had net sales from continuing operations of $30,290,318 and $5,282,242 during the six-month periods ended September 30, 2007 and 2006 ($19,483,271 and $4,159,960 during the three months ended September 30, 2007 and 2006, respectively), respectively, to Perfumania, Inc. (“Perfumania”), a wholly-owned subsidiary of E Com Ventures, Inc. (“ECMV”). These amounts exclude sales of Perry Ellis brand products during the six and three month periods ended September 30, 2006 in the amount of $4,554,099 and $2,887,276, respectively.

The Company’s former Chairman and Chief Executive Officer had an ownership interest and held identical management positions in ECMV until February 2004. Transactions with Perfumania have historically been presented as related party transactions.  ECMV’s current majority shareholders acquired an approximate 12.2% ownership interest in the Company during August and September 2006, and accordingly, transactions with Perfumania continue to be presented as related party transactions. Perfumania is one of the Company’s largest customers, and transactions with Perfumania are closely monitored by management, and any unusual trends or issues are brought to the attention of the Company’s Audit Committee and Board of Directors. Perfumania offers the Company the opportunity to sell its products in approximately 260 retail outlets and the Company’s pricing and terms with Perfumania take into consideration the rel ationship existing between the companies for over 15 years. 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) exposure 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.

25

The Company owned 378,101 shares of ECMV common stock, which was previously classified as an available-for-sale security. The Company’s adjusted cost basis for the shares was $1,648,523 or $4.36 per share. During August and September 2006, the Company sold all of the shares in the open market for $3,423,147. Accordingly, the Company recorded a gain on sale of $1,774,624 in the accompanying condensed consolidated statements of operations for the period ended September 30, 2006 (See Note I for discussion of the income tax effect of the sale).

While the Company’s invoice terms to Perfumania are stated as net ninety days, for over ten years, management has granted longer payment terms, taking into consideration the factors discussed above. Management 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 its limits. Net trade accounts receivable owed by Perfumania to the Company totaled $20,065,292 and $6,101,456 at September 30, 2007 and March 31, 2007, respectively.

Prior to July 1, 2007, sales to parties related to the Company’s former Chairman and CEO were treated as related party sales. As of June 30, 2007, the former Chairman and CEO’s beneficial ownership interest in the Company had declined to approximately 7.6%, further declining in the current quarter to less than 5%.

Accordingly, effective July 1, 2007, transactions with parties related to the former Chairman and CEO are no longer included as related party activity. Net sales to these parties and reported as related party sales during the three months ended September 30, 2007 and 2006 were $0 and $7,505,543, respectively. Net sales to these parties during the six months ended September 30, 2007 and 2006 were $8,004,914 and $14,447,957 respectively. The above amounts exclude sales of the discontinued Perry Ellis product sales during the three and six months ended September 30, 2006 of $4,831,565 and $9,091,047, respectively.

As of March 31, 2007 trade receivables from related parties included $7,931,006 from these customers, which were current in accordance with their sixty or ninety day terms. The Company also reimbursed these related party distributors for advertising and promotional expenses totaling approximately $77,000 and $1,067,000 for the six months ended September 30, 2007 and 2006, ($0 and $331,000 during the three months ended September 30, 2007 and 2006) respectively.

During the six months ended September 30, 2006, the Company purchased $773,614 ($386,807 during the three months ended September 30, 2006) in television advertising on the “Adrenalina” show, which is broadcast in various U.S. markets and Latin American countries. The Company’s former Chairman and CEO has a controlling ownership interest in a company, which has the production rights to the show and publishes certain magazines. During the six months ended September 30, 2006, the Company also purchased $16,575 (none during the three months ended September 30, 2006) of advertising space in these magazines. There were no such transactions during the three or six months ended September 30, 2007.

26

G.

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, retroactively restated for the Stock Split:

	Three Months Ended September 30,
	2007			2006
Income from continuing operations	$	1,961,852		$	465,771
Income from discontinued operations		69,646			3,183,539
Net income	$	2,031,498		$	3,649,310
Weighted average number of shares issued		29,968,485			28,717,289
Weighted average number of treasury shares		(10,931,725	)		(10,564,957	)
Weighted average number of shares outstanding used in basic earnings per share calculation		19,036,760			18,152,332
Basic net  income per common share – continuing operations	$	0.10		$	0.03
Basic net income per common share – discontinued operations	$	0.00		$	0.17
Weighted average number of shares outstanding used in basic earnings per share calculation		19,036,760			18,152,332
Effect of dilutive securities:
Stock options and warrants		1,449,266			2,694,095
Weighted average number of shares outstanding used in diluted earnings per share calculation		20,486,026			20,486,427
Diluted net income per common share – continuing operations	$	0.10		$	0.02
Diluted net income per common share – discontinued operations	$	0.00		$	0.16
	Six Months Ended September 30,
	2007			2006
Income  (loss) from continuing operations	$	1,912,239		$	(16,769,932	)
Income from discontinued operations		21,631			6,298,284
Net income (loss)	$	1,933,870		$	(10,471,468	)
Weighted average number of shares issued		29,713,409			28,659,158
Weighted average number of treasury shares		(11,138,415	)		(10,564,957	)
Weighted average number of shares outstanding used in basic and fully diluted earnings per share calculation		18,574,994			18,094,201
Basic and fully diluted net income (loss) per common share – continuing operations(1)	$	0.10		$	(0.93	)
Basic and fully diluted net income per common share – discontinued operations(1)	$	0.00		$	0.35
Weighted average number of shares outstanding used in basic earnings per share calculation		18,574,994			18,094,201
Effect of dilutive securities:
Stock options and warrants		1,846,237			—
Weighted average number of shares outstanding used in diluted earnings per share calculation(1)		20,421,231			18,094,201
Diluted net income (loss) per common share – continuing operations	$	0.09		$	(0.93	)
Diluted net income per common share – discontinued operations(1)	$	0.00		$	0.35

———————

(1)

In accordance with paragraph 15 of Statement of Financial Accounting Standards (“SFAS”) No. 128, “Earnings Per Share”, the number of shares utilized in the calculation of diluted (loss) earnings per share

27

from continuing operations, discontinued operations and net income were the same as those used in the basic calculation of earnings per share for the six months ended September 30, 2006, as we incurred a loss from continuing operations for that period.

H.

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:

	Six Months Ended September 30,
	2007		2006
Cash paid for:
Interest	$	854,420	$	1,613,427
Income taxes	$	132,950	$	2,723,088

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

Six months ended September 30, 2006:

·

Equipment in the amount of $200,000, acquired during the period, was included in accounts payable at September 30, 2006.

·

Change in unrealized holding gain of $4,342,338 on the investment in affiliate, net of deferred taxes.

I.

Income Taxes for Continuing Operations

The tax provision for continuing operations for the three-month period ended September 30, 2007 reflects an estimated effective rate of 38%. The tax benefit in the prior period results from the difference in basis of the ECMV shares sold during the current period as such sale resulted in a capital loss of $1,083,823 for income tax purposes, for which we are able to offset with capital gains, as well as a portion of the gain in connection with the December 2006 Perry Ellis fragrance brand (See Notes M and O, respectively, for further discussion). The Company had previously recorded a non-cash charge of $2,858,447 during fiscal 2002, reducing the basis of the shares for financial reporting purposes.  

The tax provision for the six-month period ended September 30, 2007, reflects an estimated effective rate of 38%. The tax provision for the six-month period ended September 30, 2006 is affected by a limitation on the estimated tax benefit that is expected to result from the share-based compensation charge related to the warrant modification. Such benefit will be limited by the maximum allowable annual compensation deduction for corporate officers under Section 162 (m) of the Internal Revenue Code. Consequently, the benefit recorded in the current period reflects management’s best estimate at the present time based upon assumptions regarding the timing and market value of the Company’s common stock upon exercise of the warrants and the amount and nature of other forms of compensation to be paid to the holders of the warrants using the method in which the cash compensation (salary and bonus) of the related individuals t akes priority over the share-based compensation in determining the annual limitation. Actual tax benefits realized may be greater or less than the amounts recorded, and such differences may be material. The Company will adjust this deferred tax asset as additional information becomes available, with adjustments reflected in the Company’s income tax (benefit) provision for the period in which the adjustments are identified. As of March 31, 2007, the Company adjusted the deferred tax asset due to a change in the maximum allowable annual compensation deduction for corporate officers under Section 162 (m), as a result of the resignation of the Company’s former Chairman and CEO, in February 2007.  The provision for the six-month period ended September 30, 2006 also reflects the tax effects discussed above for the sale of the ECMV shares.

On April 1, 2007, the Company adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation 48 (“FIN 48”) Accounting for Income Tax Uncertainties, which clarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance with SFAS Statement No. 109 Accounting for Income Taxes. FIN 48 prescribes a recognition threshold of more-likely-than-not and a measurement attribute on all tax positions taken or expected to be taken in a tax return in order to be recognized in the financial statements. In making this assessment, a company must determine whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based solely on the technical merits of the position and must assume that the tax position will be examined by

28

appropriate taxing authority that would have full knowledge of all relevant information. Once the recognition threshold is met, the tax position is then measured to determine the actual amount of benefit to recognize in the financial statements. In addition, the recognition threshold of more-likely-than-not must continue to be met in each reporting period to support continued recognition of the tax benefit. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the financial reporting period in which that threshold is no longer met. As a result of the implementation of FIN 48, the Company did not recognize a liability for unrecognized tax benefits and, accordingly, was not required to record any cumulative effect adjustment to beginning of year retained earnings. As of both the date of adoption and September 30, 2007, there was no material liability for income tax associated with unrecognized tax benefits. The Company does not anticipate any material adjustments relating to unrecognized tax benefits within the next twelve months, however, the outcome of tax matters is uncertain and unforeseen results can occur.

J.

License and Distribution Agreements

During the year ended March 31, 2007, the Company held exclusive worldwide licenses to manufacture and sell fragrance and other related products for Paris Hilton, GUESS?, Ocean Pacific (“OP”), Maria Sharapova, Andy Roddick, babyGund, Perry Ellis and XOXO. During December 2006, the Company sold its Perry Ellis licensing rights and other related assets to Perry Ellis International, its Licensor. See Note O for further discussion.

Under all of the existing license agreements, we must pay a minimum royalty, whether or not any product sales are made, and spend minimum amounts for advertising based on sales volume. Except as discussed below, the Company believes it is presently in compliance with all material obligations under these agreements.

The Company received a complaint from GUESS?, Inc. (“GUESS?”) alleging that GUESS? fragrance products were being sold in unauthorized retail channels. Although the Company did not sell such products directly to these channels, it represented a violation of the Company’s license agreement with GUESS?. On May 7, 2007, the Company entered into a settlement agreement with GUESS? which, among other items, requires GUESS?’s reapproval of all international distributors selling GUESS? fragrance products, payment of liquidated damages in the amount of $500,000, in nine equal monthly installments of $55,556, (which was expensed in the year ended March 31, 2007), as well as strict monitoring of distribution channels. Any further violations surrounding unapproved distribution could result in termination of the license agreement. During the quarter ended March 31, 2007, the Company stopped shipments to international dist ributors. GUESS? has recently approved certain international distributors and the Company has commenced shipments to these approved distributors. The Company continues to submit approval requests for additional international distributors in accordance with procedures outlined in the license agreement.

On June 21, 2007, the Company entered into an exclusive license agreement with VCJS, LLC, to develop, manufacture and distribute prestige fragrances and related products under the Jessica Simpson name. The initial term of the agreement expires five years from the date of the first product sales and is renewable for an additional five years if certain sales levels are met. The Company must pay a minimum royalty to VCJS, LLC, whether or not any product sales are made, and spend minimum amounts for advertising based upon sales volume. The Company anticipates that the first fragrance under this agreement will be launched during fall 2008.

On August 1, 2007, the Company entered into an exclusive license agreement with Kobra International, Ltd., to develop, manufacture and distribute prestige fragrances and related products under the Nicole Miller name. The initial term of the agreement expires on September 30, 2013 and is renewable for two additional terms of three years each, if certain sales levels are met. The Company must pay a minimum royalty, whether or not any product sales are made, and spend minimum amounts for advertising based upon sales volume. The Company anticipates launching a new fragrance under this license in the next twelve to eighteen months, as well as immediately assuming the manufacturing and distribution of previously developed Nicole Miller fragrances.

K.

Segment Information

In accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", the Company determined its operating segments on the same basis that it uses to evaluate performance internally.

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Prior to the quarter ended December 31, 2005, the Company operated in one industry segment as a manufacturer and distributor of prestige fragrances and beauty related products. During December 2005 and March 2006, the Company commenced sales of watches and handbags, respectively, both of which are under license agreements with Paris Hilton Entertainment, Inc. Revenues from the sale of watches and handbags during the six month period ended September 30, 2007 totaled $1,050,659 and $290,068, respectively ($704,438 and $923,133 for the six months ended September 30, 2006, respectively). Included in inventories at September 30, 2007, is approximately $1,681,576 and $418,856 relating to watches and handbags, respectively ($1,189,105 and $31,359 for watches and handbags at March 31, 2007). The Company anticipates preparing full segment disclosure as these operations become more significant.

L.

Legal Proceedings

On June 21, 2006, the Company was served with a stockholder derivative action (the “Derivative Action”) filed in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida by NECA-IBEW Pension Fund, purporting to act derivatively on behalf of the Company.

The Derivative Action named Parlux Fragrances, Inc. as a defendant, along with Ilia Lekach, Frank A. Buttacavoli, Glenn Gopman, Esther Egozi Choukroun, David Stone, Jaya Kader Zebede and Isaac Lekach, each of whom was a director of the Company at that date. The Derivative Action related to the proposal (previously disclosed in the Company’s June 14, 2006 Form 8-K) from PF Acquisition of Florida LLC (“PFA”), which was owned by Ilia Lekach, to acquire all of the outstanding shares of common stock of the Company for $29.00 ($14.50 after the Stock Split) per share in cash (the “Proposal”).

The Derivative Action seeks to remedy the alleged breaches of fiduciary duties, waste of corporate assets, and other violations of law and seeks injunctive relief from the Court appointing a receiver or other truly neutral third party to conduct and/or oversee any negotiations regarding the terms of the Proposal, or any alternative transaction, on behalf of the Company and its public shareholders, and to report to the Court and plaintiff’s counsel regarding the same. The Derivative Action alleges that the unlawful plan to attempt to buy out the public shareholders of the Company without having proper financing in place, and for inadequate consideration, violates applicable law by directly breaching and/or aiding the other defendants’ breaches of their fiduciary duties of loyalty, candor, due care, independence, good faith and fair dealing, causing the complete waste of corporate assets, and constituting an abuse of control by the de fendants. Before any response to the original complaint was due, counsel for plaintiffs indicated that an amended complaint would be filed. That First Amended Complaint (the "Amended Complaint") was served on Company counsel on August 17, 2006.

The Amended Complaint continues to name the then Board of Directors as defendants along with the Company, as a nominal defendant. The Amended Complaint is largely a collection of claims previously asserted in a 2003 derivative action, which the plaintiffs in that action, when provided with additional information, elected not to pursue. It adds to those claims, assertions regarding a 2003 buy-out effort and the abandoned buy-out effort of PF Acquisition of Florida. It also contains allegations regarding the prospect that the Company's stock might be delisted because of a delay in meeting SEC filing requirements. It relies in large measure on a bevy of media articles rather than facts known to the plaintiffs.

The Company and the other defendants engaged Florida securities counsel, including the counsel who successfully represented the Company in the previous failed derivative action, and on September 18, 2006, moved to dismiss the Amended Complaint. A Second Amended Complaint was filed on October 26, 2006, adding alleged violations of securities laws, which the Company moved to dismiss of December 1, 2006. A hearing on the dismissal was held on March 8, 2007. On March 22, 2007, the motion to dismiss was denied and the defendants were provided twenty days to respond, and a response was filed on March 29, 2007. Plaintiffs have conducted very preliminary discovery.  Based on the allegations in the Amended Complaint and the information collected in the earlier litigation and presently known to the Company, it is believed that the Amended Complaint is without merit.

On March 2, 2007, the Company, Ilia Lekach and Frank Buttacavoli were named as defendants, along with Perry Ellis International, Inc. and its Chairman and CEO, George Feldenkreis, Rene Garcia, Quality King Distributors, Inc., E Com Ventures, Perfumania, Model Reorg, Inc., Glenn Nussdorf, DFA Holdings, Inc., Duty Free Americas, Inc. Falic Fashion Group, LLC, Simon Falic and Jerome Falic. This action by Plaintiff Victory International (“Victory”) relates to Perry Ellis International’s failure to consent to the assignment by the Company of its contractual license to the Perry Ellis brand of perfumes. The Plaintiff is alleging that Perry Ellis International

30

unreasonably withheld its consent and, instead, conspired with a variety of people to prevent Victory from obtaining this license. No direct allegations are made against the Company. The allegations against Messrs. Lekach and Buttacavoli relate to the recent attempt by Glenn Nussdorf to replace all of the directors of the Company with his nominees. The First Amended Complaint alleges that Mr. Nussdorf and certain affiliates are among the alleged co-conspirators with Perry Ellis International to prevent Victory from obtaining the license. On May 18, 2007, the Company, along with Messrs Lekach and Buttacavoli, filed a motion to dismiss on the basis that the complaint failed to state a cause of action against any of them.

Management believes that the ultimate outcome of these matters will not have a material effect on the Company’s financial position or results of operations.

M.

Facility Acquisition and Sale

On July 22, 2005, the Company finalized an agreement with SGII, Ltd. (an unrelated Florida limited partnership), to purchase certain real property in Sunrise, Florida for approximately $14 million. The property, which was intended to be used as the Company’s corporate headquarters and main distribution center, includes approximately 15 acres of land and a 150,000 square foot distribution center, with existing office space of 15,000 square feet. On December 29, 2005, the Company closed on the Sunrise Facility, financing $12.75 million of the purchase price under a fifteen year conventional mortgage with GE Commercial Finance Business Property Corporation.

As a result of various factors including the Company’s continuing growth, the increase in trucking costs resulting primarily from the increase in fuel prices and South Florida’s susceptibility to major storms, management and the Company’s Board of Directors determined that it would be more cost effective and prudent to relocate a major part of the Company’s warehousing and distribution activities to the New Jersey area, close to where the Company’s products are filled and packaged. Accordingly, on April 17, 2006, the Company entered into a five-year lease for 198,500 square feet of warehouse space in New Jersey, to also serve as a backup information technology site if the current Fort Lauderdale, Florida location encounters unplanned disruptions. The Company commenced activities in the New Jersey facility during the latter part of August 2006.

On May 15, 2006, the Company entered into an agreement to sell the Sunrise Facility for $15 million receiving a non-refundable deposit of $250,000 from the buyer. The sale was completed on June 21, 2006, and the mortgage was repaid. The Company has recorded a gain of $494,465 from the sale, which is included in the accompanying condensed consolidated statement of operations for the six months ended September 30, 2006.

N.

New Accounting Pronouncements

In September 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measures” (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measures required under other accounting pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. The Company is currently reviewing the provisions of SFAS No. 157 to determine the impact, if any, on its condensed consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB No. 115” ("SFAS No. 159"). SFAS No. 159 permits companies to choose to measure many financial instruments and certain other items at fair value in order to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 is effective for the Company's fiscal year ending March 31, 2009. The Company is currently assessing the impact of this statement on its condensed consolidated financial statements.

O.

Discontinued Operations

On November 28, 2006, the Company’s Board of Directors approved the sale of the Perry Ellis fragrance brand license back to Perry Ellis International (“PEI”) at a price of approximately $63 million, including approximately $21 million for inventory and promotional products relating to the brand. A definitive agreement was signed on December 6, 2006 and the closing took place shortly thereafter. The sale included all inventory,

31

promotional products, molds and other intangibles. The transaction generated proceeds of approximately $63 million, and resulted in a pre-tax gain of approximately $34.3 million.

Beginning with the quarter ended December 31, 2006, the Perry Ellis brand activity has been presented as discontinued operations. Prior period statements of operations have been retrospectively adjusted. The activity for this discontinued operation is summarized as follows:

	Three Months Ended September 30,				Six Months Ended September 30,
	2007		2006		2007		2006
Net revenues	$	56,236	$	11,755,204	$	36,150	$	24,291,090
Operating income	$	112,331	$	5,134,741	$	34,888	$	10,158,523
Income from discontinued operations	$	69,646	$	3,183,539	$	21,631	$	6,298,284

As a result of the sale of the Perry Ellis fragrance brand, the activity for Perry Ellis is presented separately as discontinued operations. Accordingly, the accompanying condensed consolidated financial statements for the three and six months ended September 30, 2007 have been restated from the amounts previously reported, the effects of which are shown in the table below:

Reclassification	As Previously Reported		Perry Ellis Discontinued Operations		As Restated
Condensed Consolidated Statement of Operations for the three months ended
September 30, 2006:
Net Sales:
Unrelated customers	$	19,491,484	$	(4,036,361	)	$	15,455,123
Related parties	$	19,384,346	$	(7,718,843	)	$	11,665,503
Cost of Goods Sold:
Unrelated customers	$	10,014,024	$	(1,907,943	)	$	8,106,081
Related parties	$	9,005,935	$	(3,200,980	)	$	5,804,955
Condensed Consolidated Statement of Operations for the six months ended
September 30, 2006:
Net Sales:
Unrelated customers	$	46,284,550	$	(10,645,944	)	$	35,638,606
Related parties	$	33,375,345	$	(13,645,146	)	$	19,730,199
Cost of Goods Sold:
Unrelated customers	$	23,826,954	$	(4,807,417	)	$	19,019,537
Related parties	$	16,413,034	$	(6,106,688	)	$	10,306,346

The adjustments discussed above did not result in any restatement of the Company’s net income, earnings per share or working capital amounts from those that were previously reported.

* * * *

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SIGNATURES

Pursuant to the requirements 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/ NEIL J. KATZ

Neil J. Katz, Chairman and Chief Executive Officer

(Principal Executive Officer)

/s/ RAYMOND J. BALSYS

Raymond J. Balsys, Chief Financial Officer

(Principal Financial and Principal Accounting Officer)

Date: November 9, 2007

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Exhibit Index

Exhibit #	Description
10.1	Executive Employment Agreement, dated July 26, 2007, between Parlux Fragrances Inc. and Neil J. Katz (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed on July 30, 2007).*
10.2	Executive Employment Agreement, dated July 26, 2007, between Parlux Fragrances Inc. and Raymond J. Balsys (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K, filed on July 30, 2007).*
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.
32.1	Certification of Chief Executive Officer Pursuant to §906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer Pursuant to §906 of the Sarbanes-Oxley Act of 2002.

———————

*     Exhibits 10.1 and 10.2 are management contracts or compensatory plans, contracts or arrangements.

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EX-10.1

EXHIBIT 10.1

EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") is entered into effective the 26^th day of July, 2007 by and between Parlux Fragrances, Inc. (the "Company") and Neil Katz (the "Executive" and, together with the Company, the "Parties").

WHEREAS, the Company desires to employ the Executive and the Executive agrees to be employed by the Company as the Chief Executive Officer (“CEO”) of the Company on the terms and conditions set forth in this Agreement;

WHEREAS, the terms of this Agreement have been reviewed and approved by the members of the Compensation Committee of the Board of Directors of the Company (the "Committee").

NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other valuable consideration the receipt and adequacy of which is hereby acknowledged, the Parties hereby agree as follows:

1.

Position and Duties. The Company hereby agrees to employ the Executive and the Executive hereby accepts and agrees to serve as CEO of the Company. The Executive shall report to the Board. Subject to the advice, consent and direction of the Company's Board of Directors, the Executive will perform all duties and responsibilities and will have all authority inherent in the position of CEO.

2.

Term of Agreement and Employment. The term of the Executive's employment under this Agreement will be for an initial period of three (3) years, beginning on the effective date of this Agreement (the “Term”), and terminating three years thereafter. The Term will be automatically extended for two (2) consecutive one (1) year periods, unless either party provides six (6) months prior written notice of its desire not to so extend the Term.

3.

Definitions.

A.

Cause. For purposes of this Agreement, “Cause” for the termination of the Executive’s employment hereunder shall be deemed to exist if, in the good faith judgment of the Company’s Board of Directors: (i) the Employee commits fraud, theft or embezzlement; (ii) the Employee commits an act of dishonesty affecting the Company or a felony or a crime involving moral turpitude; (iii) the Employee breaches any non-competition, confidentiality or non-solicitation agreement with the Company; (iv) the Employee breaches any of the material terms of this Agreement and fails to cure such breach within 30 days after the receipt of written notice of such breach from the Company; (v) the Employee engages in gross negligence or willful misconduct that causes unreasonable harm to the business and operations of the Company; or (vi) the Executive’s unreasonable failure or refusal to diligently perform the duties and responsibilities required to be performed by the Executive under the terms of this Agreement.

B.

Company Transaction Events. For purposes of this Agreement, (i) a "Going Private Event” means a transaction in which 90% or more of the issued and

C.

outstanding shares of the capital stock of the Company are to be sold or exchanged (pursuant to an agreement, tender or exchange offer or otherwise) by the holders thereof for cash or for securities, so that upon the closing of such a transaction (or a second step merger related thereto), Parlux common stock is no longer traded on any public stock exchange (e.g., Nasdaq, AMEX, NYSE, etc.) or recognized trading market (e.g., Nasdaq OTCBB) and the holders of Parlux common stock prior to the closing of such a transaction hold cash or non-publicly traded securities in a private company after the transaction, (ii) a "Company Merger Event" means a transaction in which 90% or more of the issued and outstanding shares of the capital stock of the Company are to be exchanged (pursuant to an agreement, exchange offer or otherwise) by the holders thereof for securities of any public company, so that upon the closing of such a transaction (or a second step merger related thereto), all Parlux common stock has been exchanged or converted into securities of a public company that are traded on a public stock exchange (e.g., Nasdaq, AMEX, NYSE, etc.) or recognized trading market (e.g., Nasdaq OTCBB) and the holders of Parlux common stock prior to the closing of such a transaction hold publicly traded securities in a public company after the transaction.

D.

Good Reason. For purposes of this Agreement, termination by the Executive of his employment for "Good Reason" shall mean a termination by the Executive following a "Good Reason Event" provided (i) the Executive provides notice to the Company of such Good Reason Event within 90 days of the initial existence of such Good Reason Event; (ii) the notice provides the Company with 30 days during which it may remedy the Good Reason Event; and (iii) the Company fails to remedy the Good Reason Event within such 30 day period. A "Good Reason Event shall be deemed to occur upon (i) a material diminution in the Executive’s authority, duties, or responsibilities or (ii) any action or inaction of the Company which constitutes a material breach of this Agreement.

4.

Compensation.

A.

Annual Base Salary. Unless terminated pursuant to Section 9 hereof, Executive shall be paid an annual base salary of (i) $500,000 for the first 12 months of the Term, (ii) $550,000 for months 13 through 24 of the Term and (iii) $600,000 for months 25 through 36 of the Term, and for any extension of the Term pursuant to Section 2 (as applicable, the "Annual Base Salary"). The Annual Base Salary shall be payable at such regular times and intervals as the Company customarily pays its executives from time to time.

B.

Executive Bonus Plan. The Executive shall be entitled to participate in an executive bonus plan (the “Bonus Plan”), the terms and conditions of which shall be established by the Committee for each fiscal year and which will provide that Executive will be able to earn an annual bonus of up to 50% of the Annual Base Salary, based upon achievement by the Company of certain financial measures and management objectives as determined by the Committee.

2

5.

Executive Benefits. The Executive will be entitled to four weeks of paid vacation per fiscal year. Except as otherwise provided in this Agreement, the Executive will be eligible for and may participate in, without action by the Board or any committee thereof, any benefits and perquisites available to executive officers of the Company, including any group health, dental, disability, or other form of executive benefit plan or program of the Company existing from time to time on the same terms and conditions as is available to all other executives (collectively, the "Executive Benefits"). Executive shall receive additional term life insurance coverage with an annual cost to the Company not to exceed $2,000 per year, and shall be provided with an automobile allowance of $800 per month, at the Company’s expense.

6.

Reimbursement for Relocation. The Company will reimburse Executive for Executive's reasonable and documented relocation expenses (which will include moving expenses, travel expenses for Executive and Executive's fiance or spouse, and temporary housing for up to three months commencing on the date hereof, but which shall exclude any closing costs, brokerage commissions and other expenses incurred by Executive in connection with Executive's purchase of a residence in Broward, Miami-Dade or Palm Beach Counties, Florida ("South Florida") and Executive's sale of his existing residence in New York). If at any time during the Term of this Agreement, the Company moves the location where the Executive is required to work to a location outside of South Florida, the Company will reimburse Executive for Executive's reasonable and documented relocation expenses (which will include m oving expenses, travel expenses for Executive and Executive's fiance or spouse, and temporary housing for up to three months commencing on the date he is required to relocate, but which shall exclude any closing costs, brokerage commissions and other expenses incurred by Executive in connection with Executive's purchase of a residence in the new location and Executive's sale of his residence in South Florida). If, within one year from the date of any relocation of the Executive, Executive's employment with the Company is terminated for Cause or if Executive voluntarily terminates his employment with the Company other than for Good Reason, Executive will be required to refund all moving expenses, but not the travel expenses or temporary housing expenses, included within the relocation expenses paid to Executive by the Company. The Company shall be entitled to offset any amount owed by the Executive against any other payment due to Executive. If the Executive's employment with the Company is terminated without Cause or if Executive terminates his employment with the Company for Good Reason, the Company will reimburse Executive's reasonable and documented moving expenses (but no other expenses) to relocate himself and his fiance or spouse to New York within six months of such termination.

7.

Stock Options. As additional consideration for the Executive's services hereunder and the covenants contained herein, the Company shall grant Executive an option (the "Option") to purchase 180,000 shares of common stock of the Company (the "Common Stock") pursuant to the Company's 2007 Stock Incentive Plan (the "2007 Plan") upon shareholder approval of the 2007 Plan. The Option (i) shall provide for an exercise price equal to the market price of the Common Stock as of the close of trading on a public stock exchange or recognized trading market on the date the 2007 Plan is approved by the shareholders of the Company, and (ii) shall further provide that the Option shall vest as

3

provided on Schedule A, unless terminated pursuant to Section 9 hereof. Immediately prior to the closing of a Going Private Event or a Company Merger Event, any unvested portion of the Option shall fully vest and be exercisable by the Executive prior to the closing of the Going Private Event or Company Merger Event; provided, however, that if the Company Merger Event is with a public company that any individual shareholder or group of affiliated shareholders of the Company beneficially owns 10% or more of for a period of at least six months prior to the closing of the Company Merger Event (an "Affiliated Public Company"), then the vesting of the unvested portion of the Executive's Option shall not be accelerated so long as the Executive's Option to purchase shares of the Common Stock of the Company is converted into an option to purchase shares of the common stock of the Affil iated Public Company with the same economic value as of the date of the closing of the transaction.

8.

Death or Disability. The Executive's employment will terminate immediately upon the Executive's death. If the Executive becomes physically or mentally disabled so as to become unable for a period of more than three consecutive months to perform the Executive's duties hereunder on a substantially full-time basis, the Executive's employment will terminate as of the end of such three-month and this shall be considered a "disability" under this Agreement. The Executive agrees to submit to reasonable examination by a licensed physician selected by the Company to confirm existence or extent of any disability. Such termination shall not affect the Executive's benefits under the Company's disability insurance program, if any, then in effect.

9.

Termination. The Executive may terminate this Agreement for any reason upon not less than one hundred eighty (180) days written notice. The Company may terminate this Agreement for Cause with no prior notice, or for any other reason upon one hundred eighty (180) days written notice.

A.

Termination of Employment Other Than by Resignation of Executive or Termination for Cause. Upon the termination of this Agreement for any reason (including termination of employment by the Executive for Good Reason, termination by the Company without Cause, or termination upon the death or disability of the Executive) other than by the resignation of Executive without Good Reason or a termination by the Company for Cause, the following shall apply:

(i)

Termination Payment. The Executive, or his estate and heirs following his death, shall be entitled (A) to continue to receive, except as provided in Section 11 of this Agreement, his Annual Base Salary in effect at the time of such termination for a period of 12 months following the date of such termination (the "Severance Period"), (B) to be paid, except as provided in Section 11 of this Agreement, when otherwise payable as if employment was not terminated, any bonus earned by Executive through the date of termination pursuant to the terms of the Bonus Plan prorated to the date of termination (the “Termination Payments”), and (C) to have any unvested portion of his Option fully vest as of the date of such termination.

4

(ii)

Termination Benefits. The Company shall continue to provide the Executive with the Executive Benefits for the Severance Period in accordance with Section 11 of this Agreement.

(iii)

Condition to Severance. In the event Executive breaches any of the covenants contained in Section 10, then (A) the Company shall have no further obligation to make Termination Payments to Executive or to continue to provide the Executive Benefits to Executive during the Severance Period, and (B) any unexercised Option shall be forfeited and be cancelled.

B.

Termination of Employment by Resignation of Executive or by the Company With Cause. Upon the termination of Executive’s employment by the Company with Cause or the resignation of the Executive without Good Reason, the Executive shall be due no further compensation under this Agreement other than what is due and owing through the effective date of Executive’s resignation or termination, as applicable.

10.

Restrictive Covenants.

A.

General. The Company and the Executive hereby acknowledge and agree that (i) the Executive will come into the possession of trade secrets (as defined in Section 688.002(4) of the Florida Statutes) of the Company (the "Trade Secrets"), (ii) the restrictive covenants contained in this Section 10 are justified by legitimate business interests of the Company, including, but not limited to, the protection of the Trade Secrets, in accordance with Section 542.335(1)(e) of the Florida Statutes, and (iii) the restrictive covenants contained in this Section 10 are reasonably necessary to protect such legitimate business interests of the Company.

B.

Non-Competition. During the period of the Executive's employment with the Company and for two years after the termination of the Executive's employment with the Company, the Executive will not, directly or indirectly, on the Executive's own behalf or as a partner, officer, director, trustee, executive, agent, consultant, investor or member of any person, firm or corporation, or otherwise, enter into the employ of, render any service to, or engage in any business or activity which is the same as or competitive with the principal business or activity conducted by Company and any of its majority-owned subsidiaries, namely, the licensing, manufacture, and/or distribution to wholesalers of fragrances. The business or activity conducted by the Company and its majority-owned subsidiaries shall be deemed to also include any business not currently conducted by the Company, but which during the Term of this Agreement comes to comprise 30% of the Company's net sales or operating income for any fiscal quarter. The foregoing shall not be deemed to prevent the Executive from investing in securities of any company having a class of securities which is publicly traded, so long as through such investment holdings in the aggregate, the Executive is not deemed to be the beneficial owner of more than 5% of the class of securities that are so publicly traded.  

C.

Confidentiality. During and following the period of the Executive's employment with the Company, the Executive will not use for the Executive's own benefit or for the benefit of others, or divulge to others, any information, trade secrets, knowledge or data

5

of a secret or confidential nature and otherwise not available to members of the general public that concerns the business or affairs of the Company or its affiliates and which was acquired by the Executive at any time prior to or during the Term of the Executive's employment with the Company, except with the specific prior written consent of the Company.

D.

Work Product. The Executive agrees that all programs, inventions, innovations, improvements, developments, methods, designs, analyses, reports and all similar or related information which relate to the business of the Company and its affiliates, actual or anticipated, or to any actual or anticipated research and development conducted in connection with the business of the Company and its affiliates, and all existing or future products or services, which are conceived, developed or made by the Executive (alone or with others) during the Term of this Agreement ("Work Product") belong to the Company. The Executive will cooperate fully in the establishment and maintenance of all rights of the Company and its affiliates in such Work Product. The provisions of this Section 10(D) will survive termination of this Agreement indefinitely to the extent necessary to requ ire actions to be taken by the Executive after the termination of the Agreement with respect to Work Product created during the Term of this Agreement.

E.

Non Solicitation. During the Term of this Agreement, and until two years after the termination of Executive's employment with the Company, the Executive shall not, directly or indirectly (i) induce any person or entity that is a contract manufacturer, supplier or wholesale distributor of the Company's products to manufacture for, supply, distribute for or otherwise patronize any business or activity which is the same as or competitive with any business or activity conducted by the Company or any of its majority-owned subsidiaries, (ii) canvass, solicit or accept any business with respect to any fragrance from any person or entity which is an actual or proposed licensor of brands or fragrance product lines to the Company, (iii) request or advise any person or entity which is a customer of the Company to withdraw, curtail or cancel any such customer's business with the C ompany (provided that the Executive after the Term of this Agreement, if it is terminated without Cause by the Company or for Good Reason by the Executive, may engage in the sale of other fragrance products to the same retailers that the Company sells its fragrance products to), or (iv) employ, solicit for employment or knowingly permit any entity or business directly or indirectly controlled by him to employ or solicit for employment, any person who was employed by the Company or its majority-owned subsidiaries at or within the then prior six months, or in any manner seek to induce any such person to leave his or her employment.

F.

Non-Disparagement. The Executive will not during employment or at anytime thereafter criticize, ridicule, or make any statement or perform any act which disparages or is derogatory of the Company or of any subsidiary, officer, director, agent, employee, contractor, customer, vendor, supplier, licensor or licensee of the Company. The Company will not, during the Term hereof or at anytime thereafter, criticize, ridicule or make any statement or perform any act which disparages or is derogatory of the Executive.

6

G.

Enforcement. The parties agree and acknowledge that the restrictions contained in this Section 10 are reasonable in scope and duration and are necessary to protect the Company or any of its subsidiaries or affiliates. If any covenant or agreement contained in this Section 10 is found by a court having jurisdiction to be unreasonable in duration, geographical scope or character of restriction, the covenant or agreement will not be rendered unenforceable thereby but rather the duration, geographical scope or character of restriction of such covenant or agreement will be reduced or modified with retroactive effect to make such covenant or agreement reasonable, and such covenant or agreement will be enforced as so modified. The Employee agrees and acknowledges that the breach of this Section 10 will cause irreparable injury to the Company or any of its subsidiaries or affi liates and upon the breach of any provision of this Section 10, the Company or any of its subsidiaries or affiliates shall be entitled to injunctive relief, specific performance or other equitable relief, without being required to post a bond; provided, however, that, this shall in no way limit any other remedies which the Company or any of its subsidiaries or affiliates may have (including, without limitation, the right to seek monetary damages).

11.

Section 409A.  In the event that Executive is a "specified employee" as defined in Treas. Reg. § 1.409A-1(i) on the date that Executives separates from service with the Company, the payment of any amount due to Executive hereunder which would be deemed the "deferral of compensation" pursuant to Treas. Reg. §1.409-1(b) shall be delayed until the date that is six (6) months after the date of separation from service (or if earlier, the date of the Executive's death).  To the extent that any payment pursuant to this Agreement is due to Executive after the end of such six month period following his separation from service (or death), such amounts shall be paid without regard to this Section 11.

12.

Representations. Executive hereby represents and warrants to the Company that (i) the execution, delivery and full performance of this Agreement by the Executive does not and will not conflict with, breach, violate or cause a default under any agreement, contract or instrument to which the Executive is a party or any judgment, order or decree to which the Executive is subject; (ii) the Executive is not a party or bound by any employment agreement, consulting agreement, agreement not to compete, confidentiality agreement or similar agreement with any other person or entity; and (iii) upon the execution and delivery of this Agreement by the Company, this Agreement will be the Executive's valid and binding obligation, enforceable in accordance with its terms.

13.

Assignment. The Executive may not assign, transfer, convey, mortgage, hypothecate, pledge or in any way encumber the compensation or other benefits payable to the Executive or any rights which the Executive may have under this Agreement. Neither the Executive nor the Executive's beneficiary or beneficiaries will have any right to receive any compensation or other benefits under this Agreement, except at the time, in the amounts and in the manner provided in this Agreement. This Agreement will inure to the benefit of and will be binding upon any successor to the Company and any successor to the Company shall be authorized to enforce the terms and conditions of this Agreement, including the terms and conditions of the restrictive covenants contained in Section 10 hereof. As used in this Agreement, the term "successor" means any person, firm, corporation or other business entity which at any time, whether by merger, purchase or

7

otherwise, acquires all or substantially all of the capital stock or assets of the Company. This Agreement may not otherwise be assigned by the Company.

14.

Governing Law. This Agreement shall be governed by the laws of Florida without regard to the application of conflicts of laws.

15.

Entire Agreement. This Agreement constitutes the only agreements between Company and the Executive regarding the Executive's employment by the Company. This Agreement supersedes any and all other agreements and understandings, written or oral, between the Company and the Executive regarding the subject matter hereof and thereof. A waiver by either party of any provision of this Agreement or any breach of such provision in an instance will not be deemed or construed to be a waiver of such provision for the future, or of any subsequent breach of such provision. This Agreement may be amended, modified or changed only by further written agreement between the Company and the Executive, duly executed by both Parties.

16.

Dispute Resolution and Venue. If a dispute arises out of or relates to this Agreement, or the breach thereof, and if the dispute cannot be settled through negotiation, the parties agree first to try in good faith to settle the dispute by mediation administered by the American Arbitration Association under its Commercial Mediation Procedures before resorting to litigation. In the event any party to this Agreement commences any litigation, proceeding or other legal action with respect to any claim arising under this Agreement, the Parties hereby (a) agree that any such litigation, proceeding or other legal action shall be brought exclusively in a court of competent jurisdiction located within Broward County, Florida, whether a state or federal court; (b) agree that in connection with any such litigation, proceeding, or action, such parties will consent and submit to personal j urisdiction in any such court described in clause (a) and to service of process upon them in accordance with the rules and statutes governing service of process or in accordance with the notice provisions contained herein; and (c) agree to waive to the full extent permitted by law any objection that they may now or hereafter have to the venue of any such litigation, proceeding or action was brought in an inconvenient forum. The Parties expressly agree that any breach of this Agreement shall be deemed to have occurred in such County. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY DISPUTE IN CONNECTION WITH OR RELATING TO THIS AGREEMENT OR ANY MATTERS DESCRIBED OR CONTEMPLATED HEREIN, AND AGREES TO TAKE ANY AND ALL ACTION NECESSARY OR APPROPRIATE TO EFFECT SUCH WAIVER.

17.

Severability; Survival. In the event that any provision of this Agreement is found to be void and unenforceable by a court of competent jurisdiction, then such unenforceable provision shall be deemed modified so as to be enforceable (or if not subject to modification then eliminated herefrom) to the extent necessary to permit the remaining provisions to be enforced in accordance with the parties intention. The provisions of Section 10 (and the restrictive covenants contained therein) shall survive the termination for any reason of this Agreement and/or the Employee's relationship with the Company.

8

18.

Notices. Any and all notices required or permitted to be given hereunder will be in writing and will be deemed to have been given when deposited in United States mail, certified or registered mail, postage prepaid. Any notice to be given by the Executive hereunder will be addressed to the Company to the attention of the Committee at its main offices, currently 3725 S.W. 30^th Avenue, Fort Lauderdale, FL 33312 with a copy provided to the Company's counsel, Akerman Senterfitt, One S.E. 3^rd Ave., Miami, FL 33131, Attn: Jonathan Awner. Any notice to be given to the Executive will be addressed to the Executive at the Executive's residence address last provided by the Executive to Company with a copy to the Executive's counsel, Devine Goodman Pallot & Wells, 777 Brickell Ave., Suite 850, Miami, FL 33131, Attn: Joseph Pallot. Either party may change the address to which notices are to be addressed by notice in writing to the other party given in accordance with the terms of this Section.

19.

Headings. Section headings are for convenience of reference only and shall not limit or otherwise affect the meaning or interpretation of this Agreement or any of its terms and conditions.

9

IN WITNESS WHEREOF, the Parties hereto have executed and delivered this Agreement under seal as of the date first above written.

PARLUX FRAGRANCES, INC.
By	/s/ FRANK A. BUTTACAVOLI
Name:	Frank A. Buttacavoli
Title:	Executive VP / COO
EXECUTIVE
By:	NEIL J. KATZ
Name:	Neil Katz

10

SCHEDULE A

Date	Amount Vested
March 31, 2008	30,000
March 31, 2009	60,000
March 31, 2010	90,000

11

EX-10.2

EXHIBIT 10.2

EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") is entered into effective the 26^th day of July, 2007 by and between Parlux Fragrances, Inc. (the "Company") and Raymond J. Balsys (the "Executive" and, together with the Company, the "Parties").

WHEREAS, the Company desires to employ the Executive and the Executive agrees to be employed by the Company as the Chief Financial Officer (“CFO”) of the Company on the terms and conditions set forth in this Agreement;

WHEREAS, the terms of this Agreement have been reviewed and approved by the members of the Compensation Committee of the Board of Directors of the Company (the "Committee").

NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other valuable consideration the receipt and adequacy of which is hereby acknowledged, the Parties hereby agree as follows:

1.

Position and Duties.  The Company hereby agrees to employ the Executive and the Executive hereby accepts and agrees to serve as CFO of the Company.  The Executive shall report to the Board.  Subject to the advice, consent and direction of the Company's Board of Directors, the Executive will perform all duties and responsibilities and will have all authority inherent in the position of CFO.  

2.

Term of Agreement and Employment.  The term of the Executive's employment under this Agreement will be for an initial period of three (3) years, beginning on the effective date of this Agreement (the “Term”), and terminating three years thereafter.  The Term will be automatically extended for two (2) consecutive one (1) year periods, unless either party provides six (6) months prior written notice of its desire not to so extend the Term.

3.

Definitions.

A.

Cause.  For purposes of this Agreement, “Cause” for the termination of the Executive’s employment hereunder shall be deemed to exist if, in the good faith judgment of the Company’s Board of Directors:  (i) the Employee commits fraud, theft or embezzlement; (ii) the Employee commits an act of dishonesty affecting the Company or a felony or a crime involving moral turpitude; (iii) the Employee breaches any non-competition, confidentiality or non-solicitation agreement with the Company; (iv) the Employee breaches any of the material terms of this Agreement and fails to cure such breach within 30 days after the receipt of written notice of such breach from the Company; (v) the Employee engages in gross negligence or willful misconduct that causes unreasonable harm to the business and operations of the Company; or (vi) the Executive’s unreasonable failure o r refusal to diligently perform the duties and responsibilities required to be performed by the Executive under the terms of this Agreement.  

B.

Company Transaction Events. For purposes of this Agreement, (i) a "Going Private Event” means a transaction in which 90% or more of the issued and

C.

outstanding shares of the capital stock of the Company are to be sold or exchanged (pursuant to an agreement, tender or exchange offer or otherwise) by the holders thereof for cash or for securities, so that upon the closing of such a transaction (or a second step merger related thereto), Parlux common stock is no longer traded on any public stock exchange (e.g., Nasdaq, AMEX, NYSE, etc.) or recognized trading market (e.g., Nasdaq OTCBB) and the holders of Parlux common stock prior to the closing of such a transaction hold cash or non-publicly traded securities in a private company after the transaction, (ii) a "Company Merger Event" means a transaction in which 90% or more of the issued and outstanding shares of the capital stock of the Company are to be exchanged (pursuant to an agreement, exchange offer or otherwise) by the holders thereof for securities of any public company, so that upon the closing of such a transaction (or a second step merger related thereto), all Parlux common stock has been exchanged or converted into securities of a public company that are traded on a public stock exchange (e.g., Nasdaq, AMEX, NYSE, etc.) or recognized trading market (e.g., Nasdaq OTCBB) and the holders of Parlux common stock prior to the closing of such a transaction hold publicly traded securities in a public company after the transaction.  

D.

Good Reason.  For purposes of this Agreement, termination by the Executive of his employment for "Good Reason" shall mean a termination by the Executive following a "Good Reason Event" provided (i) the Executive provides notice to the Company of such Good Reason Event within 90 days of the initial existence of such Good Reason Event; (ii) the notice provides the Company with 30 days during which it may remedy the Good Reason Event; and (iii) the Company fails to remedy the Good Reason Event within such 30 day period.  A "Good Reason Event shall be deemed to occur upon (i) a material diminution in the Executive’s authority, duties, or responsibilities or (ii) any action or inaction of the Company which constitutes a material breach of this Agreement.

4.

Compensation.  

A.

Annual Base Salary.  Unless terminated pursuant to Section 8 hereof, Executive shall be paid an annual base salary of $190,000 (as applicable, the "Annual Base Salary").  The Annual Base Salary shall be payable at such regular times and intervals as the Company customarily pays its executives from time to time.  The Annual Base Salary shall be reviewed annually by the Board of Directors of the Company.  The fact that the Company will review Executive’s Annual Base Salary does not entitle Executive to a raise in Annual Base Salary.  Company maintains the sole discretion to determine what, if any, salary adjustments will be made to the Annual Base Salary, as determined within the sole discretion of the Board of Directors of Company.

B.

Executive Bonus Plan.  The Executive shall be entitled to participate in an executive bonus plan (the “Bonus Plan”), the terms and conditions of which shall be established by the Committee for each fiscal year and which will provide that Executive will be able to earn an annual bonus of up to 50% of the Annual Base Salary, based upon

2

achievement by the Company of certain financial measures and management objectives as determined by the Committee.

5.

Executive Benefits.  The Executive will be entitled to four weeks of paid vacation per fiscal year.  Except as otherwise provided in this Agreement, the Executive will be eligible for and may participate in, without action by the Board or any committee thereof, any benefits and perquisites available to executive officers of the Company, including any group health, dental, disability, or other form of executive benefit plan or program of the Company existing from time to time on the same terms and conditions as is available to all other executives (collectively, the "Executive Benefits").  Executive shall receive additional term life insurance coverage with an annual cost to the Company not to exceed $2,000 per year, and shall be provided with an automobile allowance of $800 per month, at the Company’s expense.

6.

Stock Options.  As additional consideration for the Executive's services hereunder and the covenants contained herein, the Company shall grant Executive an option (the "Option") to purchase 60,000 shares of common stock of the Company (the "Common Stock") pursuant to the Company's 2007 Stock Incentive Plan (the "2007 Plan") upon shareholder approval of the 2007 Plan.  The Option (i) shall provide for an exercise price equal to the market price of the Common Stock as of the close of trading on a public stock exchange or recognized trading market on the date the 2007 Plan is approved by the shareholders of the Company, and (ii) shall further provide that the Option shall vest as provided on Schedule A, unless terminated pursuant to Section 8 hereof.  Immediately prior to the closing of a Going Private Event or a Company Merger Event, any unvested portion of the Option shall fully vest and be exercisable by the Executive prior to the closing of the Going Private Event or Company Merger Event; provided, however, that if the Company Merger Event is with a public company that any individual shareholder or group of affiliated shareholders of the Company beneficially owns 10% or more of for a period of at least six months prior to the closing of the Company Merger Event  (an "Affiliated Public Company"), then the vesting of the unvested portion of the Executive's Option shall not be accelerated so long as the Executive's Option to purchase shares of the Common Stock of the Company is converted into an option to purchase shares of the common stock of the Affiliated Public Company with the same economic value as of the date of the closing of the transaction.

7.

Death or Disability.  The Executive's employment will terminate immediately upon the Executive's death.  If the Executive becomes physically or mentally disabled so as to become unable for a period of more than three consecutive months to perform the Executive's duties hereunder on a substantially full-time basis, the Executive's employment will terminate as of the end of such three-month and this shall be considered a "disability" under this Agreement.  The Executive agrees to submit to reasonable examination by a licensed physician selected by the Company to confirm existence or extent of any disability.  Such termination shall not affect the Executive's benefits under the Company's disability insurance program, if any, then in effect.

8.

Termination.  The Executive may terminate this Agreement for any reason upon not less than one hundred eighty (180) days written notice.  The Company may terminate this

3

Agreement for Cause with no prior notice, or for any other reason upon one hundred eighty (180) days written notice.

A.

Termination of Employment Other Than by Resignation of Executive or Termination for Cause.  Upon the termination of this Agreement for any reason (including termination of employment by the Executive for Good Reason, termination by the Company without Cause, or termination upon the death or disability of the Executive) other than by the resignation of Executive without Good Reason or a termination by the Company for Cause, the following shall apply:

(i)

Termination Payment.  The Executive, or his estate and heirs following his death, shall be entitled (A) to continue to receive, except as provided in Section 10 of this Agreement, his Annual Base Salary in effect at the time of such termination for a period of 12 months following the date of such termination (the "Severance Period"), (B) to be paid, except as provided in Section 10 of this Agreement, when otherwise payable as if employment was not terminated, any bonus earned by Executive through the date of termination pursuant to the terms of the Bonus Plan prorated to the date of termination (the “Termination Payments”), and (C) to have any unvested portion of his Option fully vest as of the date of such termination.  

(ii)

Termination Benefits.  The Company shall continue to provide the Executive with the Executive Benefits for the Severance Period in accordance with Section 11 of this Agreement.

(iii)

Condition to Severance.  In the event Executive breaches any of the covenants contained in Section 9, then (A) the Company shall have no further obligation to make Termination Payments to Executive or to continue to provide the Executive Benefits to Executive during the Severance Period, and (B) any unexercised Option shall be forfeited and be cancelled.

B.

Termination of Employment by Resignation of Executive or by the Company With Cause.  Upon the termination of Executive’s employment by the Company with Cause or the resignation of the Executive without Good Reason, the Executive shall be due no further compensation under this Agreement other than what is due and owing through the effective date of Executive’s resignation or termination, as applicable.

9.

Restrictive Covenants.

A.

General.  The Company and the Executive hereby acknowledge and agree that (i) the Executive will come into the possession of trade secrets (as defined in Section 688.002(4) of the Florida Statutes) of the Company (the "Trade Secrets"), (ii) the restrictive covenants contained in this Section 9 are justified by legitimate business interests of the Company, including, but not limited to, the protection of the Trade Secrets, in accordance with Section 542.335(1)(e) of the Florida Statutes, and (iii) the restrictive covenants contained in this Section 9 are reasonably necessary to protect such legitimate business interests of the Company.  

4

B.

Non-Competition.  During the period of the Executive's employment with the Company and for two years after the termination of the Executive's employment with the Company, the Executive will not, directly or indirectly, on the Executive's own behalf or as a partner, officer, director, trustee, executive, agent, consultant, investor or member of any person, firm or corporation, or otherwise, enter into the employ of, render any service to, or engage in any business or activity which is the same as or competitive with the principal business or activity conducted by Company and any of its majority-owned subsidiaries, namely, the licensing, manufacture, and/or distribution to wholesalers of fragrances.  The business or activity conducted by the Company and its majority-owned subsidiaries shall be deemed to also include any business not currently conducted by the C ompany, but which during the Term of this Agreement comes to comprise 30% of the Company's net sales or operating income for any fiscal quarter.  The foregoing shall not be deemed to prevent the Executive from investing in securities of any company having a class of securities which is publicly traded, so long as through such investment holdings in the aggregate, the Executive is not deemed to be the beneficial owner of more than 5% of the class of securities that are so publicly traded.    

C.

Confidentiality.  During and following the period of the Executive's employment with the Company, the Executive will not use for the Executive's own benefit or for the benefit of others, or divulge to others, any information, trade secrets, knowledge or data of a secret or confidential nature and otherwise not available to members of the general public that concerns the business or affairs of the Company or its affiliates and which was acquired by the Executive at any time prior to or during the Term of the Executive's employment with the Company, except with the specific prior written consent of the Company.

D.

Work Product.  The Executive agrees that all programs, inventions, innovations, improvements, developments, methods, designs, analyses, reports and all similar or related information which relate to the business of the Company and its affiliates, actual or anticipated, or to any actual or anticipated research and development conducted in connection with the business of the Company and its affiliates, and all existing or future products or services, which are conceived, developed or made by the Executive (alone or with others) during the Term of this Agreement ("Work Product") belong to the Company.  The Executive will cooperate fully in the establishment and maintenance of all rights of the Company and its affiliates in such Work Product.  The provisions of this Section 9(D) will survive termination of this Agreement indefinitely to the extent necessary to require actions to be taken by the Executive after the termination of the Agreement with respect to Work Product created during the Term of this Agreement.

E.

Non Solicitation.  During the Term of this Agreement, and until two years after the termination of Executive's employment with the Company, the Executive shall not, directly or indirectly  (i) induce any person or entity that is a contract manufacturer, supplier or wholesale distributor of the Company's products to manufacture for, supply, distribute for or otherwise patronize any business or activity which is the same as or competitive with any business or activity conducted by the Company or any of its majority-owned subsidiaries, (ii) canvass, solicit or accept any business with respect to any fragrance from any person or entity which is an actual or proposed licensor of brands

5

or fragrance product lines to the Company, (iii) request or advise any person or entity which is a customer of the Company to withdraw, curtail or cancel any such customer's business with the Company (provided that the Executive after the Term of this Agreement, if it is terminated without Cause by the Company or for Good Reason by the Executive, may engage in the sale of other fragrance products to the same retailers that the Company sells its fragrance products to), or (iv) employ, solicit for employment or knowingly permit any entity or business directly or indirectly controlled by him to employ or solicit for employment, any person who was employed by the Company or its majority-owned subsidiaries at or within the then prior six months, or in any manner seek to induce any such person to leave his or her employment.

F.

Non-Disparagement.  The Executive will not during employment or at anytime thereafter criticize, ridicule, or make any statement or perform any act which disparages or is derogatory of the Company or of any subsidiary, officer, director, agent, employee, contractor, customer, vendor, supplier, licensor or licensee of the Company.  The Company will not, during the Term hereof or at anytime thereafter, criticize, ridicule or make any statement or perform any act which disparages or is derogatory of the Executive.

G.

Enforcement.  The parties agree and acknowledge that the restrictions contained in this Section 10 are reasonable in scope and duration and are necessary to protect the Company or any of its subsidiaries or affiliates.  If any covenant or agreement contained in this Section 10 is found by a court having jurisdiction to be unreasonable in duration, geographical scope or character of restriction, the covenant or agreement will not be rendered unenforceable thereby but rather the duration, geographical scope or character of restriction of such covenant or agreement will be reduced or modified with retroactive effect to make such covenant or agreement reasonable, and such covenant or agreement will be enforced as so modified.  The Employee agrees and acknowledges that the breach of this Section 10 will cause irreparable injury to the Company or any of its su bsidiaries or affiliates and upon the breach of any provision of this Section 10, the Company or any of its subsidiaries or affiliates shall be entitled to injunctive relief, specific performance or other equitable relief, without being required to post a bond; provided, however, that, this shall in no way limit any other remedies which the Company or any of its subsidiaries or affiliates may have (including, without limitation, the right to seek monetary damages).

10.

Section 409A.   In the event that Executive is a "specified employee" as defined in Treas. Reg. § 1.409A-1(i) on the date that Executives separates from service with the Company, the payment of any amount due to Executive hereunder which would be deemed the "deferral of compensation" pursuant to Treas. Reg. §1.409-1(b) shall be delayed until the date that is six (6) months after the date of separation from service (or if earlier, the date of the Executive's death).   To the extent that any payment pursuant to this Agreement is due to Executive after the end of such six month period following his separation from service (or death), such amounts shall be paid without regard to this Section 10.

11.

Representations.  Executive hereby represents and warrants to the Company that (i) the execution, delivery and full performance of this Agreement by the Executive does not

6

and will not conflict with, breach, violate or cause a default under any agreement, contract or instrument to which the Executive is a party or any judgment, order or decree to which the Executive is subject; (ii) the Executive is not a party or bound by any employment agreement, consulting agreement, agreement not to compete, confidentiality agreement or similar agreement with any other person or entity; and (iii) upon the execution and delivery of this Agreement by the Company, this Agreement will be the Executive's valid and binding obligation, enforceable in accordance with its terms.

12.

Assignment.  The Executive may not assign, transfer, convey, mortgage, hypothecate, pledge or in any way encumber the compensation or other benefits payable to the Executive or any rights which the Executive may have under this Agreement.  Neither the Executive nor the Executive's beneficiary or beneficiaries will have any right to receive any compensation or other benefits under this Agreement, except at the time, in the amounts and in the manner provided in this Agreement.  This Agreement will inure to the benefit of and will be binding upon any successor to the Company and any successor to the Company shall be authorized to enforce the terms and conditions of this Agreement, including the terms and conditions of the restrictive covenants contained in Section 10 hereof.  As used in this Agreement, the term "successor" means any person, firm, corpor ation or other business entity which at any time, whether by merger, purchase or otherwise, acquires all or substantially all of the capital stock or assets of the Company.  This Agreement may not otherwise be assigned by the Company.

13.

Governing Law.  This Agreement shall be governed by the laws of Florida without regard to the application of conflicts of laws.

14.

Entire Agreement.  This Agreement constitutes the only agreements between Company and the Executive regarding the Executive's employment by the Company.  This Agreement supersedes any and all other agreements and understandings, written or oral, between the Company and the Executive regarding the subject matter hereof and thereof.  A waiver by either party of any provision of this Agreement or any breach of such provision in an instance will not be deemed or construed to be a waiver of such provision for the future, or of any subsequent breach of such provision.  This Agreement may be amended, modified or changed only by further written agreement between the Company and the Executive, duly executed by both Parties.

15.

Dispute Resolution and Venue.  If a dispute arises out of or relates to this Agreement, or the breach thereof, and if the dispute cannot be settled through negotiation, the parties agree first to try in good faith to settle the dispute by mediation administered by the American Arbitration Association under its Commercial Mediation Procedures before resorting to litigation.  In the event any party to this Agreement commences any litigation, proceeding or other legal action with respect to any claim arising under this Agreement,  the Parties hereby (a) agree that any such litigation, proceeding or other legal action shall be brought exclusively in a court of competent jurisdiction located within Broward County, Florida, whether a state or federal court; (b) agree that in connection with any such litigation, proceeding, or action, such parties will consent and su bmit to personal jurisdiction in any such court described in clause (a) and to service of process upon them in accordance with the rules and statutes governing service of process

7

or in accordance with the notice provisions contained herein; and (c) agree to waive to the full extent permitted by law any objection that they may now or hereafter have to the venue of any such litigation, proceeding or action was brought in an inconvenient forum.  The Parties expressly agree that any breach of this Agreement shall be deemed to have occurred in such County. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY DISPUTE IN CONNECTION WITH OR RELATING TO THIS AGREEMENT OR ANY MATTERS DESCRIBED OR CONTEMPLATED HEREIN, AND AGREES TO TAKE ANY AND ALL ACTION NECESSARY OR APPROPRIATE TO EFFECT SUCH WAIVER.

16.

Severability; Survival.  In the event that any provision of this Agreement is found to be void and unenforceable by a court of competent jurisdiction, then such unenforceable provision shall be deemed modified so as to be enforceable (or if not subject to modification then eliminated herefrom) to the extent necessary to permit the remaining provisions to be enforced in accordance with the parties intention.  The provisions of Section 10 (and the restrictive covenants contained therein) shall survive the termination for any reason of this Agreement and/or the Employee's relationship with the Company.

17.

Notices.  Any and all notices required or permitted to be given hereunder will be in writing and will be deemed to have been given when deposited in United States mail, certified or registered mail, postage prepaid.  Any notice to be given by the Executive hereunder will be addressed to the Company to the attention of the Committee at its main offices, currently 3725 S.W. 30^th Avenue, Fort Lauderdale, FL 33312 with a copy provided to the Company's counsel, Akerman Senterfitt, One S.E. 3^rd Ave., Miami, FL 33131, Attn:  Jonathan Awner.  Any notice to be given to the Executive will be addressed to the Executive at the Executive's residence address last provided by the Executive to Company.  Either party may change the address to which notices are to be addressed by notice in writing to the other party given in accordance with the terms of this Section.

18.

Headings.  Section headings are for convenience of reference only and shall not limit or otherwise affect the meaning or interpretation of this Agreement or any of its terms and conditions.

8

IN WITNESS WHEREOF, the Parties hereto have executed and delivered this Agreement under seal as of the date first above written.

PARLUX FRAGRANCES, INC.
By	/s/ NEIL J. KATZ
Name:	Neil Katz
Title:	Chairman and CEO
EXECUTIVE
By:	/s/ RAYMOND J.BALSYS
Name:	Raymond J. Balsys

9

SCHEDULE A

Date	Amount Vested
March 31, 2008	10,000
March 31, 2009	20,000
March 31, 2010	30,000

10

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS PURSUANT TO

RULE 13A-14 OF THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Neil J. Katz, certify that:

1.

I have reviewed this quarterly report on Form 10-Q 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)

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

d)

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: November 9, 2007

/s/ NEIL J. KATZ

Neil J. Katz,

Chairman and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS PURSUANT TO

RULE 13A-14 OF THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Raymond J. Balsys, certify that:

1.

I have reviewed this quarterly report on Form 10-Q 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)

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

d)

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: November 9, 2007

/s/ Raymond J. Balsys

Raymond J. Balsys

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 Quarterly Report of Parlux Fragrances, Inc. (the "Company") on Form 10-Q for the period ending September 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Neil J. Katz, Chairman and Chief Executive Officer of the Company, certifies, 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.

November 9, 2007	By:	/s/ NEIL J. KATZ
		Neil J. Katz
		Chairman and Chief Executive Officer

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-Q 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 Quarterly Report of Parlux Fragrances, Inc. (the "Company") on Form 10-Q for the period ending September 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Raymond J. Balsys, Chief Financial Officer of the Company, certifies, 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.

November 9, 2007	By:	/s/ Raymond J. Balsys
		Raymond J. Balsys
		Chief Financial Officer

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-Q 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.