802356--5/22/2009--PARLUX_FRAGRANCES

related topics

{property, intellectual, protect}

{customer, product, revenue}

{condition, economic, financial}

{personnel, key, retain}

{debt, indebtedness, cash}

{cost, operation, labor}

{competitive, industry, competition}

{loan, real, estate}

{product, liability, claim}

{financial, litigation, operation}

{acquisition, growth, future}

{stock, price, operating}

The Paris Hilton and GUESS? lines are our primary sources of revenue following our sale of the Perry Ellis brand. If we are unable to acquire or license additional brands, secure additional distribution arrangements, or obtain the required financing for these agreements and arrangements, the growth of our business could be impaired. The development of new products by us involves considerable costs and any new product may not generate sufficient consumer interest and sales to become a profitable brand or to cover the costs of its development. The loss of or interruption in our arrangements with our manufacturers, suppliers and customers could have a material adverse affect on our sales, profitability, and operating cash flow. The fragrance and cosmetic industry is highly competitive, and if we are unable to compete effectively it could have a material adverse effect on our sales, profitability, operating cash flow, and many other aspects of our business, prospects, results of operations and financial condition. Our net sales, operating income and inventory levels fluctuate on a seasonal basis and a decrease in sales or margins during our peak seasons could have a disproportionate effect on our overall financial condition and results of operations. The continued consolidation of the U.S. department store segment could have a material adverse effect on our sales and profitability. Perfumania is one of our largest customers and a loss of Perfumania as a customer would have a material adverse effect on our business. Perfumania s inability to pay its accounts payable balance due to us could have an adverse effect on our financial condition and results of operations. Failure to comply with restrictive covenants in our existing credit facility will result in our inability to borrow additional funds under the facility, which would require us to obtain replacement financing, of which there is no assurance. Consumers have reduced discretionary purchases of our products as a result of the recent general economic downturn, and may further reduce discretionary purchases of our products in the event of further economic decline, terrorism threats or other external factors. If we are unable to protect our intellectual property rights, specifically trademarks and trade names, our ability to compete could be negatively impacted. Other parties may infringe on our intellectual property rights or other intellectual property rights which we are licensed to use and may thereby dilute our brands in the marketplace. The accessories market, specifically, watches, handbags, and sunglasses, is also highly competitive and if we are unable to compete effectively it could have a material adverse effect on our profitability, operating cash flow, and many other aspects of our business, prospects, results of operations and financial condition. The loss of, or disruption in our distribution facility, could have a material adverse effect on our sales and our relationships with our customers. Reductions in worldwide travel could hurt sales volumes in our duty-free related business. If we lose the services of our executive officers and senior management, it could have a negative impact on our business. If we lose our key personnel, or fail to attract and retain additional qualified experienced personnel, we will be unable to continue to develop our prestige fragrance products and attract and obtain new licensing partners. We may unknowingly infringe on others intellectual property rights which could result in litigation. We are involved in litigation from time to time in the ordinary course of business, which, if the outcome of such litigation is adverse to us, could materially adversely affect our business, results of operations, financial condition, and cash flows. Our quarterly results of operations could fluctuate significantly due to retailing peaks related to gift giving seasons and delays in new product launches, which could adversely affect our stock price. Our stock price has been volatile.

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802356--5/22/2009--PARLUX_FRAGRANCES_INC