802356--7/11/2007--PARLUX_FRAGRANCES

related topics

{property, intellectual, protect}

{customer, product, revenue}

{cost, operation, labor}

{condition, economic, financial}

{financial, litigation, operation}

{competitive, industry, competition}

{product, liability, claim}

{control, financial, internal}

{loan, real, estate}

{debt, indebtedness, cash}

{stock, price, share}

{personnel, key, retain}

{acquisition, growth, future}

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. We have not remediated material weaknesses and significant deficiencies in our internal control over financing reporting. Our arrangements with our manufacturers, suppliers and customers are generally informal and if these arrangements were changed, interrupted, or terminated it could limit our supply of inventory and reduce sales, profitability and operating cash flow. 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. The continued consolidation of the U.S. department store segment, and the transition period after such consolidation, could have a material adverse effect on our sales and profitability. 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 intellectual property rights which we are licensed to use and may thereby dilute our brands in the marketplace. We are subject to significant litigation . We depend on third parties for the manufacture and delivery of our products, and any disruption or interruption in this supply chain can affect production levels. Consumers may reduce discretionary purchases of our products as a result of a general economic downturn, terrorism threats, or other external factors. 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 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. 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. 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. Our quarterly results of operations could fluctuate significantly due to retailing peaks related to gift giving seasons and delays in new product launches, which could adversely affect our stock price. We may be unable to maintain our listing on the Nasdaq National Market. Our stock price volatility could result in litigation, substantial cost, and diversion of management s attention.

Full 10-K form ▸

802356--7/11/2007--PARLUX_FRAGRANCES_INC