<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
--------------------------------------------------------------------------------
                                   Form 10-K/A

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

FOR FISCAL YEAR ENDED MARCH 31, 1996

                                            OR

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

For the transition period from ____________to _______________

                         Commission File Number 0-15491

Parlux Fragrances, Inc.
-----------------------
(Exact name of registrant as specified in its charter)

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

3725 SW 30Th Avenue, Ft. Lauderdale, FL     33312
---------------------------------------     -----
(Address of principal executive offices)  (zip code)

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

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

Title Of Class                              Name of Exchange on which registered
--------------                              ------------------------------------

None                                        None

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

                    Common Stock (par value $.01 per share)
             -------------------------------------------------------
                                 Title of Class

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes  X    No
    ---      ---

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

Class                                       Outstanding at June 25, 1996

-----------------------------               ------------------------------------
Common Stock, $.01 par value                13,229,546

The aggregate market value of the Registrant's common stock held by
non-affiliates of the Registrant was approximately $102,557,000 based on a
closing price of $10.25 for the Common Stock as of June 25, 1996 as reported on
the National Association of Securities Dealers Automated Quotation System on
such date. For purposes of the foregoing calculation, only the Directors and
beneficial owners of the registrant are deemed to be affiliates.

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


<PAGE>   2


  Item 1.         BUSINESS

         Parlux Fragrances, Inc. (the Company), was incorporated in Delaware in
  1984 and is engaged in the creation, design, manufacture, distribution and
  sale of prestige fragrances, cosmetics and beauty related products marketed
  primarily through specialty stores and national department stores. The
  fragrance market is generally divided into a prestige segment (distributed
  primarily through department and specialty stores) and a mass market segment.
  The Company's products are positioned primarily in the prestige segment.
  Additionally, the Company manufactures and distributes certain brands through
  Perfumania Inc., an affiliated national chain which is a leading specialty
  retailer of fragrances. Currently, the Company engages in the manufacture
  (through sub-contractors), distribution and sale of PERRY ELLIS, FRED HAYMAN
  BEVERLY HILLS, TODD OLDHAM, VICKY TIEL and PHANTOM OF THE OPERA fragrances and
  grooming items on an exclusive worldwide basis as a licensee. Additionally,
  the Company manufactures, distributes and sells its own brands of ANIMALE, BAL
  A' VERSAILLES, DANIEL DE FASSON, DECADENCE and LIMOUSINE fragrances and
  ALEXANDRA DE MARKOFF cosmetics on a worldwide basis.

  RESTATEMENT OF NET INCOME AND NET INCOME PER SHARE TO REFLECT SEC ANNOUNCEMENT

         In a 1997 announcement discussed in Topic No. D-60 by the Emerging
  Issues Task Force, the staff of the Securities and Exchange Commission
  ("S.E.C.") indicated that when debt is convertible at a discount from the then
  current common stock market price, the discounted amount reflects at that time
  an incremental yield, e.g. a "beneficial conversion feature" which should be
  recognized as a return to the debt holders from the date the debt is issued to
  the date it first becomes convertible. Based on the market price of the
  Company's common stock on the date of issuance of the convertible debt, the
  convertible debentures issued by the Company during the period November 1995
  through March 1996 had a beneficial conversion feature of $4,303,320. Although
  management believes that the Company followed generally accepted accounting
  principles in existence at the time of the issuances, it has agreed to comply
  with the S.E.C. announcement, restating its net income and per share
  information for the year ended March 31, 1996 ("fiscal 1996"), to reflect such
  accounting treatment for this non-cash charge, which has been recorded as
  additional interest expense in the accompanying restated consolidated
  financial statements. The effect of the restatement was to decrease net income
  for fiscal 1996 by $2,800,210, resulting in net income of $4,972,481.

  RECENT DEVELOPMENTS

         On May 8, 1996 the Company signed a letter of intent with HAAS WHEAT &
  PARTNERS (HWP) with respect to the proposed investment by HWP of $40 million
  into the Company. The original proposal was structured as a ten-year 10%
  pay-in-kind debenture in the face amount of $40 million, accompanied by
  warrants to purchase up to 5 million shares of the Company's common stock at
  $11.00. On May 31, 1996 the 



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  letter of intent was amended to extend the term of the debenture to 20 years,
  making the debenture convertible into 3.7 million shares, and reducing the
  warrants to the right to acquire 1.3 million common shares. On June 11, 1996,
  the parties mutually agreed to terminate the letter of intent.

         On January 31, 1996, the Company entered into an agreement to purchase
  all of the assets and assume certain liabilities of Richard Barrie Fragrances,
  Inc. (RBF) for a combination of cash and Parlux common stock. The agreement is
  subject to the approval of RBF's board of directors, shareholders and
  convertible note holders. The Company anticipates that, if the agreement is
  approved, closing would take place prior to June 30, 1996.

         On January 11, 1996, the Company entered into a non-binding letter of
  intent with Parfums Jean Desprez, to purchase, for cash and notes, the
  world-wide trademarks and the Bal A' Versailles fragrance brand (BAV). The
  acquisition was completed on March 19, 1996. See Note 5 to the accompanying
  Consolidated Financial Statements for further discussion.

         On December 27, 1995, the Company consummated the acquisition of
  substantially all of the assets of Alexandra de Markoff (AdM), a prestige
  cosmetic line, pursuant to an asset purchase agreement entered into on
  September 21, 1995 between the Company and Revlon Holdings, Inc. (Revlon). See
  Note 5 to the accompanying Consolidated Financial Statements for further
  discussion.

         In May 1995, the Company terminated its license agreement with
  FRANCESCO SMALTO INTERNATIONAL (SMALTO) for breach of contract. On October 5,
  1995, the Company entered into a transition and termination agreement with
  SMALTO which provides for the continued use of the Francesco Smalto trademark
  through September 30, 1996. The agreement contains certain production
  restrictions and requires a fixed amount of royalties during the period, which
  the Company anticipates will not exceed 5% of net sales of Smalto fragrances.
  Sales of Francesco Smalto products represented approximately 7% of total
  Company net sales for the year ended March 31, 1996.

         On October 26, 1995, the Company announced a two-for-one stock split
  effected in the form of a dividend to shareholders of record as of November 3,
  1995 (the stock split). Distribution was effected on November 10, 1995. All
  comparable share information in this Form 10-K, unless indicated, has been
  retroactively restated to reflect the split.

  THE PRODUCTS

         The Company's principal products are fragrances and cosmetics. Each
  fragrance is distributed in a variety of sizes and packaging. In addition,
  each fragrance line may be complemented by beauty-related products such as
  soaps, deodorants, body lotions, 



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  cremes and dusting powders. The cosmetics are full-service lines with
  treatment and make-up products consisting of over 200 stock keeping units
  (S.K.U.'s). The Company's basic products generally retail at prices ranging
  from $20 to $300 per item.

         The Company designs and creates fragrances and cosmetics/shades using
  its own staff and independent contractors. It also supervises the design of
  its packaging by independent contractors and has recently completed the design
  process for PERRY ELLIS "AMERICA" for men and women, which is being launched
  on July 4, 1996.

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

                                FISCAL 1996       FISCAL 1995       FISCAL 1994
                                -----------       -----------       -----------
  PERRY ELLIS                       39%               16%                0%
  FRED HAYMAN                       20%               45%                0%
  ANIMALE                           15%               24%               62%
  FRANCESCO SMALTO                   7%                8%               19%

         The Company anticipates that the sales of PERRY ELLIS, FRED HAYMAN,
  VICKY TIEL and ANIMALE brand fragrances, coupled with the recent brand
  acquisitions such as ALEXANDRA DE MARKOFF and BAL A' VERSAILLES, will continue
  to account for a significant portion of the Company's sales, and will more
  than offset the discontinuation of the FRANCESCO SMALTO products.

  MARKETING AND SALES

         In the United States, the Company has established its own sales and
  marketing staff, and also utilizes independent sales representatives for
  certain channels of distribution. The Company sells directly to retailers,
  primarily national and regional department stores and specialty stores, which
  it believes will maintain the image of its products as prestige fragrances.
  The Company's products are sold in over 1,800 retail outlets in the United
  States. Additionally, the Company sells products to Perfumania, Inc., an
  affiliated company, which is a leading specialty retailer of fragrances with
  over 190 retail outlets principally located in manufacturers' outlet malls and
  regional malls.

         Marketing and sales activities outside the United States are conducted
  through arrangements with independent distributors. The Company has
  established relationships for the marketing of its fragrances with
  distributors in Canada, Europe, the Middle East, the Far East, Latin America,
  the Caribbean and, recently, Russia.

         The Company advertises both directly and through a cooperative
  advertising program in association with major retailers in the fashion media
  on a national basis and through retailers' statement enclosures and
  catalogues. The Company is required to



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  spend certain minimum amounts for advertising under certain licensing
  agreements. See "Licensing Agreements" and Note 8(B) to the Consolidated
  Financial Statements.

  RAW MATERIALS

         Raw materials and components for the Company's products are available
  from sources in Europe and the United States. The Company uses third party
  contract manufacturers to produce finished products. Presently, approximately
  10% of contract manufacturing is performed in France, however, the Company
  intends to continue the transition of it's manufacturing to the United States
  during the current fiscal year upon the completion of the RBF acquisition.

         In the past, the Company has had little difficulty obtaining raw
  materials at competitive prices. The Company has no reason to believe that
  this situation will change in the near future, but there can be no assurances
  that this will continue.

  SEASONALITY

         Typical of the fragrance industry, the Company has its highest sales
  during the calendar year end holiday season. Lower than projected sales during
  this period could have a material adverse affect on the Company's operating
  results.

  INDUSTRY PRACTICES

         It is an industry practice in the United States for businesses that
  market cosmetics and fragrances to department stores to provide the department
  stores with rights to return merchandise. The Company's products are subject
  to such return rights. It is the Company's practice to establish reserves and
  provide allowances for product returns at the time of sale. The Company
  believes that such reserves and allowances are adequate based on past
  experience, however, no assurances can be made that reserves and allowances
  will continue to be adequate. Consequently, if product returns are in excess
  of the reserves and allowances made by the Company, sales will be reduced in
  later periods.

  CUSTOMERS

         The Company concentrates its sales efforts in the United States in
  specialty stores, such as Nordstrom's, Neiman Marcus, and Bergdorf Goodman and
  a number of regional department store retailers including, among others,
  Macy's, J.L. Hudson, Dillards, Bloomingdales and a national department store
  chain, J.C. Penney. Retail distribution has been targeted by brand to maximize
  potential and minimize overlap between each of these distribution channels.
  Certain brands are sold exclusively through specialty stores, while others are
  sold exclusively through J.C. Penney.



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<PAGE>   6

         Sales to Perfumania, a company affiliated with Mr. Ilia Lekach, the
  Company's Chairman of the Board and Chief Executive Officer, amounted to
  $26,187,460 for the fiscal year ended March 31, 1996. Net amounts owed by
  Perfumania to the Company amounted to $13,482,423 at March 31, 1996. The loss
  of Perfumania as a customer could have a material adverse effect on the
  operations of the Company.

  FOREIGN AND EXPORT SALES

         A significant portion of the Company's international sales and exports
  are made through its wholly-owned French subsidiary, Parlux S.A. Net sales to
  unaffiliated customers by Parlux S.A. were $9,101,611, $7,219,601 and
  $8,225,259 for fiscal years ended March 31, 1996, 1995, and 1994 respectively.
  The French subsidiary reported net income of $887,163, $319,535 and $122,025
  for the fiscal years ended March 31, 1996, 1995 and 1994, respectively.

  LICENSING AGREEMENTS

  PERRY ELLIS: The Company acquired the Perry Ellis license from Sanofi Beaute
  in December 1994. The Perry Ellis license is entering its eleventh year, and
  is renewable every two years if the average annual sales in the completed
  period exceed 75% of the average sales of the previous four years. All minimum
  sales levels have been met by the previous licensee, and the Company believes
  that this will continue. The license requires the payment of royalties, which
  decline as a percentage of net sales as net sales volume increases, and the
  spending of certain minimum amounts for advertising based upon net sales
  levels achieved in the prior year.

  FRED HAYMAN: In June 1994, the Company entered into an Asset Purchase
  Agreement with Fred Hayman Beverly Hills, Inc. (FHBH), pursuant to which the
  Company purchased substantially all of the assets and liabilities of the FHBH
  fragrance division, including inventory, accounts receivable (excluding those
  backed by non-cancelable letters of credit issued prior to June 2, 1994),
  molds, and assignable contracts. In addition, FHBH granted to Parlux an
  exclusive royalty free 55-year license to use FHBH's United States Class 3
  trademarks FRED HAYMAN(R), 273(R), TOUCH(R), WITH LOVE(R) and FRED HAYMAN
  PERSONAL SELECTIONS(R) and the corresponding international registrations.
  There are no minimum sales or advertising requirements.

  VICKY TIEL: In September 1992, the Company entered into an exclusive worldwide
  license agreement with VICKY TIEL S.A. in which the Company secured the rights
  to manufacture and distribute fragrances and beauty care products using the
  VICKY TIEL trademark for an initial five-year period, renewable for a
  subsequent five-year period upon achieving specified sales or minimum royalty
  levels. Under this agreement, the Company is obligated to pay royalties
  calculated as a percentage of net sales, which 


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<PAGE>   7

  decline as net sales volume increases. The Company is also obligated to spend
  certain minimum amounts for advertising based upon the annual net sales of the
  products.

  TODD OLDHAM: In December 1992, the Company entered into an exclusive worldwide
  licensing agreement with L-7 Designs, Inc. in which the Company has secured
  the rights to manufacture and distribute fragrances and beauty care products
  using the TODD OLDHAM trademark for an initial contract period ending March
  31, 1997, renewable for subsequent three-year and four-year periods upon
  achieving specified sales or minimum royalty levels. The license requires the
  payment of royalties, which decline as a percentage of net sales as net sales
  volume increases, and the spending of certain minimum amounts for advertising
  based upon net sales levels. The Company launched the TODD OLDHAM women's
  fragrance line in March 1995.

  PHANTOM OF THE OPERA: In April 1993, the Company entered into an exclusive
  worldwide agreement with Creative Fragrances, Inc. for the worldwide
  manufacturing and distribution rights to PHANTOM OF THE OPERA covering men's
  and women's fragrances and beauty related products. The agreement expires in
  April 1998. Royalties are payable at 7% of net sales. There are no minimum
  sales or advertising requirements.

  FRANCESCO SMALTO: In May 1995, the Company terminated its license agreement
  with FRANCESCO SMALTO INTERNATIONAL (SMALTO) for breach of contract. On
  October 5, 1995, the Company entered into a transition and termination
  agreement with SMALTO which provides for the continued use of the Francesco
  Smalto trademark through September 30, 1996. The agreement contains certain
  production restrictions and requires a fixed amount of royalties during the
  period, which the Company anticipates will not exceed 5% of net sales of
  Smalto fragrances. Sales of Francesco Smalto products represented
  approximately 7% of total Company net sales for the year ended March 31, 1996.

  SUMMARY: The Company believes it is presently in compliance with all material
  obligations under the above agreements. There can be no assurance the Company
  will be able to continue to comply with the terms of these agreements in the
  future.

  BARTER ARRANGEMENTS

         In June 1991, the Company entered into a barter arrangement (the Barter
Agreement) under which the Company would receive advertising credits in exchange
for its inventory of JOAN COLLINS products, which had been manufactured under a
manufacturing and distribution agreement terminated in 1991. Sales under the
Barter Agreement were finalized during fiscal 1994.

         The estimated value of the advertising was recorded as a prepaid
expense on the Company's balance sheet at the time such inventory was sold, net
of unearned income equal to the amount of advertising credits minus the related
cost of goods bartered. As 



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advertising credits are used by the Company, unearned income is debited and cost
of goods sold is credited. As a result, as the advertising credits are used
aggregate cost of goods as a percentage of net sales decreases and gross margin
as a percentage of net sales increases.

          During the fiscal year ended March 31, 1996, the Company had no barter
sales, utilized $684,000 of its deferred advertising credits and realized
$355,000 of deferred income on the use of these credits. Since the inception of
the Barter Agreement, $6,186,000 of JOAN COLLINS products were bartered and
$5,697,000 of advertising credits have been used. In addition, in connection
with the FHBH acquisition in 1994, the Company acquired approximately $471,000
of advertising credits. The balance of deferred advertising credits and unearned
income at March 31, 1996 were $1,493,000 and $434,000, respectively ($1,094,000
and $434,000, respectively relate to the Barter Agreement).

         The Company expects to be able to fully utilize these advertising
credits as part of its normal ongoing advertising expenditures.

  TRADEMARKS

         The Company owns the worldwide trademarks and distribution rights to
ANIMALE, BAL A' VERSAILLES, DANIEL DE FASSON, DECADENCE and LIMOUSINE
fragrances, and ALEXANDRA de MARKOFF cosmetics. Accordingly, there are no
licensing agreements requiring the payment of royalties. Additionally, the
Company has the rights to license certain of these trademarks for all classes of
merchandise.

  PRODUCT LIABILITY

         The Company has insurance coverage for product liability in the amount
of $5 million per incident. The Company maintains an additional $5 million of
coverage under an "umbrella" policy. In addition, the Company believes that the
manufacturers of the products sold by the Company also carry product liability
coverage and that the Company effectively is protected thereunder.

         There are no pending and, to the best of the Company's knowledge, no
threatened product liability claims. Over the past eight years, the Company has
not been presented with any product liability claims. Based on this historical
experience, management believes that it's insurance coverage is adequate.

  COMPETITION

         The market for fragrances and beauty related products is highly
competitive and sensitive to changing consumer preferences and demands. The
Company believes that





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the quality of its fragrance and cosmetics products, as well as its ability to
develop, distribute and market new products, will enable it to continue to
compete effectively in the future and to continue to achieve positive product
reception, position and inventory levels in retail outlets. However, there are
products which are better known than the products distributed by the Company.
There are also companies which are substantially larger and more diversified,
and which have substantially greater financial and marketing resources than the
Company, as well as greater name recognition, and the ability to develop and
market products similar to, and competitive with, those distributed by the
Company.

  EMPLOYEES

         As of March 31, 1996, the Company had 126 full-time and part-time
employees. Of these, 42 were engaged in worldwide sales activities, 46 in
administrative and finance functions and 38 in warehousing and distribution
activities. None of the Company's employees are covered by a collective
bargaining agreement and the Company believes that its relationship with its
employees is satisfactory. The Company also uses the services of independent
contractors in various capacities, including sales representatives.

         During June 1993, the Company established a 401-K Plan covering
substantially all of its U.S. employees. Commencing on April 1, 1996, the
Company matches 25% of the first 6% of employee contributions, within annual
limitations established by the Internal Revenue Code.

  ITEM 2.  PROPERTIES

         In November 1995, the Company moved its corporate headquarters and
domestic operations from a 38,500 square foot leased facility in Pompano Beach,
Florida to a new 100,000 square foot leased facility in Fort Lauderdale, Florida
to accommodate current and future growth levels. The annual lease cost of the
new facility is approximately $600,000, with the lease covering a ten-year
period.

         The Company is actively seeking to sublease the Pompano Beach facility
where the current annual rent is approximately $240,000 annually. Management
expects to sublease this facility for amounts which will closely approximate its
current commitment.

         The Company's French subsidiary leases approximately 1,500 square feet
under an operating lease which provides for annual rentals equivalent to
approximately $48,000.

  ITEM 3.  LEGAL PROCEEDINGS

         To the best of the Company's knowledge, there are no proceedings
pending against the Company or any of its properties which, if determined
adversely to the



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Company, would have a material effect on the Company's financial condition.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY
           HOLDERS
          
         The Company did not submit any actions for shareholders' approval
during the fiscal year ended March 31, 1996.

PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON STOCK AND
           RELATED SECURITY HOLDER MATTERS

         The Company's Common Stock, par value $0.01 per share, has been listed
on the National Association of Securities Dealers Automatic Quotation System
("NASDAQ") National Small Cap List market since February 26, 1987 and commenced
trading on the NASDAQ National Market on October 24, 1995. All share references
below have been retroactively adjusted to reflect the two-for-one stock split
effected on November 3, 1995.

         In July 1992, 250,000 shares included in the Company's employee stock
option plans were registered with the SEC via a Form S-8 registration statement.
Of these shares, 159,592 had been exercised through March 31, 1996. Of the
90,408 remaining shares, 81,000 have been granted, and 9,408 remain available
for future grants.

         At March 31, 1995, certain officers and/or directors and previous
employees of the Company held warrants to purchase 2,172,916 shares of the
Company's common stock exercisable at prices ranging from $1.50 to $3.125 per
share. In addition, Mr. Boris Lekach, a relative of the Company's chairman
received warrants to purchase 100,000 shares of common stock in connection with
a $200,000 loan extended to the Company during 1990. In connection with the
October 1990 acquisition of certain fragrance brands from the Deco Distribution
Group, Inc. (Deco), the Deco shareholders held 1,100,000 warrants exercisable at
$2.00 per share, which were to expire in March 1996. In connection with the FHBH
acquisition, FHBH held 200,000 warrants exercisable at $2.125 per share.

         In May 1995, the Company extended a discount of $0.75 per share to
those holders of warrants issued in connection with the FHBH and Deco
acquisitions, as well as the loan to Mr. Boris Lekach, if the holders would
exercise by May 31, 1995. The exercise period was subsequently extended to July
31, 1995. These warrant holders exercised all of their warrants into 1,400,000
shares of common stock, increasing stockholders' equity by approximately
$2,300,000. The Company had agreed to register with the SEC all shares issued as
a result of such warrants being exercised prior to July 31, 1995, and the
registration was completed in September 1995.


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<PAGE>   11

         In June 1995, in connection with a long-term loan, the Company issued
warrants to acquire 60,000 unregistered shares of common stock to Mr. F. Lekach,
which are exercisable at $6.94 per share, for a two-year period.

         During the year ended March 31, 1996, the Company issued 1,125,044
shares of common stock in private placements pursuant to Regulation S or Rule
144, which resulted in an increase in stockholders' equity of $7,715,000.

         In December 1995, the Company issued 424,000 shares of common stock,
and options to purchase an additional 176,000 shares of common stock to Revlon
in connection with the AdM acquisition. In May 1996, Revlon exercised the
176,000 options. The combined effect increased stockholders' equity by
$4,800,000 ($3,392,000 in the year ended March 31, 1996 and $1,408,000 in the
ensuing fiscal year).

         During the period November 2, 1995 through March 31, 1996 the Company
issued $3,700,000 of 7% convertible debentures and $15,000,000 of 5% convertible
debentures, (the "Debentures") pursuant to Regulation S. The Debentures were
convertible into shares of the Company's common stock at 85% of the closing
price of the stock as listed on NASDAQ over specific time frames. As of March
31, 1996, $7,000,000 of the Debentures, plus accrued interest of $48,416, had
been converted into 1,073,688 shares of common stock. Subsequent to March 31,
1996, an additional $10,950,000 have been converted into 1,257,667 shares of
common stock. During April and May 1996, the Company issued an additional
$13,000,000 of 5% convertible debentures, $3,000,000 pursuant to Regulation S
and $10,000,000 pursuant to Regulation D, of which $3,000,000 have been
converted into 308,727 shares of common stock through June 25, 1996. See Note 7
to the consolidated financial statements.

         The Company believes that the number of beneficial owners of its common
stock is approximately 1,500.

         The following chart, as reported by the National Association of
Securities Dealers, Inc., shows the high and low bid prices, adjusted for the
stock split, for the Company's securities available for each quarter of the last
two years and the interim period from January through June 1996. The prices
represent quotations by the dealers without adjustments for retail mark-ups,
mark-downs or commissions and may not represent actual transactions.

            CALENDAR QUARTER                      COMMON STOCK
            ----------------                      ------------
                                                HIGH        LOW
                                                ----        ---

               First 1994                       3.563      1.688
               Second 1994                      3.375      1.750
               Third 1994                       3.063      2.125
               Fourth 1994                      3.188      2.188



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<PAGE>   12

First 1995                              4.875                   2.875
Second 1995                             7.313                   4.500
Third 1995                              9.188                   6.500
Fourth 1995                            10.000                   7.000

First 1996                             13.250                   6.125
Second 1996  (to June 25, 1996)        15.250                   9.000

ITEM 6.    SELECTED FINANCIAL DATA

         The following data has been derived from financial statements audited
by Price Waterhouse LLP, independent certified public accountants. Consolidated
balance sheets at March 31, 1995 and 1996 and the related consolidated
statements of income and of cash flows for the three years ended March 31, 1996
and notes thereto appear elsewhere in this Annual Report on Form 10-K.
<TABLE>
<CAPTION>

FOR THE YEAR ENDED MARCH 31,           (in thousands of dollars, except per share data)
----------------------------

                                          1996            1995          1994           1993            1992
                                          ----            ----          ----           ----            ----
<S>                                    <C>             <C>           <C>            <C>             <C>    
Net sales                              $67,727         $38,209       $25,366        $28,427         $28,120
Costs/operating exps.                   53,539          31,208        23,071         26,982          26,791
Operating income                        14,188           7,001         2,295          1,445           1,329
Net income (1)                           4,972           4,231         1,362            135             310
Income per share (1):
   Primary                               $0.48           $0.50         $0.22          $0.03           $0.07
   Fully diluted                         $0.47           $0.48         $0.22          $0.03           $0.06

AT MARCH 31,                              1996            1995          1994           1993            1992
------------                              ----            ----          ----           ----            ----

Current assets                         $67,666         $31,955       $18,514        $18,094         $20,215
Current liabilities                     36,866          27,113        14,679         12,575          13,320
Working capital                         30,800           4,842         3,835          5,519           6,895
Long-term debt                           4,694           5,281             0          3,021           5,093
Total assets                            95,239          45,477        20,746         20,184          22,420
Total liabilities (1)                   51,691          32,394        14,679         15,596          18,413
Stockholders' equity (1)                43,548          13,083         6,068          4,588           4,007
</TABLE>

(1) As disclosed in Note 7 to the consolidated financial statements, the net
income and net income per share for 1996 has been restated to account for the
value attributable to the beneficial conversion feature on convertible
debentures issued during fiscal 1996.





                                       12


<PAGE>   13

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         FINANCIAL CONDITION AND RESULTS OF OPERATION

         The following discussion and analysis should be read in conjunction
with the Consolidated Financial Statements and notes thereto appearing elsewhere
in this annual report. Except for the historical matters contained herein,
statements made in this annual report are forward looking and are made pursuant
to the safe harbor provisions of the Securities Litigation Reform Act of 1995.
Investors are cautioned that forward looking statements involve risks and
uncertainties which may affect the Company's business and prospects, including
economic, competitive, governmental, technological and other factors discussed
in this annual report and in the Company's filings with the Securities and
Exchange Commission.

         COMPARISON OF THE TWELVE-MONTH PERIOD ENDED MARCH 31, 1996 WITH THE
TWELVE-MONTH PERIOD ENDED MARCH 31, 1995

         For the fiscal year ended March 31, 1996 net sales increased 77% to
$67,726,926 as compared to $38,209,099 in the prior fiscal year. This increase
was primarily due to strong international growth of Perry Ellis and to the full
year effect of Perry Ellis brands in fiscal 1996, compared to a partial year of
operations in the prior year. Sales of Perry Ellis increased 337% to $26,663,302
as compared to $6,101,700 in the prior year. Sales of Parlux continued brands 
(brands which the Company owned or held licenses at March 31, 1994) increased
60% to $24,890,474, as compared to $15,551,408 in the prior year, due to
significant increases in Vicky Tiel and Todd Oldham fragrances, and to the
resolution of out-of-stock situations existing in the prior year. Sales of the
FHBH brands declined 18% from $18,024,268 in the prior year to $14,848,225 in
the current fiscal year. Sales of AdM and Bal a Versailles were $2,095,305 and
$1,542,138, respectively, compared to no sales in the prior year period.

         Sales of $41,539,466 to unaffiliated customers increased by 81%, while
sales to affiliates of $26,187,460 increased by 72%. The percentage of sales to
affiliated customers in relation to total sales decreased from 40% in the prior
year to 39% in fiscal 1996. Approximately 82% of total net sales in the fiscal
year ended March 31, 1996 came from operations in, or supplied by, the United
States, and 17% from the Company's French subsidiary.

         In June 1991, the Company entered into the Barter Agreement for which
the Company would receive advertising credits in exchange for its inventory of
JOAN COLLINS products. The Company expects to fully utilize these bartered
advertising credits as part of its ongoing advertising expenditures. Advertising
credits, less unearned income, are accounted for as prepaid expenses on the
Company's balance sheet at the time such inventory is bartered. Unearned income
equals the amount of advertising credits minus the cost of goods bartered. As
advertising credits are used by the Company, unearned income is debited and the
cost of goods sold is credited. As a result, 




                                       13
<PAGE>   14

as the advertising credits are used, the aggregate cost of goods sold as a
percentage of net sales decreases and gross margin as a percentage of net sales
increases.

         Cost of goods sold increased as a percentage of net sales from 39% for
the fiscal year ended March 31, 1995 to 42% for the fiscal year ended March 31,
1996, which was mainly attributable to the effect of the Barter Agreement. The
Company utilized advertising credits amounting to $684,000 in the current year
($1,592,000 in 1995) generating $355,000 ($866,000 in 1995) of earned income
which partially offset cost of goods during this period. Without the effects of
the Barter Agreement, cost of goods sold in the fiscal year ended March 31, 1996
would have remained at 42% compared to 41% in the prior fiscal year. All of the
Company's products are manufactured by third parties. For fiscal 1996,
approximately 10% of the Company's products were manufactured in France. The
Company will continue transitioning the consolidation of manufacturing,
warehousing and shipping to the United States, as it believes that it can
continue to achieve cost reductions through consolidation.

         Operating expenses increased 54% to $25,099,294 for the year ended
March 31, 1996 compared to $16,251,094 in the prior year, but as a percentage of
sales were 37% in fiscal 1996 compared to 43% in the prior year. Advertising and
promotional expenses of $12,942,647 increased by 79% compared to fiscal 1995,
reflecting the similar increase in sales. Selling and distribution costs
increased by 45%, but as a percentage of sales decreased from 9% in the prior
fiscal year to 8% currently. General and administrative costs increased by 19%
in fiscal 1996 compared to the prior year, however, as a percentage of net
sales, general and administrative costs declined to 8% compared to 12% in the
prior fiscal year. These percentage decreases reflect the economies of scale
realized from the acquisition of FHBH, Perry Ellis and Alexandra de Markoff
brand products. Royalty expense increased by 83% in fiscal 1996 compared to the
prior year, principally due to the royalties required on the sale of Perry Ellis
and Todd Oldham brand products, but remained relatively constant at 2% of net
sales. As a result of the above, operating income increased by 103% to
$14,187,843 or 21% of net sales for the year ended March 31, 1996, compared to
$7,000,530 or 18% of net sales in the prior year.

         Interest expense increased by 293% to $4,685,622 for fiscal 1996
compared to $1,189,658 for fiscal 1995 due to increased borrowing levels and a
non-cash interest charge of $2,800,210 for a beneficial conversion feature of
convertible debt (See Note 7 to the consolidated financial statements).
Excluding the effect of the non-cash interest charge, interest remained
relatively constant at 3% of net sales. Exchange gains were $234,074 for fiscal
1996 compared to exchange losses of $300,661 in the prior year, due to the
weakening of the French franc against the U.S. dollar and the Company's net
French franc liability position.

         As a result of the above, income before taxes increased to $9,736,295
in fiscal 1996 compared to $5,510,211 in fiscal 1995. Taxes increased to
$4,763,814 in fiscal 1996 reflecting the non-deductible nature of the non-cash
interest charge, compared to





                                       14
<PAGE>   15

$1,279,000 in fiscal 1995, as the Company utilized all tax loss carry forwards
and reversed its valuation allowance on deferred tax assets in fiscal 1995. As a
result, net income increased 18% to $4,972,481, or 7% of net sales in the fiscal
year ended March 31, 1996, compared to $4,231,211, or 11% of net sales for the
fiscal year ended March 31, 1995.

         COMPARISON OF THE TWELVE-MONTH PERIOD ENDED MARCH 31, 1995 WITH THE
TWELVE-MONTH PERIOD ENDED MARCH 31, 1994

         For the fiscal year ended March 31, 1995 net sales increased by 51% to
$38,209,099 as compared to $25,366,436 in the prior year. This increase was
primarily due to the acquisition of FHBH in June 1994 and the Perry Ellis
license in December 1994. Sales of FHBH and Perry Ellis products were
$18,024,000 and $6,102,000, respectively, during the year ended March 31, 1995
compared to no sales during the prior year. Sales of continued brands owned by
Parlux decreased 41% to $10,497,000 compared to sales of $17,830,000 in the
prior year, due to the lack of sufficient working capital to support the
manufacturing of existing lines, as well as to complete peak seasonal inventory
requirements for the FHBH products during the first three quarters of fiscal
1995. Sales of continued licensed brands decreased by 19% to $5,055,000 compared
to $6,222,000 in the prior year, due to decreases in the Francesco Smalto line
(see Recent Developments above).

         Sales to affiliated customers increased by 23%, while sales to
unaffiliated parties increased by 77%. As a result, the percentage of sales to
affiliates in relation to total sales declined to 40% in fiscal 1995, as
compared to 49% in the prior year, in line with Corporate strategy.
Approximately 80% of total net sales in the fiscal year ended March 31, 1995
came from operations in the United States, and 20% from the company's French
subsidiary.

         Cost of goods sold decreased as a percentage of net sales from 41% for
the fiscal year ended March 31, 1994 to 39% for the fiscal year ended March 31,
1995. The decrease was due primarily to the increase in sales to unaffiliated
parties as a percentage of total sales, since these sales carry a substantially
lower percentage cost of goods than sales to affiliated parties. The Company
utilized advertising credits amounting to $1,592,000 in the current year
($1,154,000 in 1994) generating $866,000 ($619,000 in 1994) of earned income
which partially offset cost of goods during this period. Without the effects of
the Barter Agreement, cost of goods sold in the fiscal year ended March 31, 1995
would have been 41% compared to 40% in the prior fiscal year. All of the
Company's products are manufactured by third parties. For fiscal 1995,
approximately 30% of the Company's products were manufactured in France. The
Company decided to consolidate manufacturing, warehousing and shipping in the
United States, as it believes that it can continue to achieve cost reductions
through consolidation.






                                       15
<PAGE>   16

         Operating expenses increased 28% to $16,251,094 for the year ended
March 31, 1995 compared to $12,726,625 in the prior year, but as a percentage of
sales were 43% in fiscal 1995 compared to 50% in the prior year. Advertising and
promotional expenses increased by 51% in line with the sales increase for fiscal
1995 compared to fiscal 1994, remaining relatively constant at 19% of net sales,
reflecting the increased investment necessary to support FHBH and Perry Ellis
Products. Selling and distribution costs increased by 20%, but decreased as a
percentage of sales from 12% to 9%. General and administrative costs increased
by 3% in fiscal 1995 compared to the prior year, however, as a percentage of net
sales, general and administrative costs declined to 12% compared to 18% in the
prior year, reflecting the economies of scale realized from the acquisition of
FHBH and Perry Ellis brand products. Royalty expense increased by 77% in fiscal
1995 compared to the prior year, principally due to the royalties required on
the sale of Perry Ellis and Todd Oldham brand products, but remained relatively
constant at 2% of net sales. Sales of FHBH products represented 45% of total
sales, and no royalty is payable on these sales. As a result of the above,
operating income increased by 205% to $7,000,530 or 18% of net sales for the
year ended March 31, 1995, compared to $2,295,385 or 9% of net sales in the
prior year.

         Interest expense increased by 69% for fiscal 1995 compared to fiscal
1994 due to increased borrowing levels. Exchange losses were $300,661 for fiscal
1995 compared to exchange losses of $76,124 in the prior year, due to the
strengthening of the French franc against the U.S. dollar.

         As a result of the above, income before taxes increased to $5,510,211
in fiscal 1995 compared to $1,517,334 in fiscal 1994. Taxes increased to
$1,279,000 in fiscal 1995 compared to $155,128 in fiscal 1994, and the Company
utilized all tax loss carry forwards. As a result, net income increased 211% to
$4,231,211, or 11% of net sales in the fiscal year ended March 31, 1995 compared
to $1,362,206, or 5% of net sales for the fiscal year ended March 31, 1994.

  LIQUIDITY AND CAPITAL RESOURCES

         Working capital increased to $30,800,351 at March 31, 1996 from
$4,842,290 at March 31, 1995. The increase was mainly attributable to (all
references to share information are on a post-split basis): (i) during the
twelve months ended March 31, 1996, certain warrants and employee stock options
to acquire a total of 1,897,966 shares were exercised into common stock,
increasing working capital and stockholders' equity by approximately $3,693,000;
(ii) during the period August 1995 through March 1996, the Company issued
1,125,044 shares of common stock in private placements pursuant to Regulation S
or Rule 144 at an average price of $6.86 per share, increasing working capital
and stockholders' equity by approximately $7,715,000, net of placement costs;
(iii) in connection with the AdM acquisition, the Company issued 424,000 shares
of common stock to Revlon in December 1995, which increased stockholders' equity
by $3,392,000 (in May 1996, Revlon exercised 176,000 options relating to the
transaction 














                                       16
<PAGE>   17

increasing shareholders' equity by an additional $1,408,000 in fiscal 1997) and;
(iv) current period net income.

         During the period November 2, 1995 through March 31, 1996, the Company
issued $3,700,000 of 7% convertible debentures and $15,000,000 of 5% convertible
debentures. Of these amounts, $7,000,000 of the Debentures, plus accrued
interest of $48,416, were converted into 1,073,688 shares at an average price of
$6.56 during the period ended March 31, 1996. See Note 7 to the consolidated
financial statements.

         In August 1995, the Company entered into an agreement to borrow, on an
unsecured basis, $500,000, from Distribuidora de Perfumes Senderos, Ltda., with
an additional $500,000 available at the option of the Company, to be drawn upon
prior to October 31, 1995. The note bears interest at 12% per annum and was
originally due on February 23, 1996, but was subsequently extended through June
30, 1996. In connection with the note, the Company issued warrants to purchase
53,978 shares of Parlux common stock at a price of $8.11 per share, which expire
on August 21, 1997. The Company borrowed a total of $674,722 under the 
agreement. In May 1996, the Company repaid $500,000, leaving an open balance of
$174,722.

         In June 1995, the Company borrowed, on an unsecured basis, $300,000
from an individual related to the Company's Chairman of the Board. The note
bears interest at 11% per annum and is due on September 30, 1996. In connection
with the note, the Company had issued warrants to purchase 60,000 shares of
Parlux common stock at a price of $6.94 per share.

         In December 1994, the Company entered into a Loan and Security
Agreement (the Credit Agreement) with Finova Capital Corporation, pursuant to
which the Company is able to borrow, on a revolving basis for a three-year
period, up to $5,000,000 at an interest rate of 2% in excess of the Citibank,
N.A. "base or prime rate." Finova has taken a security interest in substantially
all of the domestic assets of the Company. The Credit 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 consolidations without
the prior consent of Finova. The Credit Agreement also contains certain
financial covenants relating to net worth, interest coverage and other financial
ratios. In May 1996, the Credit Agreement was amended to provide for a temporary
increase in the line up to $6,000,000 until August 29, 1996.

         Simultaneously with the closing of the Credit Agreement, the Company
restructured a prior loan extended by the National Bank of Kuwait SAK (NBK) by
paying NBK approximately $2,120,000, including interest, from borrowings under
the Credit Agreement. In exchange for such payment, NBK released Parlux and its
subsidiaries from all outstanding liabilities and guarantees owed to NBK except
for those obligations relating to a new $560,000 term loan, and a $1,000,000
letter of credit made available to 











                                       17
<PAGE>   18

support the Finova loan. The combined $1,560,000 facility is fully cash
collateralized by certain shareholders' deposits. In addition, these
shareholders have signed a subordination agreement in connection with the Credit
Agreement. The term loan has been repaid at March 31, 1996.

         The Company is currently pursuing additional facilities, including an
increase in the Credit Agreement, to finance future growth. There can be no
assurance that such financing facilities will become available, or, if
available, that they will be on terms satisfactory to the Company.

  IMPACT OF CURRENCY EXCHANGE AND INFLATION

         The Company's business operations were positively affected in the
current year in the amount of $234,074, and negatively affected in the amount of
$300,661 and $76,124 for the fiscal years ended March 31, 1995 and 1994,
respectively, due to the continuing movement of the French franc vs. the U.S.
dollar.

         The Company's sales and purchases are virtually all in U.S. dollars or
French francs. Since approximately 10% of the Company's sales are manufactured
in France, a strengthening of the French franc vis-a-vis the U.S. dollar results
in exchange rate losses for the Company. Conversely, a weakening of the French
franc vis-a-vis the U.S. dollar results in exchange rate gains for the Company.

         The Company monitors exchange rates on a daily basis and regularly
seeks to evaluate long-term expectations for the French franc in order to
minimize its exchange rate risk. To date, the Company has not elected to engage
in currency hedging transactions, but may pursue this alternative.

         The Company intends to continue to centralize manufacturing in the
United States which will minimize the currency exchange impact on intercompany
transactions for the future.

  ITEM 8.FINANCIAL STATEMENTS

         The financial statements are included herein commencing on page F-1.

         The financial statement schedules are listed in the Index to Financial
Statements on page F-1.

  ITEM 9.         CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                  ON ACCOUNTING AND FINANCIAL DISCLOSURE

                  None





                                       18
<PAGE>   19

PART III

ITEM 10.        DIRECTORS AND EXECUTIVE OFFICERS OF THE
                REGISTRANT

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

ITEM 11.        EXECUTIVE COMPENSATION

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

ITEM 12.        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                AND MANAGEMENT

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

ITEM 13.        CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

PART IV

ITEM 14.        EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
                REPORTS ON FORM 8-K.

  (a)    1.  Financial Statements

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

         2.  Financial Statement Schedules

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

         3. Exhibit Index




                                       19
<PAGE>   20
          The following exhibits are attached:
<TABLE>
<CAPTION>

<S>       <C>                                           
4.16      5% Convertible Debenture dated March 1, 1996 between the Company
          and Karle Limited.
4.17      5% Convertible Debenture dated March 4, 1996 between the Company 
          and Newsun Limited.
4.18      5% Convertible Debenture dated March 11, 1996 between the Company
          and Kempton Investments Ltd.
4.19      5% Convertible Debenture dated March 11, 1996 between the Company 
          and Newsun Limited.
4.20      5% Convertible Debenture dated April 16, 1996 between the Company 
          and Kempton Investments, Ltd.
4.21      5% Convertible Debenture dated April 16, 1996 between the Company
          and Newsun Limited.
4.22      5% Convertible Debenture dated May 8, 1996 between the Company
          and Newsun Limited.
4.23      5% Convertible Debenture dated May 17, 1996 between the Company and 
          GFL Performance Fund, Ltd.
23        Consent of PricewaterhouseCoopers LLP
27        Financial Data Schedule (for SEC use only)
</TABLE>

(b)      Reports on Form 8-K

         In January 1996, the Company filed a Current Report on Form 8-K with
         respect to the license and asset acquisition of Alexandra de Markoff
         from Revlon Holdings, Inc.























                                       20

<PAGE>   21




                    PARLUX FRAGRANCES, INC. AND SUBSIDIARIES
                    ----------------------------------------

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------

                                                                      Page
                                                                      ----

          Report of Independent Certified Public Accountants           F-2

          Consolidated Balance Sheets                                  F-3

          Consolidated Statements of Income                            F-4

          Consolidated Statement of Changes in Stockholders' Equity    F-5

          Consolidated Statements of Cash Flows                        F-6

          Notes to Consolidated Financial Statements                   F-7

          FORM 10-K SCHEDULES:

          Schedule VIII - Valuation and Qualifying Accounts            F-26

          Schedule IX - Short-term Bank Borrowings                     F-27


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














                                       F-1


<PAGE>   22




               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
               --------------------------------------------------


To the Board of Directors and
Shareholders of Parlux Fragrances, Inc.

In our opinion, the consolidated financial statements listed in the index
referred to under Item 14(a)(1) and (2) on page 19 and appearing on page F-1
present fairly, in all material respects, the financial position of Parlux
Fragrances, Inc. and its subsidiaries at March 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years in
the period ended March 31, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

As discussed in Note 7, the Company has restated its March 31, 1996 net income
and net income per share calculation to comply with provisions of Emerging
Issues Task Force Topic No. D-60 on accounting for convertible securities having
beneficial conversion features.

PricewaterhouseCoopers LLP
Miami, Florida
June 28, 1996, except as to the last paragraph
of Note 7, which is as of July 16, 1998









                                      F-2



<PAGE>   23
                    PARLUX FRAGRANCES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                            March 31,
                                                                ---------------------------------
ASSETS                                                         (As Restated, Note 7)
------------------------------------                                 1996               1995
                                                                --------------     --------------
<S>                                                                         <C>                <C>
CURRENT ASSETS:
  Cash and cash equivalents                                      $    339,423       $    302,113
  Receivables, net of allowance for
   doubtful accounts, sales returns and
   allowances of approximately $2,121,000 and $2,055,000
   in 1996 and 1995, respectively                                  10,892,347          4,888,250
  Trade receivables from affiliates                                13,482,423          4,893,710
  Inventories, net                                                 35,762,570         16,963,006
  Prepaid expenses and other current assets                         7,189,213          4,908,321
                                                                 ------------       ------------

    TOTAL CURRENT ASSETS                                           67,665,976         31,955,400
Equipment and leasehold improvements, net                           2,475,919          2,043,758
Trademarks, licenses and goodwill, net                             24,623,417         11,380,201
Other                                                                 473,611             97,107
                                                                 ------------       ------------

    TOTAL ASSETS                                                 $ 95,238,923       $ 45,476,466
                                                                 ============       ============

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

CURRENT LIABILITIES:
  Borrowings, current portion                                    $ 11,564,917       $ 13,512,291
  Convertible debentures                                              250,000                 --
  Accounts payable                                                 18,739,117          7,337,910
  Accrued expenses                                                  1,543,591          2,425,850
  Income taxes payable                                              4,768,000          1,386,000
  Advances from customers                                                  --          2,451,059
                                                                 ------------       ------------

    TOTAL CURRENT LIABILITIES                                      36,865,625         27,113,110
Borrowings, less current portion                                    4,694,239          5,280,689
Convertible debentures, net of original issue discount              9,946,890                 --
Deferred tax liability                                                183,864                 --
                                                                 ------------       ------------

    TOTAL LIABILITIES                                              51,690,618         32,393,799
                                                                 ------------       ------------

COMMITMENTS                                                                --                 --
                                                                 ------------       ------------

STOCKHOLDERS' EQUITY :
  Preferred stock, $0.01 par value, 5,000,000 shares
   authorized, 0 issued and outstanding                                    --                 --
  Common stock, $0.01 par value, 15,000,000
   shares authorized, 11,456,426 and 6,980,428
   shares issued in 1996  and 1995, respectively                      114,564             34,902
  Additional paid-in capital                                       37,184,527         11,563,537
  Retained earnings                                                 6,200,439          1,271,947
  Cumulative translation adjustment                                   182,247            345,753
                                                                 ------------       ------------
                                                                   43,681,777         13,216,139

  Less - 39,000 shares of common stock in treasury, at cost          (133,472)          (133,472)
                                                                 ------------       ------------

    TOTAL STOCKHOLDERS' EQUITY                                     43,548,305         13,082,667
                                                                 ------------       ------------

    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                   $ 95,238,923       $ 45,476,466
                                                                 ============       ============
</TABLE>


                 See notes to consolidated financial statements.


                                       F-3


<PAGE>   24

                    PARLUX FRAGRANCES, INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                                   Year ended March 31,
                                                            -------------------------------------------------------------

                                                                  1996                   1995                 1994
                                                            ------------------     -----------------    -----------------
                                                            (As Restated, Note 7)
<S>                                                               <C>                   <C>                  <C>        
Net sales:
   Unaffiliated customers                                         $41,539,466           $22,978,956          $12,956,138
   Affiliates                                                      26,187,460            15,230,143           12,410,298
                                                            ------------------     -----------------    -----------------

                                                                   67,726,926            38,209,099           25,366,436

Cost of goods sold                                                 28,439,789            14,957,475           10,344,426
                                                            ------------------     -----------------    -----------------

Gross profit                                                       39,287,137            23,251,624           15,022,010
                                                            ------------------     -----------------    -----------------

Operating expenses:
  Advertising and promotional                                      12,942,647             7,248,839            4,790,189
  Selling and distribution                                          5,130,099             3,530,133            2,945,019
  General and administrative                                        5,524,416             4,648,899            4,527,445
  Royalties                                                         1,502,132               823,223              463,972
                                                            ------------------     -----------------    -----------------

  Total operating expenses                                         25,099,294            16,251,094           12,726,625
                                                            ------------------     -----------------    -----------------

Operating income                                                   14,187,843             7,000,530            2,295,385

Interest expense and bank charges                                   4,685,622             1,189,658              701,927

Exchange (gains) losses                                              (234,074)              300,661               76,124
                                                            ------------------     -----------------    -----------------

Income before income taxes                                          9,736,295             5,510,211            1,517,334

Income taxes                                                        4,763,814             1,279,000              155,128
                                                            ------------------     -----------------    -----------------

Net income                                                         $4,972,481            $4,231,211           $1,362,206
                                                            ==================     =================    =================


Earnings per common and common 
 equivalent share:

     Primary                                                      $0.48                 $0.50                $0.22
                                                            ==================     =================    =================

     Fully diluted                                                $0.47                 $0.48                $0.22
                                                            ==================     =================    =================
</TABLE>



                 See notes to consolidated financial statements.



                                       F-4

<PAGE>   25

                    PARLUX FRAGRANCES, INC. AND SUBSIDIARIES

            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>

                                          COMMON STOCK                       RETAINED
                                  --------------------------  ADDITIONAL     EARNINGS      CUMULATIVE
                                     NUMBER        PAR        PAID-IN      (ACCUMULATED   TRANSLATION   TREASURY
                                     ISSUED       VALUE       CAPITAL        DEFICIT)      ADJUSTMENT     STOCK           TOTAL
                                  ----------- ------------  ------------  -------------  ------------  ------------   ------------
<S>                                 <C>       <C>           <C>           <C>            <C>           <C>            <C>
BALANCE at April 1, 1993            2,812,642 $     28,127  $  8,712,669  $ (4,321,470)  $    169,243            --   $  4,588,569

  Net income                               --           --            --     1,362,206             --            --      1,362,206
  Issuance of common stock upon
   exercise of:
   Employee stock options              36,547          365       111,445            --             --            --        111,810
   Warrants                            12,000          120        44,880            --             --            --         45,000
  Foreign currency translation
    adjustment                             --           --            --            --        (39,985)           --        (39,985)
                                 ------------ ------------  ------------  ------------   ------------  ------------   ------------

BALANCE at March 31, 1994           2,861,189       28,612     8,868,994    (2,959,264)       129,258            --      6,067,600

  Net income                               --           --            --     4,231,211             --            --      4,231,211
  Issuance of common stock in
   connection with:
   Exercise of employee stock
    options                            19,025          190        61,020            --             --            --         61,210
   Sale of stock in private 
    placement                         110,000        1,100       438,523            --             --            --        439,623
   Acquisition of assets              500,000        5,000     2,195,000            --             --            --      2,200,000
  Foreign currency translation 
   adjustment                              --           --            --            --        216,495            --        216,495
  Purchase of 19,500 shares of 
   treasury stock, at cost                 --           --            --            --             --  $   (133,472)      (133,472)
                                 ------------ ------------  ------------  ------------   ------------  ------------   ------------

BALANCE at March 31, 1995           3,490,214       34,902    11,563,537     1,271,947        345,753      (133,472)    13,082,667

  Net income                               --           --            --     4,972,481             --            --      4,972,481

  Issuance of common stock upon
    exercise of:
   Employee stock options              11,175          112        33,910            --             --            --         34,022
   Warrants                         1,056,916       10,569     3,006,022            --             --            --      3,016,591
  Sale of stock in private 
   placements                       1,001,514       10,015     7,605,570            --             --            --      7,615,585
  Stock issued in connection 
   with the acquisition of assets     424,000        4,240     3,739,760            --             --            --      3,744,000
  Conversion of debentures, net  
    of unamortized debt             
    issuance costs                  1,073,688       10,737     6,932,408            --             --            --      6,943,145
  Beneficial conversion feature
    of debentures                                              4,303,320                                                 4,303,320
  Adjustment for stock split        4,398,919       43,989            --       (43,989)            --            --             --
  Foreign currency translation
    adjustment                             --           --            --            --       (163,506)           --       (163,506)
                                 ------------ ------------  ------------  ------------   ------------  ------------   ------------

BALANCE at March 31, 1996
  (As Restated, Note 7)            11,456,426 $    114,564  $ 37,184,527  $  6,200,439   $    182,247  $   (133,472)  $ 43,548,305
                                 ============ ============  ============  ============   ============  ============   ============
</TABLE>




                 See notes to consolidated financial statements.


                                       F-5

<PAGE>   26

                    PARLUX FRAGRANCES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                              Year ended March 31,
                                                                                 --------------------------------------------

                                                                                     1996             1995           1994
                                                                                 ------------    ------------    ------------
                                                                           (As Restated, Note 7)
<S>                                                                              <C>             <C>             <C>         
Cash flows from operating activities:
Net income                                                                       $  4,972,481    $  4,231,211    $  1,362,206
                                                                                 ------------    ------------    ------------

Adjustments to reconcile net income
 to net cash provided by operating activities:
Depreciation and amortization                                                       1,563,673         807,491         546,882
Net deferred tax benefit                                                               (4,184)       (628,504)             --
Beneficial conversion feature of debentures                                         2,800,210              --              --
Changes in assets and liabilities net of effect of acquisitions:
   (Increase) decrease in trade receivables - customers                            (7,900,097)      2,683,107       1,500,320
   Increase in trade receivables - affiliates                                      (8,588,713)     (1,788,026)     (1,093,192)
   (Increase) decrease in inventories                                             (15,371,203)      1,919,988        (722,476)
   (Increase) decrease in prepaid expenses and
     other current assets                                                          (1,032,135)        944,125        (478,996)
   (Increase) decrease in other non-current assets                                   (376,504)         (4,497)         58,126
   Increase (decrease) in accounts payable                                         11,401,204      (1,321,624)        238,251
   Increase in accrued expenses                                                     2,726,637       2,557,874         146,655
   (Decrease) increase in advances from customers                                  (2,451,059)      2,451,059              --
                                                                                 ------------    ------------    ------------

            Total adjustments                                                     (17,232,171)      7,620,993         195,570
                                                                                 ------------    ------------    ------------

              Net cash (used in) provided by operating activities                 (12,259,690)     11,852,204       1,557,776
                                                                                 ------------    ------------    ------------

Cash flows from investing activities:
Purchases of equipment and leasehold improvements                                  (1,168,386)       (336,046)       (709,823)
Purchases of trademarks                                                               (82,122)        (17,467)        (50,178)
Cash paid in acquisitions:
  Fred Hayman Beverly Hills                                                                --      (2,000,000)             --
  Perry Ellis                                                                              --      (7,500,000)             --
  Alexandra de Markoff                                                             (8,608,000)             --              --
  Bal a Versailles                                                                 (1,697,500)             --              --
Purchases of treasury stock                                                                --        (133,472)             --
                                                                                 ------------    ------------    ------------

              Net cash used in investing activities                               (11,556,008)     (9,986,985)       (760,001)
                                                                                 ------------    ------------    ------------

Cash flows from financing activities:
Proceeds (payments) - overdraft facilities                                            145,450        (481,929)        242,636
Proceeds (payments) - receivable financing facilities                                 579,731        (348,082)       (657,791)
Proceeds - notes payable Distr. de Perfumes Senderos                                  674,722              --              --
Proceeds - notes payable related parties                                              300,000              --              --
(Payments) proceeds - notes payable to Finova Capital Corp.                          (127,352)      4,015,729              --
Payments to National Bank of Kuwait                                                  (560,000)     (2,040,000)       (150,000)
Proceeds from Eagle Bank                                                              401,378          81,014              --
Payments to Sanofi Beaute, Inc.                                                    (5,501,535)       (947,335)             --
Payments to Fred Hayman Beverly Hills                                                (202,480)     (2,770,027)             --
Payments - other notes payable                                                             --         (29,969)       (195,999)
Proceeds - 7% debentures, net                                                       3,666,000              --              --
Proceeds - 5% debentures, net                                                      14,614,500              --              --
Proceeds from issuance of common stock, net                                         9,771,094         500,833          80,610
                                                                                 ------------    ------------    ------------

              Net cash provided by (used in) financing activities                  23,761,508      (2,019,766)       (680,544)
                                                                                 ------------    ------------    ------------


Effect of exchange rate changes on cash                                                91,500         417,968        (147,893)
                                                                                 ------------    ------------    ------------

Net increase (decrease) in cash and cash equivalents                                   37,310         263,421         (30,662)
Cash and cash equivalents, beginning of year                                          302,113          38,692          69,354
                                                                                 ------------    ------------    ------------

Cash and cash equivalents, end of year                                           $    339,423    $    302,113    $     38,692
                                                                                 ============    ============    ============
</TABLE>


                 See notes to consolidated financial statements.

                                       F-6

<PAGE>   27

                     PARLUX FRAGRANCES INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          MARCH 31, 1996, 1995 AND 1994




1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A.       NATURE OF BUSINESS

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

B.       PRINCIPLES OF CONSOLIDATION

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

C.       REVENUE RECOGNITION

         Revenue is recognized when the product is shipped to a customer.
         Estimated amounts for sales returns and allowances are recorded at the
         time of sale.

D.       ACCOUNTING ESTIMATES

         The preparation of financial statements in conformity with generally
         accepted accounting principles requires management to make estimates
         and assumptions that affect the reported amounts of assets and
         liabilities and disclosure of contingent assets and liabilities at the
         date of the financial statements and the reported amounts of revenues
         and expenses during the reporting period. The more significant
         estimates relate to the Company's reserve for doubtful accounts, sales
         returns and allowances, inventory obsolescence and periods of
         amortization for trademarks, licenses and goodwill. Actual results
         could differ from those estimates.

E.       INVENTORIES

         Inventories are stated at the lower of cost (first-in, first-out
         method) or market. The cost of inventories includes product costs and
         handling charges, including the allocation of the Company's applicable
         overhead.

F.       BARTER SALES AND CREDITS

         The Company has sold certain of its products to a barter broker in
         exchange for advertising that the Company will use. The Company defers
         the gross margin on barter sales until the advertising is used.

         The estimated value of the advertising is recorded as a prepaid expense
         on the Company's balance sheet at the time such inventory is sold, net
         of unearned income equal to the amount of 







                                       F-7
<PAGE>   28

         advertising credits minus the related cost of goods sold. As
         advertising credits are used by the Company, advertising and
         promotional expense is charged for the advertising credits used,
         unearned income is debited and cost of goods sold is credited. As a
         result, as the advertising credits are used, aggregate cost of goods
         sold as a percentage of net sales decreases and gross margin as a
         percentage of net sales increases.

G.       EQUIPMENT AND LEASEHOLD IMPROVEMENTS

         Equipment and leasehold improvements are carried at cost. Equipment is
         depreciated using the straight-line method over the estimated useful
         life of the asset. Leasehold improvements are amortized over the lesser
         of the estimated useful life or the lease period. Repairs and
         maintenance charges are expensed as incurred, while betterments and
         major renewals are capitalized.

H.       TRADEMARKS, LICENSES AND GOODWILL

         Trademarks, licenses and goodwill are recorded at cost and amortized
         over the estimated periods of benefit, principally 25 years.
         Accumulated amortization at March 31, 1996 of trademarks, licenses and
         goodwill was $983,499 ($424,694 at March 31, 1995).

I.       ADVERTISING COSTS

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

J.       INCOME TAXES

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

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

K.       FOREIGN CURRENCY TRANSLATION

         The assets and liabilities of S.A. are translated into U.S. dollars at
         year-end exchange rates. Income and expense items are translated at
         weighted average rates of exchange prevailing during the year.
         Translation adjustments are accumulated as a separate component of
         stockholders' equity.

         Both realized and unrealized gains and losses arising from foreign
         currency transactions are recorded in the statement of income.

L.       FAIR VALUE OF FINANCIAL INSTRUMENTS

         The Company's financial instruments consist primarily of instruments
         whose fair value approximates their carrying value.

                                       F-8
<PAGE>   29

M.       EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE

         On October 26, 1995, the Company announced a two-for-one stock split
         effected in the form of a dividend to shareholders of record as of
         November 3, 1995 (the stock split). All references to share and per
         share data within the financial statements and notes thereto have been
         retroactively adjusted to reflect the stock split.

         Fully dilutive earnings per common and common equivalent share have
         been computed based upon the weighted average number of shares of
         common stock and common stock equivalents outstanding of 10,529,276,
         9,014,808 and 6,697,790 for the years ended March 31, 1996, 1995 and
         1994, respectively. The modified treasury stock method was used during
         1994 and 1995 to determine the dilutive effect of the options,
         warrants, and convertible debentures since the number of shares of
         common stock issuable upon their exercise exceeds 20% of the
         outstanding common shares.

         Assuming the convertible debentures issued by the Company during fiscal
         1996, and converted into common stock through June 24, 1996, had been
         converted into common stock upon issuance, the Company would have had
         primary earnings per common and common equivalent share during fiscal
         1996 of $0.46. Such supplemental primary earnings per common and common
         equivalent share is based on the number of common and common equivalent
         shares used in the calculation of primary earnings per common and
         common equivalent share (10,287,074) plus the number of weighted
         average shares into which the convertible debentures were converted
         (434,129).

N.       STOCK BASED COMPENSATION

         In October 1995, the Financial Accounting Standards Board (FASB) issued
         Statement of Financial Accounting Standards No. 123, Accounting For
         Stock Based Compensation (SFAS 123). SFAS 123, the disclosure 
         provisions of which must be implemented for fiscal years beginning 
         subsequent to December 15, 1995, establishes a fair value based method
         of accounting for stock based compensation plans, the effect of which
         can either be disclosed or recorded. The Company will adopt the
         provisions of SFAS 123 for the year ending March 31, 1997. Upon
         adoption, the Company intends to retain the intrinsic value method of
         accounting for stock based compensation, which it currently uses.

O.       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 follow:

                                      1996             1995            1994
                                      ----             ----            ----
         Cash paid for:

         Interest                  $1,940,179        $990,859        $610,924
                                   ==========        ========        ========
         Income taxes              $1,390,076        $162,372        $106,037
                                   ==========        ========        ========

         In addition to the barter transactions discussed in Note 8(D), the
         following non-cash transactions were entered into:





                                       F-9
<PAGE>   30

     Year ended March 31, 1996:

     *  Acquisition of the Alexandra de Markoff cosmetic line and the Bal a'
        Versailles fragrance lines were partially funded through the issuance of
        common stock and notes payable, respectively, as discussed in Note 5.

     *  Notes payable and accrued interest in the amount of $792,603 and
        $178,750, respectively, were repaid through the issuance of common stock
        in connection with the exercise of certain warrants and options.

     Year ended March 31, 1995:

     *  Acquisitions of the Fred Hayman and Perry Ellis fragrance lines which
        were partially financed through the issuance of common stock and notes
        payable as discussed in Note 5.

     Year ended March 31, 1994:

     *  Repayment of accounts payable and accrued expenses totaling $76,200 in
        connection with the exercise of outstanding options and warrants for
        44,000 shares of common stock.

P.   RECLASSIFICATIONS

     Certain amounts in the consolidated financial statements for prior years
     have been reclassified to conform to the 1996 presentation.

2. INVENTORIES

     The components of inventories are as follows:

                                                         March 31,
                                               -----------------------------
                                                  1996               1995 
                                               -----------       -----------

      Finished products                        $13,477,055        $6,582,102
      Components and packaging material         17,306,010         9,412,855
      Raw material                               4,979,505           968,049
                                               -----------       -----------
                                               $35,762,570       $16,963,006
                                               ===========       ===========

     The above amounts are net of reserves for potential inventory obsolescence
     of $1,200,000 and $686,000 at March 31, 1996 and 1995, respectively.

3. PREPAID EXPENSES AND OTHER CURRENT ASSETS

     Prepaid expenses and other current assets are as follows:

                                                          March 31,
                                                ----------------------------
                                                   1996              1995
                                                ----------        ----------
     Promotional supplies                       $2,903,611        $1,965,493
     Advances to vendors                         1,463,007           153,930
     Deferred tax assets                           816,552           628,504
     Prepaid advertising                           424,000           152,000
     Advertising barter credits, net             1,059,332         1,459,121
     Other                                         522,711           549,273
                                                ----------        ----------
                                                $7,189,213        $4,908,321
                                                ==========        ==========

                                      F-10
<PAGE>   31


4. EQUIPMENT AND LEASEHOLD IMPROVEMENTS

     Equipment and leasehold improvements are comprised of the following:

<TABLE>
<CAPTION>
                                                                                        Estimated
                                                             March 31,                 useful lives
                                                      1996              1995            (in years)
                                                   ----------       -----------        ------------
<S>                                                <C>               <C>                   <C>
     Molds and equipment                           $4,593,621        $3,492,875            3-7
     Furniture and fixtures                           840,908           639,206             5
     Leasehold improvements                           126,756           155,694            5-7
     Vehicles                                           6,260             6,575             3
                                                   ----------       -----------
                                                    5,567,545         4,294,350
     Less: accumulated depreciation and
        amortization                               (3,091,626)       (2,250,592)
                                                   ----------       -----------
                                                   $2,475,919       $ 2,043,758
                                                   ==========       ===========
</TABLE>




     Depreciation and amortization expense on equipment and leasehold
     improvements for the years ended March 31,1996, 1995 and 1994 was
     $1,007,522, $560,771 and $498,582, respectively.

5. ACQUISITIONS

     On March 19, 1996, the Company consummated the acquisition of the
     trademarks and certain inventory for the Bal a' Versailles (BAV) fragrance
     and beauty products brand name from Parfums Jean Desprez, S.A., pursuant to
     a letter of intent entered into on January 11, 1996.

     At closing, the Company provided as consideration $1,697,500 in cash and
     $2,553,360 in the form of non-interest bearing promissory notes due in
     varying installments through August 1996.

     The estimated fair value of the assets acquired is summarized as follows:

            Goodwill, licenses and trademarks                 $2,772,500
            Inventories                                          978,360
            Covenant-not-to-compete                              300,000
            Molds and other fixed assets                         200,000
                                                              ----------
                 Fair value of assets acquired                $4,250,860
                                                              ==========

     On December 27, 1995, the Company consummated the acquisition of
     substantially all of the assets of Alexandra de Markoff (AdM), a prestige
     cosmetic line, pursuant to an asset purchase agreement entered into on
     September 21, 1995 between the Company and Revlon Holdings, Inc. (Revlon).

     Parlux acquired from Revlon certain inventories and fixed assets and the
     rights in certain trademarks relating to AdM. Parlux provided as
     consideration $8,608,000 in cash, 424,000 shares of common stock valued at
     $3,392,000 and agreed to accept returns and allowances in excess of
     $100,000 related to sales of AdM products by Revlon prior to December 27,
     1995.





                                      F-11
<PAGE>   32



     In addition, the Company granted Revlon an option to purchase 176,000
     shares of the Company's common stock, until June 30, 1996, at an exercise
     price of $8.00 per share.

     The estimated fair value of the net assets acquired is summarized as
     follows:

            Goodwill, licenses and trademarks                      $10,267,000
            Advance for future inventory purchases                   4,000,000
            Molds and other fixed assets                                85,000
            Reserve for sales returns and allowances                (2,000,000)
                                                                   -----------
                 Fair value of net assets acquired                 $12,352,000
                                                                   ===========

     In December 1994, the Company consummated the acquisition of the license
     for the worldwide manufacturing and distribution rights and for the use of
     the trademarks associated with the Perry Ellis International, Inc. (Perry
     Ellis) line of fragrances and beauty products pursuant to an Asset
     Purchase Agreement entered into in October 1994 between the Company and
     Sanofi Beaute, Inc., the prior holder of the Perry Ellis fragrances
     license. In addition to the acquisition of the license, which is renewable
     every two years if the Company meets certain average sales levels, Parlux
     acquired from Sanofi: a) the assets, rights, claims and contracts relating
     to the brands Perry Ellis for Men(R) and 360(Degree) Perry Ellis(R) (the
     Brands), b) certain inventories relating to the Brands, c) certain fixed
     assets relating to the Brands, and d) the ownership rights in certain
     trademarks relating to the Brands.

     At closing, the Company provided as consideration, $7,500,000 in cash and
     $6,535,660 in the form of a one-year promissory note, bearing interest at
     7% and secured by the assets acquired under the Purchase Agreement.

     The estimated fair value of the assets acquired is summarized as follows:

        Goodwill, license and trademarks                     $  7,500,000
        Inventories                                             4,528,925
        Promotional supplies                                    1,073,135
        Molds and other fixed assets                              933,600
                                                             ------------
                 Fair value of assets acquired               $ 14,035,660
                                                             ============

     In June 1994, the Company entered into an Asset Purchase Agreement with
     Fred Hayman Beverly Hills, Inc. (FHBH) pursuant to which the Company
     purchased substantially all of the assets and liabilities of the FHBH
     fragrance division, including inventory, accounts receivable, molds and
     other assets. In addition, FHBH granted Parlux an exclusive 55-year,
     royalty free license to use FHBH's United States Class 3 trademarks for
     Fred Hayman(R), 273(R), Touch(R), With Love(R), and Fred Hayman Personal
     Selections(R) and the corresponding international registrations.

     In consideration for the purchased assets, the Company provided the
     following to the seller: (i) payment of $2,000,000 in cash, (ii) issuance
     of 1,000,000 shares of the Company's common stock (approximately $2,200,000
     market value at date of closing), (iii) delivery of a short-term
     non-interest bearing note in the amount of $2,544,942 and (iv) delivery of
     a 10-year 7.25% note in the amount of $5,950,774. In addition, the Company
     granted FHBH warrants to







                                      F-12
<PAGE>   33

     purchase 200,000 shares of the Company's common stock, for a five-year
     period, at an exercise price of $2.13 per share.

     The estimated fair value of the net assets acquired is summarized as
     follows:

            Accounts receivable, net                             $  2,252,796
            Inventories                                             6,461,236
            Prepaid promotional supplies and expenses               1,407,897
            Molds                                                     477,894
            Goodwill                                                2,655,719
            Accounts payable and other liabilities                   (559,827)
                                                                 ------------
            Fair value of net assets acquired                    $ 12,695,715
                                                                 ============


     Goodwill, licenses and trademarks recorded in connection with these
     acquisitions are being amortized over 25 years.

     On January 31, 1996, The Company entered into an agreement to purchase all
     of the assets and assume certain liabilities of Richard Barrie Fragrances,
     Inc. (RBF) for a combination of $750,000 in cash and 370,000 shares of
     Parlux common stock. The agreement is subject to the approval of RBF's
     board of directors, shareholders and convertible note holders. The Company
     anticipates that, if the agreement is approved, closing would take place
     prior to June 30, 1996.

6. BORROWINGS

     The composition of debt is as follows:

<TABLE>
<CAPTION>
                                                             March 31, 1996         March 31, 1995
                                                             --------------         --------------
<S>                                                           <C>                   <C>         
     Note payable to FHBH, secured by the
     acquired licensed trademarks, interest at
     7.25%, payable in equal monthly
     installments of $69,863 including
     interest,through June 2004                                $5,173,209             $5,725,689

     Revolving credit facility payable to
     Finova Capital Corporation, interest at
     Citibank N.A. prime rate (8.25% at March
     31, 1996) plus 2%, payable on December
     27, 1997, net of restricted cash of
     $884,464 and $273,587 at March 31, 1996
     and 1995, respectively                                     3,888,378              4,015,729

     Notes payable to Parfums Jean Desprez,
     non-interest bearing, payable in
     installments through August 1996                           2,553,360                     --

     Note payable to Distribuidora de Perfumes
     Senderos, Ltda., unsecured, interest at
     12%, $500,000 repaid in May 1996, balance
     due September 30, 1996                                       674,722                     --

     Unsecured $500,000 line of credit payable
     to Eagle National Bank, interest at the
     bank's prime rate plus 2%, due August 1,
     1996                                                         482,392                 81,014
</TABLE>



                                      F-13
<PAGE>   34


<TABLE>
<CAPTION>

<S>                                                               <C>                    <C>    
     Unsecured notes payable to related
     parties, interest payable monthly at 11%,
     due September 30, 1996                                       700,000                400,000

     Note payable to Sanofi Beaute, Inc.,
     secured by the acquired inventory and
     license agreement with Perry Ellis
     International, Inc., interest at 7%,
     payable in equal monthly installments of
     $565,509, including interest, through
     December 31, 1995                                                 --              5,588,325

     Loan payable to NBK, interest at the
     bank's prime rate plus 1.5%, secured by
     shareholders' deposits, paid in varying
     installments through February 1996                                --                560,000

     Overdraft facilities, interest from
     10.25% to 10.75%, payable on demand (1)                      646,368                500,918

     Receivable financing facilities, interest
     at 9.25% to 10.25%, payable on demand (1)                  1,921,876              1,342,145

     Note payable to stockholder, interest at
     10%, repaid in May 1996 (1)                                  148,544                560,291

     Other notes payable                                           70,307                 18,869
                                                              -----------           ------------

                                                               16,259,156             18,792,980

     Less: long-term borrowings                                (4,694,239)            (5,280,689)
                                                              -----------           ------------

     Short-term borrowings                                    $11,564,917           $ 13,512,291
                                                              ===========           ============
</TABLE>

     (1) Denominated in French francs




     In December 1994, the Company entered into a Loan and Security Agreement 
     (the Credit Agreement) with Finova Capital Corporation (Finova), pursuant
     to which the Company is able to borrow, depending on the availability of a
     borrowing base, as defined in the Credit Agreement, on a revolving basis
     for a three-year period, up to $5,000,000, at an interest rate of 2% in
     excess of Citibank, N.A. "base or prime rate". Finova has taken a security
     interest in substantially all of the domestic assets of the Company. The
     Credit 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 consolidation without the prior consent of Finova. The Credit
     Agreement also contains certain financial covenants relating to net worth,
     interest coverage and other financial ratios. In May 1996, the Credit
     Agreement was amended to provide for a temporary increase in the line up to
     $6,000,000 until August 29, 1996.

     Simultaneously with the closing of the Credit Agreement, the Company
     restructured a prior loan extended by the National Bank of Kuwait SAK
     ("NBK") by paying NBK approximately $2,120,015, including interest, from
     borrowings under the Credit Agreement. In exchange for such payment, NBK
     released the Company from all outstanding liabilities and guarantees owed
     to NBK, except for those obligations relating to a new $560,000 term loan,
     and a $1,000,000





                                      F-14
<PAGE>   35

     letter of credit made available to support the Finova loan. The combined
     $1,560,000 facility is fully cash collateralized by certain shareholders'
     deposits. In addition, the shareholders have signed a subordination
     agreement in connection with the Credit Agreement. During the year ended
     March 31, 1996, the Company repaid the $560,000 term loan.

     The Company has overdraft and trade financing facilities aggregating
     15,450,000 French francs (approximately $3,060,000 as of March 31, 1996).
     These credit facilities are renewed annually.

     On September 21, 1995, in connection with the proposed purchase of the AdM
     cosmetic line, the Company entered into a $2,400,000 loan agreement with
     Revlon. The loan was repaid on December 27, 1995 upon closing of the AdM
     transaction.

     In August, 1995, the Company entered into an agreement to borrow, on an
     unsecured basis, $500,000 from Distribuidora de Perfumes Senderos, Ltda.,
     with an additional $500,000 available at the option of the Company, to be
     drawn upon prior to October 31, 1995. The note bears interest at 12% per
     annum and was due on February 23, 1996. The Company borrowed a total of
     $674,722 under the agreement and repaid $500,000 in May 1996, with the
     balance being extended to September 30, 1996.

     In June 1995, the Company borrowed $300,000 from an individual related to
     the Company's Chairman of the Board. The unsecured note bears interest at
     11% per annum and is due on September 30, 1996.

     Future maturities of borrowings are as follows (in 000's):

                          For the year ending March 31,
                          -----------------------------

                           1997                $11,565
                           1998                    515
                           1999                    553
                           2000                    594
                           2001                    639
                           Thereafter            2,393
                                               -------
                           Total               $16,259
                                               =======

7. CONVERTIBLE DEBENTURES

     During the period November 2, 1995 through March 31, 1996, the Company
     issued $3,700,000 of 7% convertible debentures and $15,000,000 of 5%
     convertible debentures (the Debentures), pursuant to regulation S with
     maturities between one and two years. The Debentures are convertible into
     shares of the Company's common stock at 85% of the average closing price of
     the stock over a five-day period prior to conversion.

     As of March 31, 1996, $7,000,000 of the Debentures, plus accrued interest
     of $48,146, had been converted into 1,073,688 shares of common stock and
     $10,000,000 of the 5% Debentures and $1,700,000 of the 7% Debentures were
     outstanding. Subsequent to March 31, 1996, an additional $10,950,000 have
     been converted into 1,257,667 shares of common stock. Accordingly, these
     $10,950,000 of Debentures have been classified as long-term in the
     accompanying consolidated balance sheet at March 31, 1996.











                                      F-15
<PAGE>   36

     During April and May 1996, the Company issued an additional $13,000,000 in
     5% Debentures with the same conversion features and terms as those issued
     above, of which $3,000,000 have been converted into 308,727 shares of
     common stock during June 1996.

     In a 1997 announcement discussed in Topic No. D-60 by the Emerging Issues
     Task Force, the staff of the Securities and Exchange Commission ("S.E.C.")
     indicated that when debt is convertible at a discount from the then current
     common stock market price, the discounted amount reflects at that time an
     incremental yield, e.g. a "beneficial conversion feature" which should be
     recognized as a return to the debt holders from the date the debt is issued
     to the date it first becomes convertible. Based on the market price of the
     Company's common stock on the date of issuance of the convertible debt, the
     convertible debentures issued by the Company during the period November
     1995 through March 1996 had a beneficial conversion feature of $4,303,320.
     Although management believes that the Company followed generally accepted
     accounting principles in existence at the time of the issuances, it has
     agreed to comply with the S.E.C. announcement, restating its net income
     and per share information for the year ended March 31, 1996 ("fiscal
     1996"), to reflect such accounting treatment for this non-cash charge,
     which has been recorded as additional interest expense in the accompanying
     restated consolidated financial statements. The effect of the restatement
     was to decrease net income for fiscal 1996 by $2,800,210, resulting in net
     income of $4,972,481.

8. COMMITMENTS

A.   LEASES:

     The Company leases its office space and certain equipment in both the U.S.
     and France under operating leases expiring on various dates through the
     year ending October 31, 2005. Total rent expense charged to operations for
     the years ended March 31, 1996, 1995 and 1994 was approximately $916,000,
     $568,000 and $422,000, respectively.

     At March 31, 1996, the minimum annual rental commitments are as follows (in
     000's):

                              For the year ending March 31,
                              -----------------------------
                              1997            $   1,052
                              1998                1,055
                              1999                1,048
                              2000                1,033
                              2001                  705
                              Thereafter          2,580
                                              ---------
                              Total           $   7,473
                                              =========

B.   LICENSE AND DISTRIBUTION AGREEMENTS:

     The Company holds the following exclusive worldwide licenses to manufacture
     and sell fragrance and other related products:

                                   Perry Ellis
                                   Vicky Tiel
                                   Todd Oldham
                              Phantom of the Opera












                                      F-16
<PAGE>   37

     Under each of these arrangements, the Company must pay royalties at various
     rates based on net sales, and spend minimum amounts for advertising based
     on sales volume. The agreements expire on various dates through 1998 and
     are subject to renewal.

     In May 1995, the Company terminated its license agreement with Francesco
     Smalto for breach of contract. On October 5, 1995, the Company entered into
     a transition and termination agreement with SMALTO which provides for the
     continued use of the Francesco Smalto trademark through September 30, 1996.
     The agreement contains certain production restrictions and requires a fixed
     amount of royalties during the period, which the Company anticipates will
     not exceed 5% of net sales of Smalto fragrances. Sales of Francesco Smalto
     products represented approximately 7% of total Company net sales for the
     year ended March 31, 1996.

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

                      Fiscal year ending March 31,             1997        1998
                      ----------------------------             ----        ----

                      Advertising                            $6,781      $5,936
                      Royalties                                $828        $440

C.       TRADEMARKS:

     Though various acquisitions since 1991, the Company acquired worldwide
     trademarks and distribution rights to ANIMALE, DANIEL DE FASSON, DECADENCE,
     LIMOUSINE and BAL A VERSAILLES fragrances and ALEXANDRA de MARKOFF
     cosmetics and fragrances. In addition, FHBH granted the Company an
     exclusive 55-year royalty free license. Accordingly, there are no licensing
     agreements requiring the payment of royalties. The Company also has the
     rights to license these trademarks, other than FHBH, for all classes of
     merchandise.

D.       BARTER ARRANGEMENTS:

     In June 1991, the Company entered into a barter arrangement (the Barter
     Agreement) for which the Company would receive advertising credits in
     exchange for its inventory of JOAN COLLINS products. The final sale of
     these products was completed in June 1993.

     The following table sets forth the balances and transactions included in
     the accompanying financial statements related to the Barter Agreement (in
     000's):

<TABLE>
<CAPTION>
                                                   1996         1995         1994
                                                   ----         ----         ----
<S>                                              <C>          <C>           <C>   
Prepaid advertising at March 31, net
of deferred income of $287, $643 and $1,509
in 1996, 1995 and 1994, respectively             $   660      $    989      $1,714
                                                 =======      ========      ======

Barter sales for the year ended March 31         $    --      $     --      $1,285
                                                 =======      ========      ======
</TABLE>




                                      F-17
<PAGE>   38

     Advertising credits used for the
     year ended March 31                     $   684      $  1,592      $1,154
                                             =======      ========      ======

     Deferred income recognized for
     the year ended March 31                 $   355      $    866      $  619
                                             =======      ========      ======

     In connection with the June 1994 FHBH acquisition, the Company acquired
     $471,000 of advertising credits of which $72,000 has been utilized during
     the year ended March 31, 1996. The Company expects to be able to fully
     utilize all of these barter advertising credits as part of its normal
     ongoing advertising expenditures.

E.   EMPLOYMENT AND CONSULTING AGREEMENTS:

     The Company has employment contracts with certain officers and employees
     which expire from April 1997 through January 1998. Minimum commitments
     under these contracts are as follows (in 000's):

                                  For the year ending March 31,
                                  -----------------------------

                                    1997             $1,291
                                    1998                288
                                                     ------
                                                     $1,579
                                                     ======

     In connection with the employment contracts, warrants to purchase 1,190,000
     shares of common stock, at prices ranging from $1.50 to $7.50 have been
     issued. These warrants are exercisable for a ten-year period from the date
     of grant and vest over the term of the applicable contracts through January
     1998. During the year ended March 31, 1996, 28,000 warrants were exercised.
     As of March 31, 1996, an additional 772,000 of the above mentioned warrants
     were vested. In addition, during January 1996, the Board of Directors
     approved a resolution whereby the number of warrants issued to key
     employees would double in the event of a change in control.

     On April 1, 1994, the Company entered into a three-year consulting
     agreement with Cosmix, Inc., a company owned by Mr. Frederick Purches, the
     Vice Chairman of the Board, which provides for monthly payments of $8,333.
     The agreement calls for Mr. Purches to spend substantial time to assist the
     Company in the areas of banking, SEC and stockholder relations, financial
     planning, assessment and coordination of acquisitions and divestiture, and
     any other similar activities which may be assigned by the Board of
     Directors. Mr. Purches receives certain insurance benefits as a part of his
     agreement, and has received 90,000 warrants to acquire shares of common
     stock at $2.06 over the three-year period of the contract, of which 60,000
     warrants have been exercised during the year ended March 31, 1996.

     On April 1, 1994, the Company entered into a three-year consulting
     agreement commencing June 1, 1994, with Cambridge Development Corporation,
     a company owned by Mr. Albert F. Vercillo, who is a director of the
     Company. The Agreement calls for Mr. Vercillo to devote substantial time to
     the Company in the areas of U.S. and international financial analysis and
     planning. Cambridge Development Corporation receives $4,500 a month and Mr.
     Vercillo receives certain insurance benefits, and has received 30,000
     warrants to acquire shares of common stock at $2.06 over the three-year
     period of the contract.






                                      F-18
<PAGE>   39

     On April 1, 1994, the Company entered into a consulting agreement with its
     former President, which provides for monthly payments of $16,667 through
     September 30, 1997. In addition, the former President had previously
     received warrants to purchase 500,000 shares of common stock, at an
     exercise price of $1.875 per share.

     All of the previously described warrants were issued at the market value of
     the underlying shares at the date of grant and reflect the two-for-one
     stock split effected as of November 3, 1995.

     Contingent upon the closing of the proposed acquisition of RBF, the Company
     has entered into employment agreements with four RBF employees through
     March 31, 1999. Minimum commitments under these agreements are
     approximately $575,400, $575,400 and $575,400 for the fiscal years ending
     March 31, 1997, 1998 and 1999, respectively. In addition, these employees
     were issued warrants to purchase a total of 210,000 shares of common stock
     at $6.75 per share that vest equally over the three year period.

9. FOREIGN SUBSIDIARY

     The following amounts relate to the Company's wholly-owned subsidiary,
     Parlux S.A.:
<TABLE>
<CAPTION>

                                                        As of and for the year ended March 31,
                                         --------------------------------------------------------------
                                             1996                       1995                    1994
                                         -------------              -------------           -----------
<S>                                         <C>                       <C>                   <C>        
Total assets                                $9,458,774                $10,607,585           $11,248,450
Working capital                              2,115,755                  1,112,504               447,107
Equity                                       2,229,714                  1,506,057               970,028

Net Sales:
     Trade                                   9,101,611                  7,219,601             8,225,259
     Affiliates                              2,742,211                    336,195               191,425
     Intercompany                            4,258,054                  4,845,524             5,296,957
                                         -------------              -------------           -----------
Total                                      $16,101,876                $12,401,320           $13,713,641
                                         =============              =============           ===========

Net income                               $     887,163              $     319,535           $   122,025
                                         =============              =============           ===========
</TABLE>

     Prior to 1996, foreign sales were principally made by Parlux S.A. During
     the year ended March 31, 1996, sales to foreign customers from the
     Company's domestic subsidiary amounted to approximately $19,000,000. At
     March 31, 1996, trade receivables from foreign customers amounted to
     approximately $5,753,000.

10. INCOME TAXES

     The Company adopted Statement of Financial Accounting Standards No. 109
     "Accounting for Income Taxes" (SFAS 109) in the first quarter of the fiscal
     year ended March 31, 1995. The Company provided a valuation allowance for
     the full amount of the deferred tax asset at April 1994 and, therefore,
     adoption of this statement did not materially impact the financial
     statements.





                                      F-19
<PAGE>   40

     Income tax expense is as follows:

<TABLE>
<CAPTION>
                                                                     Years ended March 31, 
                                                     ------------------------------------------------------
                                                         1996                 1995                   1994
                                                      ----------            ----------             --------
<S>                                                   <C>                   <C>                     <C>    
Current taxes:
     U.S. Federal                                     $3,764,477            $1,570,504              $30,000
     U.S. state and local                                472,360               175,000               63,008
     Foreign income taxes                                531,161               162,000               62,120
                                                      ----------            ----------             --------
                                                       4,767,998             1,907,504              155,128
U.S. Federal deferred tax benefit                         (4,184)             (628,504)                  --
                                                      ----------            ----------             --------
Income tax expense                                    $4,763,814            $1,279,000             $155,128
                                                      ==========            ==========             ========
</TABLE>

     A reconciliation of the U.S. Federal statutory rate to the Company's
     effective tax rate follows:
<TABLE>
<CAPTION>
                                                 1996               1995              1994
                                                 ----               ----              ----
                                         (As Restated, Note 7)
<S>                                            <C>                <C>               <C>
Tax at statutory rate                            35.0%             35.0 %            34.0 %
Utilization of net operating loss carry
forward                                            --              (4.3)%           (34.7)%
Valuation allowance recognition                    --             (11.0)%              --
Beneficial conversion feature of
debentures                                       10.9%               --                --
Non-deductible items                               .3%               .8 %             3.9 %
Incremental foreign taxes                          .3%              (.1)%             4.1 %
State and local taxes                             2.4%              2.0 %             2.9 %
                                               ------              ------           ------
                                                 48.9%             22.4 %            10.2 %
                                               ======              ======           ======
</TABLE>
     Deferred tax assets, which are included in other current assets, and
     deferred tax liabilities, are comprised of the following:


                                                            March 31,
                                                        -------------------
                                                         1996        1995
                                                         ----        ----

     Allowance for doubtful accounts, sales 
       returns and allowances                           $653,000   $420,000
     Reserve for inventory obsolescence                  188,000    145,000
     Other, net                                          (24,448)    63,504
                                                        --------   --------
            Total deferred tax assets                   $816,552   $628,504
                                                        ========   ========

     Deferred tax liabilities related to
       depreciation and amortization                    $183,864  $      --
                                                        ========  =========

     During fiscal 1995, the Company utilized approximately $700,000 of net
     operating loss carryforwards to offset current U.S. taxable income. A
     valuation allowance for 100% of these net operating loss carryforwards had
     been established at March 31, 1994. Additionally, during fiscal 1995, the
     Company reversed $544,000 of valuation allowances on deferred tax assets at
     March 31, 1994, as a result of the expected recoverability of such deferred
     tax assets in the future.

     In June 1996, the Company received a notification from the Internal Revenue
     Service informing the Company that its federal income tax return for the
     year ended March 31, 1994 would be audited. Management believes that the
     outcome of this audit will not have a material effect on the Company's
     financial position or results of operations.











                                      F-20
<PAGE>   41

11. COMMON STOCK

     At various dates since April 1989, the Company has issued, in addition to
     the warrants described in Note 8(E), a total of 738,000 warrants to key
     employees and/or consultants to purchase the Company's common stock at an
     exercise price of $1.87 per share. In March 1993, Mr. Gerard Semhon, in
     exchange for an amount due him of $180,000, exercised warrants to acquire
     96,000 registered shares and Mr. Fred Purches exercised warrants for the
     acquisition of 28,000 unregistered shares in exchange for cash and amounts
     due him of $47,000. In September 1993, Mr. Semhon exercised his remaining
     warrants to acquire 24,000 registered shares in exchange for amounts due
     him of $45,000. Accordingly, as of March 31, 1995, 540,000 of these
     warrants remained outstanding. The underlying shares related to the
     unexercised warrants had not been registered.

     In September 1990, in connection with a long-term loan, the Company issued
     100,000 warrants to Mr. Boris Lekach which were exercisable at $2.00 per
     share. Mr. Boris Lekach is related to Mr. Ilia Lekach, the Company's Chief
     Executive Officer.

     In March 1991, the Company issued warrants to Deco Distribution Group, Inc.
     (Deco) to acquire 1,100,000 shares of common stock in accordance with an
     Asset Acquisition Agreement of the same date. The warrants were exercisable
     through March 1, 2001 at an exercise price of $2.00 per share.

     In May 1995, the Company extended a discount of $0.75 per share to those
     holders of warrants issued in connection with the FHBH and Deco
     acquisitions, as well as the loan to Mr. Boris Lekach, if the holders would
     exercise by May 31, 1995. The exercise period was subsequently extended to
     July 31, 1995. These warrant holders exercised all of their warrants into
     1,400,000 shares of common stock, increasing stockholders' equity by
     approximately $2,300,000.

     In June 1995, in connection with a long-term loan, the Company issued
     warrants to acquire 60,000 unregistered shares of common stock to Mr. F.
     Lekach, which are exercisable at $6.94 per share for a two-year period. Mr.
     F. Lekach is related to Mr. Ilia Lekach, the Company's Chief Executive
     Officer.

     In June 1993, in recognition of continuing financial support, personal
     guarantees and pledged deposits in connection with the NBK loan, the
     Company issued 52,916 warrants to Mr. Zouheir Beidoun, a Director of the
     Company, at an exercise price of $1.75. These warrants, along with an
     additional 200,000 warrants issued during 1991, were exercised during
     February 1996, whereby a portion of the note payable to Mr. Beidoun,
     including accrued interest payable, was partially converted to equity.

     The following table summarizes the activity for the warrants outstanding
     under the commitments disclosed in Note 8(E) and the warrants described
     above after the retroactive effect of the stock split:
<TABLE>
<CAPTION>

                                                         Amount             Exercise Price
                                                         ------             --------------
<S>                                                     <C>                  <C>
 Balance at March 31, 1993                              1,614,000            $1.87 - $2.00
 Issued                                                   452,916            $1.50 - $1.87
 Exercised                                                (24,000)                   $1.87
                                                       ----------
 Balance at March 31, 1994                              2,042,916            $1.50 - $2.00
</TABLE>


                                      F-21

<PAGE>   42


<TABLE>
<CAPTION>
<S>                                                     <C>                  <C>     <C>  
 Issued                                                 1,530,000            $1.75 - $3.12
 Exercised                                                     --                       --
                                                       ----------
 Balance at March 31, 1995                              3,572,916            $1.50 - $3.12
 Issued                                                   307,978            $3.75 - $4.06
 Exercised                                             (1,830,916)           $1.62 - $2.06
                                                       ----------
 Balance at March 31, 1996                              2,049,978            $1.50 - $8.11
                                                       ==========
</TABLE>

12. STOCK OPTION AND OTHER PLANS

     The Company has adopted a Stock Option Plan and a 1989 Stock Option Plan
     (collectively, the "Plan") and has reserved and registered 250,000 shares
     of its Common Stock for issue thereunder. Options for most of the shares in
     the Plan may qualify as "incentive stock options" under the Internal
     Revenue Code. The shares are also available for distribution pursuant to
     options which do not so qualify. Under the Plan, options can be granted to
     eligible officers and key employees at not less than the fair market value
     of the shares at the date of grant of the option (110% of the fair market
     value for 10% or greater stockholders).

     Options which do not qualify as "incentive stock options" may also be
     granted to consultants. Options generally may be exercised only if the
     option holder remains continuously associated with the Company or a
     subsidiary from the date of grant to the date of exercise.

     On June 20, 1995, the Company granted to various employees additional
     options to acquire 24,500 shares of common stock at $5.75, the closing bid
     price of the stock on June 19, 1995. These options are exercisable at the
     rate of 25% per annum beginning June 20, 1996. Concurrently, 5,500 options
     were canceled through employee resignations.

     As of March 31, 1996, and since the inception of the Plan, options have
     been issued, net of cancellations, to purchase 242,592 shares at exercise
     prices ranging from $1.06 to $2.32 per share. Through March 31, 1996,
     159,592 options had been exercised under the Plan.

     The following table summarizes the activity for options covered by the Plan
     after the retroactive effect of the stock split:


                                               Amount         Exercise Price
                                               ------         --------------

     Balance at March 31, 1994                  118,674       $1.06 - $ 2.32
     Issued                                      10,000       $2.19
     Exercised                                  (38,050)      $1.06 - $ 1.87
     Canceled                                    (6,274)      $1.06 - $ 1.44
                                              ---------
     Balance at March 31, 1995                   84,350       $1.06 - $ 2.19
     Issued                                      24,500       $5.75
     Exercised                                  (22,350)      $1.06 - $ 2.19
     Canceled                                    (5,500)      $1.44 - $ 5.75
                                              ---------
     Balance at March 31, 1996                   81,000       $1.06 - $ 5.75
                                              =========

     As of March 31, 1996, options to purchase 81,000 shares are outstanding, of
     which 36,000 are currently exercisable and 22,000 are exercisable during
     the year ending March 31, 1997.

     During June 1993, the Company established a 401-K plan covering
     substantially all of its U.S. employees. No Company contribution was made
     during the year. Commencing on April 1,



                                      F-22

<PAGE>   43

     1996, the Company has agreed to match 25% of the first 6% of employee
     contributions, within annual limitations established by the Internal
     Revenue Code.

13. EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE

     For the year ended March 31, 1995, the number of shares of common stock
     issuable upon exercise of outstanding options and warrants, in the
     aggregate, exceeds 20% of the number of common shares outstanding.
     Accordingly, the modified treasury stock method was used to determine the
     dilutive effect of the options and warrants on earnings per share.

     Earnings per common and common equivalent share and the weighted average
     number of shares outstanding used in the computations, retroactively
     adjusted for the stock split, are summarized as follows:

<TABLE>
<CAPTION>
                     PRIMARY                                          1996                             1995
                     -------                                          ----                             ----
                                                               (As Restated, Note 7)
<S>                                                                 <C>                             <C>       
Net income                                                          $4,972,481                      $4,231,211
Add - reduction of interest expense                                         --   (1)                   237,585  (3)
                                                                    ----------                      ----------
Adjusted for per share computation                                  $4,972,481                      $4,468,796
                                                                    ==========                      ==========
Number of shares:
Weighted average shares outstanding                                  8,791,749                       6,696,890
Add - net additional shares issuable                                 1,495,325   (2)                 2,317,918  (4) 
                                                                    ----------                      ----------

Weighted average shares used in the per share                                   
computation                                                         10,287,074                       9,014,808      
                                                                    ==========                       =========
Earnings per common and common 
equivalent share                                                         $0.48                           $0.50
                                                                         =====                           =====
</TABLE>


<TABLE>
<CAPTION>

                  FULLY DILUTED                                        1996                            1995
                  -------------                                        ----                            ----
                                                              (As Restated, Note 7)
<S>                                                                 <C>                             <C>       
Net income                                                          $4,972,481                      $4,231,211
Add - reduction of interest expense                                         --   (1)                    77,317   (3)
                                                                    ----------                      ----------
Adjusted for per share computation                                  $4,972,481                      $4,308,528
                                                                    ==========                      ==========
Number of shares:
Weighted average shares outstanding                                  8,791,749                       6,696,890
Add - net additional shares issuable                                 1,737,527   (2)                 2,317,918   (4)
                                                                    ----------                      ----------
Weighted average shares used in the per share                                                                       
computation                                                         10,529,276                       9,014,808       
                                                                    ==========                      ==========
Earnings per common and common 
equivalent share                                                         $0.47                           $0.48
                                                                         =====                           =====
</TABLE>

(1)  Reduction of interest expense would assume that the Debentures were 
     converted into shares of common stock on the date of their issuance.
     However, conversion of the Debentures was not assumed since it would be
     antidilutive. Accordingly, no interest expense or charge for the beneficial
     conversion feature on the Debentures has been added back.

(2)  Assumes exercise or conversion of outstanding common stock equivalents
     (options and warrants) at the beginning of the period, or at the date of
     issuance if issued during the period, net of the assumed repurchase of
     common stock from exercise proceeds. The assumed repurchase of common stock
     is based on the average price



                                      F-23
<PAGE>   44

     of the Company's common stock during the period for primary and the end of
     period price for fully diluted. Conversion of convertible debentures was
     not assumed since it would be antidilutive.

(3)  Reduction of interest expense assumes that proceeds from the exercise of
     stock options and warrants, after the assumed repurchase of 20% of the
     weighted average common shares outstanding, were used to repay debt at the
     beginning of the period.

(4)  Assumes exercise of outstanding common stock equivalents (options and
     warrants) at the beginning of the period, or at the date of issuance if
     issued during the period, net of the assumed repurchase of common stock.
     The assumed repurchase of common stock was limited to 20% of the weighted
     average common shares outstanding and is based on the average price of the
     Company's common stock during the period for primary and the end of period
     price for fully diluted.

14. RELATED PARTY TRANSACTIONS, SIGNIFICANT CUSTOMERS AND CONCENTRATION OF
    CREDIT RISK

     The Company had sales of approximately $26,187,000, $15,230,000 and
     $12,410,000 during the fiscal years ended March 31, 1996, 1995 and 1994,
     respectively, to Perfumania, Inc. (Perfumania), a company affiliated with
     the Company's Chairman and Chief Executive Officer. Net amounts due from
     Perfumania amounted to $13,482,000 and $4,894,000 at March 31, 1996 and
     1995, respectively. No unaffiliated customer accounted for more than 10% of
     the Company's sales during the years ended March 31, 1996 and 1995. During
     the year ended March 31, 1994, the Company had sales of approximately
     $2,760,000 or 10.9% of net sales, to an unaffiliated customer.

15.  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

     The following is a summary of the Company's unaudited quarterly results of
     operations for the years ended March, 31, 1996 and 1995 (in thousands,
     except per share amounts). Certain of the quarterly information has been
     restated to comply with the provisions of Emerging Issues Task Force Topic
     No. D-60 as described below.
<TABLE>
<CAPTION>

                                                                         Quarter Ended
                                                  --------------------------------------------------------------------
                                                    June 30,         September 30,        December 31,       March 31,
                                                     1995                1995               1995 (1)         1996 (1)
                                                  -----------        -------------        ------------      ----------
<S>                                                 <C>                 <C>                 <C>              <C>    
Net sales                                           $10,209             $13,925             $23,834          $19,759
Gross margin                                          7,076               8,495              13,687           10,029
Net income (loss)                                     1,142               1,508               2,468            (145)
Earnings (loss) per common and
 common equivalent share:
      Primary                                         $0.13               $0.15               $0.23           $(0.01)
      Fully diluted                                   $0.13               $0.15               $0.23           $(0.01)
Net income (loss) as previously reported             $1,142              $1,508              $2,991           $2,132
Beneficial conversion feature of
debentures                                                -                   -                (523)          (2,277)
                                                     ------              ------              ------          -------
Net income (loss) as adjusted                        $1,142              $1,508              $2,468          ($  145)
                                                     ======              ======              ======          =======
</TABLE>



                                      F-24
<PAGE>   45

<TABLE>
<CAPTION>

<S>                                                   <C>                 <C>                 <C>              <C>  
Per share amounts:
   Primary:
   Net income (loss) as previously
   reported                                           $0.13               $0.15               $0.29            $0.17
   Beneficial conversion feature
   of debentures                                         --                  --               (0.06)           (0.18)
                                                      -----               -----               -----           ------
   Net income (loss) as adjusted                      $0.13               $0.15               $0.23           $(0.01)
                                                      =====               =====               =====           ======
Fully diluted:
   Net income (loss) as previously
   reported                                           $0.13               $0.15               $0.29            $0.15
   Beneficial conversion feature
   of debentures                                         --                  --               (0.06)           (0.16)
                                                      -----               -----               -----           ------
   Net income (loss) as adjusted                      $0.13               $0.15               $0.23           $(0.01)
                                                      =====               =====               =====           ======
</TABLE>


<TABLE>
<CAPTION>

                                                                         Quarter Ended
                                           --------------------------------------------------------------------------
                                                    June 30,          September 30,       December 31,      March 31,
                                                      1994               1994                1994             1995
                                           ----------------------    --------------     ----------------   ----------
<S>                                                   <C>                 <C>                 <C>              <C>  
Net sales                                            $6,492              $7,609             $12,356          $11,752
Gross margin                                          3,992               4,437               6,635            8,188
Net income                                              623                 740               1,228            1,640
Earnings per common and
   common equivalent share:
      Primary                                         $0.09               $0.09               $0.14            $0.18
      Fully diluted                                   $0.09               $0.09               $0.14            $0.16
</TABLE>

NOTE: Earnings per common and common equivalent shares have been retroactively
adjusted for the effect of the November 1995 two-for-one stock split. 

(1) As disclosed in Note 7 to the consolidated financial statements, the net
    income and net income per share for 1996 has been restated to account for
    the value attributable to the beneficial conversion feature on convertible
    debentures issued during fiscal 1996.





















                                      F-25



<PAGE>   46



                    PARLUX FRAGRANCES, INC. AND SUBSIDIARIES
                SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>

                                               Additions
                             Balance at        charged to
                             beginning of      costs and                              Balance at
Description                  period            expenses              Deductions       end of period
-----------------------------------------------------------------------------------------------------
<S>                         <C>               <C>                  <C>                      <C>       
Year ended
March 31, 1996
--------------

Reserve for
doubtful accounts
and sales returns &
allowances                  $2,055,413        $6,548,444           $6,482,612  (1)      $2,121,245

Reserve for
inventory shrinkage
and obsolescence              $685,629          $688,626   (3)       $174,255           $1,200,000

Year ended
March 31, 1995
--------------

Reserve for
doubtful accounts
and sales returns &
allowances                    $741,951        $2,001,601             $688,139  (2)      $2,055,413

Reserve for
inventory shrinkage
and obsolescence              $200,000          $485,629   (4)                            $685,629

Year ended
March 31, 1994
--------------

Reserve for
doubtful accounts
and sales returns &
allowances                    $772,857        $1,288,688           $1,319,594             $741,951
</TABLE>

(1) Net of reserves of $1,500,000 recorded in connection with the AdM
    acquisition.

(2) Net of reserves of $1,556,275 recorded in connection with the FHBH
    acquisition.

(3) Includes $600,000 recorded in connection with the AdM acquisition.

(4) Includes $303,665 recorded in connection with the FHBH and Perry Ellis
    acquisitions.



                                      F-26


<PAGE>   47

                    PARLUX FRAGRANCES, INC. AND SUBSIDIARIES
                    SCHEDULE IX - SHORT-TERM BANK BORROWINGS
<TABLE>
<CAPTION>

Col. A                      Col. B.           Col.C           Col.D              Col.E              Col.F

Category of                 Balance at end    Weighted        Maximum amount     Average amount     Weighted
aggregate                   of period         average         outstanding        outstanding        average
short-term                                    interest rate   during the period  during the period  interest
borrowings                                    (4)                                                   during the
                                                                                                    period (5)
-----------------------------------------------------------------------------------------------------------------
<S>                               <C>                             <C>               <C>
March 31, 1996
Notes Payable
Banks (1)                     $6,939,014         10.2%            $7,823,478        $7,361,251        12.1%

March 31, 1995
Notes Payable
Banks (2)                     $6,773,394         10.3%            $6,773,394        $5,932,300        12.1%

March 31, 1994
Notes Payable
Banks (3)                     $5,127,715          8.7%            $6,294,599        $4,803,080        11.5%
</TABLE>


(1)      Loans of $3,888,378 from Finova, $482,392 from Eagle National Bank, as
         well as overdraft and receivable facilities of $2,568,244 granted by
         French banks.

(2)      Loans of $4,289,316 from Finova, $560,000 from the National Bank of
         Kuwait, $81,014 from Eagle National Bank, as well as overdraft and
         receivable facilities of $1,843,074 granted by French banks.

(3)      Aggregate revolving credit loan from the National Bank of Kuwait of
         $2,600,000 and overdraft and receivable facilities granted by French
         banks of $2,527,715. The loan was re-classified from long-term
         borrowings as of July 31, 1994 reflecting the proposed repayment date
         of July 31, 1995.

(4)      The weighted average interest rate was computed by dividing the annual
         interest costs based on March 31, 1996 rates by the short-term bank
         borrowings outstanding at March 31, 1996.

(5)      The weighted average interest rate during the period was computed by
         dividing the actual interest expense for the year by the average
         short-term bank borrowings outstanding during the year.













                                      F-27

<PAGE>   48


SIGNATURES

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

PARLUX FRAGRANCES, INC.

/s/ Ilia Lekach
-----------------------------------------
Ilia Lekach, Chief Executive Officer and Chairman

Dated: July 17, 1998

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


/s/ Zalman Lekach
------------------------------------------
Zalman Lekach, President, Chief Operating Officer and Director


/s/ Frank A. Buttacavoli
-------------------------------------------
Frank A. Buttacavoli, Executive Vice President,
  Chief Financial Officer and Director


/s/ Frederick E. Purches
-------------------------------------------
Frederick E. Purches, Vice Chairman and Director


/s/ Albert F. Vercillo
--------------------------------------------
Albert F. Vercillo, Director


/s/ Mayi de la Vega
---------------------------------------------
Mayi de la Vega, Director


/s/ Glenn Gopman
---------------------------------------------
Glenn Gopman, Director












                                      F-28