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| þ                                                         |  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934     |
|----------------------------------------------------------------|------------------------------------------------------------------------------------------------|
|                                                           |                                                                                           |
| For the fiscal year ended: March 31, 2011                 |
|                                                           |
| or                                                             |
|                                                           |                                                                                           |
| o                                                              |  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|                                                           |                                                                                           |
| For the transition period from: _____________ to _____________ |

| PARLUX FRAGRANCES, INC.                                |
|--------------------------------------------------------|
| (Exact Name of Registrant as Specified in Its Charter) |

| DELAWARE                                                      |   | 22-2562955                          |
|---------------------------------------------------------------|--------|-------------------------------------|
| (State or Other Jurisdiction ofIncorporation or Organization) |   | (I.R.S. EmployerIdentification No.) |

| Title of each class                      |   | Name of each exchange on which registered                |
|------------------------------------------|--------|----------------------------------------------------------|
| Common stock (par value $0.01 per share) |   | The NASDAQ Stock Market LLC(NASDAQ Global Select Market) |

| Class                                    |   | Outstanding at May 25, 2011 |
|------------------------------------------|--------|----------------------------------|
| Common Stock, $ 0.01 par value per share |   | 20,758,812 shares                |

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|                      |                                                                                                                |   | PAGE   |   |
|---------------------------|---------------------------------------------------------------------------------------------------------------------|--------|--------|--------|
|                      |                                                                                                                |   |   |   |
| PART I                    |
|                      |                                                                                                                |   |   |   |
| Item 1.              | Business.                                                                                                           |   |   | 1      |   |
| Item 1A.   | Risk Factors.                                                                                                       |   |   | 9      |   |
| Item 1B.                  | Unresolved Staff Comments.                                                                                          |   |   | 16     |   |
| Item 2.              | Properties.                                                                                                    |   |   | 16     |   |
| Item 3.                   | Legal Proceedings.                                                                                             |   |   | 17     |   |
| Item 4.              | Removed and Reserved.                                                                                               |   |   | 18     |   |
|                      |                                                                                                                |   |   |   |   |
| PART II                   |
|                      |                                                                                                                |   |   |   |   |
| Item 5.                   | Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |   |   | 19     |   |
| Item 6.                   | Selected Financial Data.                                                                                            |   |   | 22     |   |
| Item 7.                   | Management’s Discussion and Analysis of Financial Condition and Results of Operations.                        |   |   | 23     |   |
| Item 7A                   | Quantitative and Qualitative Disclosures About Market Risk.                                                         |   |   | 45     |   |
| Item 8.                   | Financial Statements and Supplementary Data.                                                                        |   |   | 45     |   |
| Item 9.                   | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.                               |   |   | 45     |   |
| Item 9A.             | Controls and Procedures.                                                                                            |   |   | 45     |   |
| Item 9B.                  | Other Information.                                                                                                  |   |   | 47     |   |
|                      |                                                                                                                |   |   |   |   |
| PART III                  |
|                      |                                                                                                                |   |   |   |   |
| Item.10.                  | Directors, Executive Officers and Corporate Governance                                                              |   |   | 48     |   |
| Item.11.             | Executive Compensation                                                                                              |   |   | 53     |   |
| Item.12.                  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters                     |   |   | 65     |   |
| Item.13.                  | Certain Relationships and Related Transactions, and Director Independence                                           |   |   | 66     |   |
| Item.14.                  | Principal Accounting Fees and Services                                                                              |   |   | 68     |   |
|                      |                                                                                                                |   |   |   |   |
| PART IV                   |
|                      |                                                                                                                |   |   |   |   |
| Item 15.             | Exhibits, Financial Statement Schedules.                                                                            |   |   | 69     |   |

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|                                           |   | Fiscal 2011 |   |   | Fiscal 2010 |   |   | Fiscal 2009 |   |
|------------------------------------------------|--------|-------------|--------|--------|-------------|--------|--------|-------------|--------|
|                                           |   |        |   |   |        |   |   |        |   |
| PARIS HILTON (including accessories)      |   |        | 60     | %      |        |   | 42     | %           |   |   | 55 | % |
| GUESS? (license expired in December 2009) |   |        | N/A    |   |        |   | 28     | %           |   |   | 30 | % |
| JESSICA SIMPSON                                |   |        | 19     | %      |        |   | 15     | %           |   |   | 13 | % |

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|                      | For the Years Ended March 31, |   |
|---------------------------|------------------------------------|--------|
|                      | 2011                               |   | 2010 |   | 2009 |   |
| (in millions)        |                               |   |   |   |   |   |   |   |   |
| Sales to Perfumania       |                               | $      | 47.5 |   |   | $ | 37.6 |   |   | $ | 41.5 |   |
| As a % of total net sales |                               |   | 39 | % |   |   | 25 | % |   |   | 27 | % |

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|                             | For the Years Ended March 31, |   |
|----------------------------------|------------------------------------|--------|
|                             | 2011                               |   | 2010 |   | 2009 |   |
| (in millions)               |                               |   |   |   |   |   |   |   |   |
| Sales to international customers |                               | $      | 29.7 |   |   | $ | 46.3 |   |   | $ | 55.8 |   |
| As a % of total net sales        |                               |   | 24 | % |   |   | 31 | % |   |   | 37 | % |

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|   | · | incur additional indebtedness; |
|--------|--------|--------------------------------|

|   | · | pay dividends; |
|--------|--------|----------------|

|   | · | create or incur liens; or |
|--------|--------|---------------------------|

|   | · | engage in mergers or acquisitions. |
|--------|--------|------------------------------------|

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|   | · | import and export license requirements; |
|--------|--------|-----------------------------------------|

|   | · | trade restrictions; |
|--------|--------|---------------------|

|   | · | changes in tariffs and taxes; |
|--------|--------|-------------------------------|

|   | · | product registration, permitting and regulatory compliance; |
|--------|--------|-------------------------------------------------------------|

|   | · | restrictions on repatriating foreign profits back to the United States; |
|--------|--------|-------------------------------------------------------------------------|

|   | · | the imposition of foreign and domestic governmental controls; |
|--------|--------|---------------------------------------------------------------|

|   | · | changes in, or our unfamiliarity with, foreign laws and regulations; |
|--------|--------|----------------------------------------------------------------------|

|   | · | difficulties in staffing and managing international operations; |
|--------|--------|-----------------------------------------------------------------|

|   | · | changes in economic, social, legal and other conditions; |
|--------|--------|----------------------------------------------------------|

|   | · | the volatility or weakening of the U.S. dollar against other currencies; |
|--------|--------|--------------------------------------------------------------------------|

|   | · | greater difficulty enforcing intellectual property rights and weaker laws protecting such rights; and |
|--------|--------|-------------------------------------------------------------------------------------------------------|

|   | · | geo-political conditions, such as terrorist attacks, war or other military action, public health  problems and natural disasters. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|

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|   | · | quarterly variations in operating results; |
|--------|--------|--------------------------------------------|

|   | · | acquisitions, capital commitments or strategic alliances by us or our competitors; |
|--------|--------|------------------------------------------------------------------------------------|

|   | · | legal and regulatory matters that are applicable to our business; |
|--------|--------|-------------------------------------------------------------------|

|   | · | the operating and stock price performances of other companies that investors may deem comparable to us; |
|--------|--------|---------------------------------------------------------------------------------------------------------|

|   | · | news reports relating to trends in our markets; and |
|--------|--------|-----------------------------------------------------|

|   | · | the amount of shares constituting our public float. |
|--------|--------|-----------------------------------------------------|

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| ITEM 3. |   LEGAL PROCEEDINGS. |
|--------------|--------------------------------|

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|                              |   | Common Stock |   |
|-----------------------------------|--------|--------------|--------|
|                              |   | High         |   |   | Low |   |
| Quarter – Fiscal Year 2010: |   |         |   |   |   |   |
| First (April/June) 2009           |   |         | 2.57   |   |   |   | 0.77 |   |
| Second (July/Sept.) 2009          |   |         | 2.50   |   |   |   | 1.52 |   |
| Third (Oct./Dec.) 2009            |   |         | 2.61   |   |   |   | 1.88 |   |
| Fourth (Jan./Mar.) 2010           |   |         | 2.18   |   |   |   | 1.52 |   |
| Quarter – Fiscal Year 2011: |   |         |   |   |   |   |   |   |
| First (April/June) 2010           |   |         | 2.41   |   |   |   | 1.68 |   |
| Second (July/Sept.) 2010          |   |         | 2.34   |   |   |   | 1.69 |   |
| Third (Oct./Dec.) 2010            |   |         | 2.96   |   |   |   | 2.09 |   |
| Fourth (Jan./Mar.) 2011           |   |         | 3.79   |   |   |   | 2.85 |   |

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| Plan Category                                              |   | Number of securities to be issued upon exercise of outstanding options, warrants and rights |      | Weighted-average exercise price of outstanding options, warrants and rights |   | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column) |
|------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------|-----------|-----------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|
| Equity compensation plans approved by security holders     |   |                                                                                        | 3,086,625 |  (1)                                                                   |   |                                                                                                                                              | $4.03 |   |   |   | 6,513,200 |  (2) |
| Equity compensation plans not approved by security holders |   |                                                                                        | 4,020,000 |  (3)                                                                   |   |                                                                                                                                              | $4.98 |   |   |   | — |   |
| Total                                                      |   |                                                                                        | 7,106,625 |                                                                        |   |                                                                                                                                              | $4.68 |   |   |   | 6,513,200 |   |

| ——————— |
|---------------------------------------------------|

| (1) | Represents 1,086,625 shares to be issued upon the exercise of outstanding options under our 2007 Stock Incentive Plan (the “2007 Plan”) and our 2000 Stock Option Plan (which expired on June 7, 2010), which were approved by our stockholders on October 11, 2007, and October 12, 2000, respectively, and 2,000,000 shares to be issued upon the exercise of warrants granted in connection with the Artistic Brands licenses, which was approved by our stockholders on December 18, 2009. See Note 10 to the accompanying Consolidated Financial Statements included with this filing for further discussion. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Represents 513,200 shares available for grant under our 2007 Plan, which were approved by our stockholders as discussed in footnote 1 above, and 6,000,000 shares, which may be issued upon the exercise of warrants that may be issued in the future, if and when the sublicense agreement is entered into for Shawn “Jay Z” Carter and a fourth artist in connection with the Artistic Brands licenses, which was approved by our stockholders on December 18, 2009. See Note 10 to the accompanying Consolidated Financial Statements included with this filing for further discussion. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Represents warrants to purchase 20,000 shares granted in connection with previous annual Board of Directors’ compensation. In addition, it represents warrants granted on April 7, 2009, to purchase 4,000,000 shares of our common stock in connection with the Artistic Brands licenses.  See Note 10 to the accompanying Consolidated Financial Statements included with this filing for further discussion. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                      |   |   | 3/06   |   |   |   | 3/07   |   |   |   | 3/08   |   |   |   | 3/09   |   |   |   | 3/10   |   |   |   | 3/11   |   |
|---------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Parlux Fragrances, Inc.   |   | $      | 100.0  |   |   | $      | 34.60  |   |   | $      | 18.23  |   |   | $      | 5.33   |   |   | $      | 12.40  |   |   | $      | 19.47  |   |
| S&P 500               |   | $      | 100.0  |   |   | $      | 111.83 |   |   | $      | 106.15 |   |   | $      | 65.72  |   |   | $      | 98.43  |   |   | $      | 113.83 |   |
| S&P Personal Products |   | $      | 100.0  |   |   | $      | 126.26 |   |   | $      | 132.38 |   |   | $      | 67.78  |   |   | $      | 141.54 |   |   | $      | 149.09 |   |

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| Statement of Operations Data:                  |   | For the Years Ended March 31,                                         |       |
|------------------------------------------------|--------|----------------------------------------------------------------------------|------------|
|                                           |   | 2011                                                                       |       |   | 2010 |   |   | 2009 |   |   | 2008 |   |   | 2007(3) |   |
|                                           |   | (in thousands of dollars, except number of shares and per share data) |       |
| Continuing Operations:                         |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net sales                                      |   | $                                                                          | 123,006    |   |   | $ | 148,102 |   |   | $ | 151,155 |   |   | $ | 153,696 |   |   | $ | 134,365 |   |
| Costs/operating expenses (4)                   |   |                                                                       | 120,533    |   |   |   | 171,611 |   |   |   | 157,958 |   |   |   | 145,096 |   |   |   | 177,601 |   |
| Operating income (loss)                        |   |                                                                       | 2,473      |   |   |   | (23,509 | ) |   |   | (6,803 | ) |   |   | 8,600 |   |   |   | (42,742 | ) |
| Income (loss) from continuing operations (4)   |   |                                                                       | 1,242      |   |   |   | (14,759 | ) |   |   | (4,284 | ) |   |   | 5,011 |   |   |   | (27,864 | ) |
| Income from discontinued operations (1)        |   |                                                                       | —    |   |   |   | — |   |   |   | — |   |   |   | 25 |   |   |   | 30,746 |   |
| Net income (loss)                              |   | $                                                                          | 1,242      |   |   | $ | (14,759 | ) |   | $ | (4,284 | ) |   | $ | 5,036 |   |   | $ | 2,882 |   |
| Income (loss) per share:                       |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic:                                         |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Continuing operations                          |   | $                                                                          | 0.06       |   |   | $ | (0.73 | ) |   | $ | (0.21 | ) |   | $ | 0.26 |   |   | $ | (1.53 | ) |
| Discontinued operations                        |   |                                                                       | —    |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 1.69 |   |
| Total                                          |   | $                                                                          | 0.06       |   |   | $ | (0.73 | ) |   | $ | (0.21 | ) |   | $ | 0.26 |   |   | $ | 0.16 |   |
| Diluted: (2)                                   |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Continuing operations                          |   | $                                                                          | 0.06       |   |   | $ | (0.73 | ) |   | $ | (0.21 | ) |   | $ | 0.24 |   |   | $ | (1.53 | ) |
| Discontinued operations                        |   |                                                                       | —    |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 1.69 |   |
| Total                                          |   | $                                                                          | 0.06       |   |   | $ | (0.73 | ) |   | $ | (0.21 | ) |   | $ | 0.24 |   |   | $ | 0.16 |   |
| Weighted average number of shares outstanding: |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                          |   |                                                                       | 20,497,701 |   |   |   | 20,330,395 |   |   |   | 20,537,624 |   |   |   | 19,344,953 |   |   |   | 18,154,190 |   |
| Diluted                                        |   |                                                                       | 20,653,305 |   |   |   | 20,330,395 |   |   |   | 20,537,624 |   |   |   | 20,603,256 |   |   |   | 18,154,190 |   |

| ——————— |
|---------------------------------------------------|

| (1) | Represents operations relating to the Perry Ellis brand, which was sold during December 2006. |
|-----|----------------------------------------------------------------------------------------------------|

| (2) | The number of shares utilized in the calculation of diluted loss per share from continuing operations, discontinued operations and net income were the same as those used in the basic calculation of earnings per share for the years ended March 31, 2010, 2009 and 2007, as we incurred a loss from continuing operations for each of those periods. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Concurrent with the Stock Split in fiscal year 2007, we modified the outstanding warrants, doubling the number of warrants and reducing the exercise price in half to reflect the Stock Split. Since the warrant terms did not contain an anti-dilution provision, we were required to record share-based compensation expense in the amount of $16.2 million, reflecting the change in the warrants’ fair value immediately before and after the Stock Split. This non-cash charge was included in operation expenses for the year ended March 31, 2007. We also recorded a tax benefit of $5.2 million as a result of the charge, which reduced income tax expense for the period. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | During the year ended March 31, 2010, we recorded additional charges of $7.6 million to cost of sales to reduce the recorded value of our GUESS? brand inventories, due to the expiration of the GUESS?  license on December 31, 2009, to amounts which we estimated could be realized upon their sale or liquidation. In addition, during the year ended March 31, 2010, we wrote-off approximately $1.7 million of collateral material related to the GUESS? brand products, which was recorded as advertising and promotional expense. Please refer to “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a more detailed discussion of the expiration of the GUESS? license. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Balance Sheet Data:          |   | March 31, |    |
|------------------------------|--------|----------------|---------|
|                         |   | 2011           |    |   | 2010 |   |   | 2009 |   |   | 2008 |   |   | 2007 |   |
|                         |   | (in thousands) |    |
|                         |   |           |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Current assets               |   | $              | 103,994 |   |   | $ | 103,373 |   |   | $ | 128,674 |   |   | $ | 122,333 |   |   | $ | 114,065 |   |
| Current liabilities          |   |           | 10,975  |   |   |   | 14,532 |   |   |   | 26,220 |   |   |   | 15,040 |   |   |   | 34,605 |   |
| Working capital              |   |           | 93,019  |   |   |   | 88,841 |   |   |   | 102,454 |   |   |   | 107,293 |   |   |   | 79,460 |   |
| Trademarks and licenses, net |   |           | 4,195   |   |   |   | 4,654 |   |   |   | 1,885 |   |   |   | 2,770 |   |   |   | 3,913 |   |
| Long-term borrowings, net    |   |           | — |   |   |   | — |   |   |   | — |   |   |   | 543 |   |   |   | 1,537 |   |
| Total assets                 |   |           | 112,706 |   |   |   | 114,332 |   |   |   | 136,704 |   |   |   | 131,148 |   |   |   | 144,896 |   |
| Total liabilities            |   |           | 10,975  |   |   |   | 14,532 |   |   |   | 26,220 |   |   |   | 15,583 |   |   |   | 36,142 |   |
| Stockholders’ equity   |   | $              | 101,731 |   |   | $ | 99,800 |   |   | $ | 110,484 |   |   | $ | 115,565 |   |   | $ | 108,755 |   |

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|                                                                                                                         | March 31, 2011 |   |
|------------------------------------------------------------------------------------------------------------------------------|---------------------|--------|
|                                                                                                                         | FinishedGoods       |   | Componentsand PackagingMaterial |   | RawMaterial |   | Total |   |
|                                                                                                                         | (in millions)  |   |
| Inventories                                                                                                                  |                | $      | 21.4 |   |   | $ | 14.5 |   |   | $ | 2.3 |   |   | $ | 38.2 |   |
| Less write-downs                   |                |   | 0.3 |   |   |   | 0.4 |   |   |   | 0.1 |   |   |   | 0.8 |   |
| Net inventories                                                                                                              |                | $      | 21.1 |   |   | $ | 14.1 |   |   | $ | 2.2 |   |   | $ | 37.4 |   |
|                                                                                                                         |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                         | March 31, 2010 |   |
|                                                                                                                         | FinishedGoods       |   | Componentsand PackagingMaterial |   | RawMaterial |   | Total |   |
|                                                                                                                         | (in millions)  |   |
| Inventories                                                                                                                  |                | $      | 28.2 |   |   | $ | 22.2 |   |   | $ | 2.6 |   |   | $ | 53.0 |   |
| Less write-downs                                                                                                             |                |   | 4.9 |   |   |   | 6.0 |   |   |   | 0.3 |   |   |   | 11.2 |   |
| Net inventories                                                                                                              |                | $      | 23.3 |   |   | $ | 16.2 |   |   | $ | 2.3 |   |   | $ | 41.8 |   |

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| ·   | Paris Hilton Tease |
|--------------------|--------------------|

| ·   | Paris Hilton – The Passport Series |
|--------------------|------------------------------------------|

| ·   | Jessica Simpson Fancy Nights |
|--------------------|------------------------------|

| ·   | Queen Latifah Queen of Hearts |
|--------------------|-------------------------------|

| ·   | Marc Ecko Blue for Men |
|--------------------|------------------------|

| ·   | UNLTD by Marc Ecko |
|--------------------|--------------------|

| ·   | Nicole Miller for Women (new license) |
|--------------------|---------------------------------------|

| ·   | Rihanna Reb’l Fleur (new license) |
|--------------------|-----------------------------------------|

----

| ·   | Paris Hilton Siren |
|--------------------|--------------------|

| ·   | Jessica Simpson Fancy Love |
|--------------------|----------------------------|

| ·   | Queen Latifah Queen (new license) |
|--------------------|-----------------------------------|

| ·   | Marc Ecko for Men (new license) |
|--------------------|---------------------------------|

| ·   | Josie Natori for Women (new license) |
|--------------------|--------------------------------------|

| ·   | GUESS? by Marciano for Men |
|--------------------|----------------------------|

| ·   | Paris Hilton Fairy Dust |
|--------------------|-------------------------|

| ·   | Jessica Simpson Fancy (new license) |
|--------------------|-------------------------------------|

----

|                          |   | For the Years Ended March 31, |   |
|-------------------------------|--------|------------------------------------|--------|
|                          |   | 2011                               |   |   | %Change |   |   | 2010 |   |   | %Change |   |   | 2009 |   |
|                          |   |  (in millions)           |   |
| Domestic sales                |   | $                                  | 40.7   |   |   |   | (14 | )% |   | $ | 47.6 |   |   |   | (12 | )% |   | $ | 53.9 |   |
| International sales           |   |                               | 29.7   |   |   |   | (36 | )% |   |   | 46.3 |   |   |   | (17 | )% |   |   | 55.8 |   |
| Unrelated customer sales      |   |                               | 70.4   |   |   |   | (25 | )% |   |   | 93.9 |   |   |   | (14 | )% |   |   | 109.7 |   |
| Related parties sales         |   |                               | 51.2   |   |   |   | 3 | % |   |   | 49.6 |   |   |   | 20 | % |   |   | 41.5 |   |
| Sales – expired license |   |                               | 1.4    |   |   |   | (69 | )% |   |   | 4.6 |   |   |   | 100 | % |   |   | — |   |
| Total net sales               |   | $                                  | 123.0  |   |   |   | (17 | )% |   | $ | 148.1 |   |   |   | (2 | )% |   | $ | 151.2 |   |

| * | % change is based on unrounded numbers |
|---|----------------------------------------|

----

|                                   |   | For the Years Ended March 31, |   |
|----------------------------------------|--------|------------------------------------|--------|
|                                   |   | 2011                               |   |   | %Change * |   |   | 2010 |   |   | %Change * |   |   | 2009 |   |
|                                   |   | (in millions)                 |   |
| Unrelated customers                    |   | $                                  | 29.4   |   |   |   | (35 | )% |   | $ | 44.9 |   |   |   | (12 | )% |   | $ | 51.3 |   |
| As a % of unrelated customer net sales |   |                               | 42     | % |   |   |   |   |   |   | 48 | % |   |   |   |   |   |   | 47 | % |
| Related parties                        |   |                               | 24.0   |   |   |   | (18 | )% |   |   | 29.2 |   |   |   | 51 | % |   |   | 19.3 |   |
| As a % of related parties net sales    |   |                               | 47     | % |   |   |   |   |   |   | 59 | % |   |   |   |   |   |   | 46 | % |
| Cost of sales – expired license  |   |                               | 1.4    |   |   |   | (88 | )% |   |   | 11.9 |   |   |   | 100 | % |   |   | — |   |
| As a % of expired license net sales    |   |                               | 100    | % |   |   |   |   |   |   | 257 | % |   |   |   |   |   |   | 0 | % |
| Total cost of goods sold               |   | $                                  | 54.8   |   |   |   | (36 | )% |   | $ | 86.0 |   |   |   | 22 | % |   | $ | 70.6 |   |
| As a % of net sales                    |   |                               | 45     | % |   |   |   |   |   |   | 58 | % |   |   |   |   |   |   | 47 | % |
|                                   |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross Margin                           |   | $                                  | 68.2   |   |   |   | 10 | % |   | $ | 62.1 |   |   |   | (23 | )% |   | $ | 80.6 |   |
| As a % of net sales                    |   |                               | 55     | % |   |   |   |   |   |   | 42 | % |   |   |   |   |   |   | 53 | % |

| * | % change is based on unrounded numbers |
|---|----------------------------------------|

----

|                          |   | For the Years Ended March 31, |   |
|-------------------------------|--------|------------------------------------|--------|
|                          |   | 2011                               |   |   | %Change * |   |   | 2010 |   |   | %Change * |   |   | 2009 |   |
|                          |   | (in millions)                 |   |
| Advertising and promotional   |   | $                                  | 32.7   |   |   |   | (27 | )% |   | $ | 44.9 |   |   |   | (1 | )% |   | $ | 45.4 |   |
| As a % of net sales           |   |                               | 27     | % |   |   |   |   |   |   | 30 | % |   |   |   |   |   |   | 30 | % |
| Selling and distribution      |   |                               | 12.3   |   |   |   | (13 | )% |   |   | 14.2 |   |   |   | (11 | )% |   |   | 15.9 |   |
| As a % of net sales           |   |                               | 10     | % |   |   |   |   |   |   | 10 | % |   |   |   |   |   |   | 11 | % |
| Royalties                     |   |                               | 10.3   |   |   |   | (23 | )% |   |   | 13.4 |   |   |   | 3 | % |   |   | 13.0 |   |
| As a % of net sales           |   |                               | 8      | % |   |   |   |   |   |   | 9 | % |   |   |   |   |   |   | 9 | % |
| General and administrative    |   |                               | 8.1    |   |   |   | (21 | )% |   |   | 10.3 |   |   |   | (2 | )% |   |   | 10.6 |   |
| As a % of net sales           |   |                               | 7      | % |   |   |   |   |   |   | 7 | % |   |   |   |   |   |   | 7 | % |
| Depreciation and amortization |   |                               | 2.3    |   |   |   | (20 | )% |   |   | 2.9 |   |   |   | 15 | % |   |   | 2.5 |   |
| As a % of net sales           |   |                               | 2      | % |   |   |   |   |   |   | 2 | % |   |   |   |   |   |   | 2 | % |
| Total operating expenses      |   | $                                  | 65.7   |   |   |   | (23 | )% |   | $ | 85.7 |   |   |   | (2 | )% |   | $ | 87.4 |   |
| As a % of net sales           |   |                               | 53     | % |   |   |   |   |   |   | 58 | % |   |   |   |   |   |   | 58 | % |

| * | % change is based on unrounded numbers |
|---|----------------------------------------|

----

----

|                                           |   | For the Years Ended March 31, |    |
|------------------------------------------------|--------|------------------------------------|---------|
|                                           |   | 2011                               |    |   | %Change * |   |   | 2010 |   |   | %Change * |   |   | 2009 |   |
|                                           |   |                               |    |   |   |   |   | (in millions) |   |   |   |   |   |   |   |
| Operating income (loss)                        |   | $                                  | 2.5     |   |   |   | 111 | % |   | $ | (23.5 | ) |   |   | (246 | )% |   | $ | (6.8 | ) |
| As a % of net sales                            |   |                               | 2       | % |   |   |   |   |   |   | (16 | )% |   |   |   |   |   |   | (5 | )% |
| Net interest (expense and bank charges) income |   |                               | (0.6    | ) |   |   | (153 | )% |   |   | (0.2 | ) |   |   | (202 | )% |   |   | 0.2 |   |
| As a % of net sales                            |   |                               | 0       | % |   |   |   |   |   |   | 0 | % |   |   |   |   |   |   | 0 | % |
| Foreign exchange loss                          |   |                               | — |   |   |   | N/A |   |   |   | — |   |   |   | N/A |   |   |   | — |   |
| As a % of net sales                            |   |                               | 0       | % |   |   |   |   |   |   | 0 | % |   |   |   |   |   |   | 0 | % |
| Income (loss) before income taxes              |   | $                                  | 1.9     |   |   |   | 108 | % |   | $ | (23.7 | ) |   |   | (261 | )% |   | $ | (6.6 | ) |
| As a % of net sales                            |   |                               | 2       | % |   |   |   |   |   |   | (16 | )% |   |   |   |   |   |   | (4 | )% |

| * | % change is based on unrounded numbers |
|---|----------------------------------------|

----

|                              |   | For the Years Ended March 31, |   |
|-----------------------------------|--------|------------------------------------|--------|
|                              |   | 2011                               |   |   | %Change * |   |   | 2010 |   |   | %Change * |   |   | 2009 |   |
|                              |   |                               |   |   |   |   |   | (in millions) |   |   |   |   |   |   |   |
| Income (loss) before income taxes |   | $                                  | 1.9    |   |   |   | 108 | % |   | $ | (23.7 | ) |   |   | (261 | )% |   | $ | (6.6 | ) |
| As a % of net sales               |   |                               | 2      | % |   |   |   |   |   |   | (16 | )% |   |   |   |   |   |   | (4 | )% |
| Income tax provision (benefit)    |   |                               | 0.7    |   |   |   | N/A |   |   |   | (8.9 | ) |   |   | N/A |   |   |   | (2.3 | ) |
| As a % of net sales               |   |                               | (1     | )% |   |   |   |   |   |   | 6 | % |   |   |   |   |   |   | 2 | % |
| Net income (loss)                 |   | $                                  | 1.2    |   |   |   | 108 | % |   | $ | (14.8 | ) |   |   | (245 | )% |   | $ | (4.3 | ) |
| As a % of net sales               |   |                               | 1      | % |   |   |   |   |   |   | (10 | )% |   |   |   |   |   |   | (3 | )% |

| * | % change is based on unrounded numbers |
|---|----------------------------------------|

----

----

|                                    |   | March 31, |   |
|-----------------------------------------|--------|----------------|--------|
|                                    |   | 2011           |   |   | 2010 |   |
|                                    |   |           |   |   |   |   |
| Trade receivables - Unrelated (1) (3)   |   |           | 83     |   |   |   | 26 |   |
| Trade receivables - Related parties (2) |   |           | 94     |   |   |   | 93 |   |
|                                    |   |           |   |   |   |   |   |   |
| Inventories(3)                          |   |           | 255    |   |   |   | 202 |   |

| (1) | Calculated on gross trade receivables based on the number of days sales in trade receivables excluding allowances for doubtful accounts, sales returns and advertising allowances of $3.9 million and $4.1 million in 2011 and 2010, respectively. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Based upon the seasonal nature of our sales to Perfumania, the calculation of number of days sales in trade receivables is based on the actual agings as of March 31, 2011 and 2010, respectively. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | The calculation excludes the transition of the remaining GUESS? brand inventory and the trade receivables of its new fragrance licensee as of March 31, 2011 and 2010. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                                 |   | For the Quarters Ended |   |   |              |   |
|------------------------------------------------------|--------|------------------------|--------|--------|-------------------|--------|
|                                                 |   | March 31,2009     |   |   | June 30,2009 |   |   | September 30, 2009 |   |   | December 31, 2009 |   |   | RollingTwelve MonthsEnded December 31, 2009 |   |
| (Unaudited)                                          |   |                   |   |   |              |   |   | (in thousands) |   |   |   |   |   |   |   |
| EBITDA:                                              |   |                   |   |   |              |   |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                    |   | $                      | 1,491  |   |              | $      | (2,467 | ) |   | $ | 2,969 |   |   | $ | (5,426 | ) |   | $ | (3,433 | ) |
| Interest                                             |   |                   | 16     |   |              |   | 56 |   |   |   | 97 |   |   |   | 131 |   |   |   | 300 |   |
| Taxes                                                |   |                   | 1,253  |   |              |   | (1,512 | ) |   |   | 1,820 |   |   |   | (3,326 | ) |   |   | (1,765 | ) |
| Depreciation and amortization                        |   |                   | 622    |   |              |   | 687 |   |   |   | 812 |   |   |   | 755 |   |   |   | 2,876 |   |
| Non-cash expenses (issuance of options and warrants) |   |                   | 70     |   |              |   | 82 |   |   |   | 82 |   |   |   | 192 |   |   |   | 426 |   |
| EBITDA                                               |   | $                      | 3,452  |   |              | $      | (3,154 | ) |   | $ | 5,780 |   |   | $ | (7,674 | ) |   | $ | (1,596 | ) |

|                   |   | December 31,2009 |    |
|------------------------|--------|-----------------------|---------|
| (Unaudited)            |   | (in thousands)        |    |
| Tangible Net Worth:    |   |                  |    |   |
| Total assets           |   | $                     | 127,061 |   |
| Less intangible assets |   |                  | 4,847   |   |
|                   |   |                  | 122,214 |   |
| Less total liabilities |   |                  | 17,591  |   |
| Tangible Net Worth     |   | $                     | 104,623 |   |

----

| Payment Date           |   | Payment Amount    |
|------------------------|--------|-------------------|
|                   |   |              |
| November 30, 2009 |   | $1.0 million |
| December 31, 2009 |   | $1.6 million |
| February 1, 2010  |   | $1.0 million |
| February 16, 2010 |   | Fully paid        |

----

|                                     |   | Payment Due by Period |    |
|------------------------------------------|--------|-----------------------|---------|
| Type of Obligation                       |   | Total                 |    |   | Less Than1 Year |   |   | 1-3 Years |   |   | 3-5 Years |   |   | More Than5 Years |   |
|                                     |   |                  |    |   |   |   |   | (In thousands) |   |   |   |   |   |   |   |
| Operating Lease Obligations(1)           |   | $                     | 9,227   |   |   | $ | 2,166 |   |   | $ | 3,922 |   |   | $ | 3,139 |   |   | $ | ― |   |
| Revolving Credit Facility(2)             |   |                  | 563     |   |   |   | 450 |   |   |   | 113 |   |   |   | ― |   |   |   | ― |   |
| Purchase Obligations (3)                 |   |                  | 26,184  |   |   |   | 26,184 |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Advertising Obligations (4)              |   |                  | 121,552 |   |   |   | 28,403 |   |   |   | 60,278 |   |   |   | 28,981 |   |   |   | 3,890 |   |
| Employment and Consulting Agreements (5) |   |                  | 803     |   |   |   | 803 |   |   |   | ― |   |   |   | — |   |   |   | — |   |
| Other Long-term Obligations (6)          |   |                  | 34,266  |   |   |   | 7,724 |   |   |   | 16,289 |   |   |   | 9,086 |   |   |   | 1,167 |   |
|                                     |   | $                     | 192,595 |   |   | $ | 65,730 |   |   | $ | 80,602 |   |   | $ | 41,206 |   |   | $ | 5,057 |   |

| (1) | Represents the future minimum annual rental commitments net of future minimum annual rental income of $186 in fiscal year 2012. See Notes 5 and 8A to the accompanying Consolidated Financial Statements for further discussion. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Represents GE Capital loan monitoring and unused commitment fees. |
|-----|-------------------------------------------------------------------|

| (3) | Represents purchase orders issued in the normal course of business for components, raw materials and promotional supplies. |
|-----|----------------------------------------------------------------------------------------------------------------------------|

| (4) | Consists of advertising commitments under our licensing agreements. These amounts were calculated based on the guaranteed minimum sales goals, as set forth in the agreements. Unlike guaranteed minimum royalties, advertising and promotional spending are based on a percentage of actual net sales, and are not contractually required if there are no sales. See Note 8B to the accompanying Consolidated Financial Statements for further discussion of these amounts. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Consists of amounts remaining under employment and consulting agreements. See Note 8D to the accompanying Consolidated Financial Statements for further discussion. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Consists of guaranteed minimum royalty requirements under our licensing agreements. |
|-----|-------------------------------------------------------------------------------------|

----

|   | · | The Paris Hilton line is our primary source of revenue following the expiration of our GUESS? license. |
|--------|--------|--------------------------------------------------------------------------------------------------------|

|   | · | If we are unable to acquire or license additional brands, secure additional distribution arrangements, or obtain the required financing for these agreements and arrangements, the growth of our business could be impaired. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The development of new products by us involves considerable costs and any new product may not generate sufficient consumer interest and sales to become a profitable brand or to cover the costs of its development and subsequent promotions. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | We depend on a relatively small number of customers for most of our revenue, therefore if any of our significant customers reduced their demand for our products or became financially unstable it may have a material adverse effect on our business. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The loss of or interruption in our arrangements with our manufacturers, suppliers and customers could have a material adverse affect on our sales, financial condition, and operating cash flow. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The fragrance and cosmetic industry is highly competitive, and if we are unable to compete effectively it could have a material adverse effect on our sales, financial condition, operating cash flow, and many other aspects of our business, prospects, results of operations and financial condition. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Our net sales, operating income and inventory levels fluctuate on a seasonal basis and a decrease in sales or profit margins during our peak seasons could have a disproportionate effect on our overall financial condition and results of operations. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The continued consolidation of the U.S. department store segment could have a material adverse effect on our sales, financial condition, and operating cash flow. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Our customers’ inability  or other failure to pay their accounts payable balance due to us could have a material adverse effect on our financial condition and results of operations. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Consumers have reduced discretionary purchases of our products as a result of the general economic downturn, and may further reduce discretionary purchases of our products in the event of further economic decline, terrorism threats or other external factors. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Our New Loan Agreement contains restrictive and financial covenants that could adversely affect our ability to borrow funds under the New Loan Agreement or adversely affect our business by limiting our flexibility. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | Failure to manage inventory effectively could negatively impact our operations. |
|--------|--------|---------------------------------------------------------------------------------|

|   | · | The value of our long-lived assets, including brand licenses and trademarks, may be adversely affected if we experience declines in operating results or experience significant negative industry or economic trends. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   | · | If we experience privacy breaches and liability for online content, it could negatively affect our reputation, credibility and business. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------|

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

|   | · | Our success depends, in part, on the quality and safety of our fragrance and related products. |
|--------|--------|------------------------------------------------------------------------------------------------|

|   | · | We are subject to risks related to our international operations. |
|--------|--------|------------------------------------------------------------------|

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

|   | · | If we lose the services of our executive officers and senior management, it could have a negative impact on our business. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------|

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

|   | · | We may unknowingly infringe on others’ intellectual property rights which could result in litigation. |
|--------|--------|-------------------------------------------------------------------------------------------------------------|

|   | · | We are involved in litigation from time to time in the ordinary course of business, which, if the outcome of such litigation is adverse to us, could materially adversely affect our business, results of operations, financial condition, and cash flows. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   | · | Our information systems and websites may be susceptible to outages and other risks. |
|--------|--------|-------------------------------------------------------------------------------------|

|   | · | Our business is subject to regulation in the United States and internationally. |
|--------|--------|---------------------------------------------------------------------------------|

|   | · | Our stock price has been volatile. |
|--------|--------|------------------------------------|

----

----

|   | · | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| Name                     |   | Age |   | Position                                                       |
|--------------------------|--------|-----|--------|----------------------------------------------------------------|
| Frederick E. Purches     |   | 73  |   | Chairman of the Board of Directors and Chief Executive Officer |
| Frank A. Buttacavoli     |   | 56  |   | Executive Vice President and Chief Operating Officer           |
| Raymond J. Balsys        |   | 54  |   | Senior Vice President and Chief Financial Officer              |
| Anthony D’Agostino |   | 53  |   | Independent Director                                           |
| Esther Egozi Choukroun   |   | 49  |   | Independent Director                                           |
| Glenn Gopman             |   | 55  |   | Independent Director                                           |
| Robert Mitzman           |   | 56  |   | Independent Director                                           |

----

----

----

----

----

|   | · | the program is designed to achieve our goals of promoting financial and operational success by attracting, motivating and facilitating the retention of key employees with outstanding talent and ability; and |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the program adequately rewards performance which is tied to creating stockholder value. |
|--------|--------|-----------------------------------------------------------------------------------------|

----

----

| Fiscal 2011 Performance Targets                  |   | Percentage (%)of Base Salary |   |
|--------------------------------------------------|--------|------------------------------|--------|
|                                             |   |                         |   |
|   Pre-tax profit target of $3,000,000: |   |                         | 5.0    |   |
|   Pre-tax profit target of $5,000,000: |   |                         | 10.0   |   |
|   Pre-tax profit target of $7,000,000: |   |                         | 15.0   |   |
|   Pre-tax profit target of $9,000,000: |   |                         | 25.0   |   |
| Various individual performance targets           |   |                         | 25.0   |   |
| Total incentive bonus available                  |   |                         | 50.0   |   |

|   | · | give our key employees and executive officers an opportunity to acquire shares of our Common Stock; |
|--------|--------|-----------------------------------------------------------------------------------------------------|

|   | · | provide an incentive for our key employees and executive officers to continue to promote our best interests and those of our stockholders; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | enhance our long-term performance; and |
|--------|--------|----------------------------------------|

|   | · | provide an incentive for our key employees and executive officers to join or to remain employees of our Company. |
|--------|--------|------------------------------------------------------------------------------------------------------------------|

|   | · | the executive’s position with us and total compensation package; |
|--------|--------|------------------------------------------------------------------------|

|   | · | the executive’s performance of his or her individual responsibilities; and |
|--------|--------|----------------------------------------------------------------------------------|

|   | · | the executive’s contribution to the success of our financial performance. |
|--------|--------|---------------------------------------------------------------------------------|

----

| Name and Principal Position         |   | Year   |   | Salary($) |    |   | OptionAwards($)(2) |   |    | Non-EquityIncentive PlanCompensation($) |   |   | All OtherCompensation($) |   |   | Total($) |    |
|-------------------------------------|--------|--------|--------|-----------|---------|--------|--------------------|--------|---------|-----------------------------------------|--------|--------|--------------------------|--------|--------|----------|---------|
| Frederick E. Purches                |   | 2011   |   | $         | 379,646 |   |               | $      | 59,611  |                                    |   |   | —                  |   |   | $        | 11,863  | (3) |   | $ | 451,120 |   |
| (Chairman and Chief                 |   | 2010   |   | $         | 27,273  |   |               |   | — |                                    |   |   | —                  |   |   | $        | 108,169 | (6) |   | $ | 135,442 |   |
| Executive Officer)(1)               |   | 2009   |   |      | — |   |               |   | — |                                    |   |   | —                  |   |   |     | — |   |   |   | — |   |
|                                |   |   |   |      |    |   |               |   |    |                                    |   |   |                     |   |   |     |    |   |   |   |   |   |
| Frank A. Buttacavoli                |   | 2011   |   | $         | 361,231 |   |               |   | — |                                    |   |   | —                  |   |   | $        | 17,161  | (3) |   | $ | 378,392 |   |
| (Executive Vice President and Chief |   | 2010   |   | $         | 400,000 |   |               | $      | 110,727 |                                    |   |   | —                  |   |   |     | — | (5) |   | $ | 510,727 |   |
| Operating Officer)                  |   | 2009   |   | $         | 400,000 |   |               |   | — |                                    |   |   | —                  |   |   | $        | 10,716  | (4) |   | $ | 410,716 |   |
|                                |   |   |   |      |    |   |               |   |    |                                    |   |   |                     |   |   |     |    |   |   |   |   |   |
| Raymond J. Balsys                   |   | 2011   |   | $         | 225,769 |   |               | $      | 24,409  |                                    |   |   | —                  |   |   | $        | 15,219  | (3) |   | $ | 265,397 |   |
| (Chief Financial                    |   | 2010   |   | $         | 241,346 |   |               |   | — |                                    |   |   | —                  |   |   |     | — | (5) |   | $ | 241,346 |   |
| Officer)                            |   | 2009   |   | $         | 225,000 |   |               |   | — |                                    |   |   | —                  |   |   | $        | 16,251  | (3) |   | $ | 241,251 |   |

| (1) | Mr. Purches was appointed Chairman and Chief Executive Officer of the Company on January 25, 2010. |
|-----|--------------------------------------------------------------------------------------------------------------|

| (2) | The amounts reflect the aggregate grant date fair value of awards computed in accordance with FASB ASC Topic 718.  For assumptions made for the purpose of computing this amount see Note 10 in the accompanying Consolidated Financial Statements. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | “All Other Compensation” consists of car allowance, and matching contributions made by us under our 401-K Plan. |
|-----|-----------------------------------------------------------------------------------------------------------------------------|

| (4) | “All Other Compensation” consists of matching contributions made by us under our 401-K Plan. |
|-----|----------------------------------------------------------------------------------------------------------|

| (5) | “All Other Compensation” did not exceed $10,000 for the Named Executive Officer, during this period. |
|-----|------------------------------------------------------------------------------------------------------------------|

| (6) | “All Other Compensation” consists of a car allowance of $2,400 and consulting fees of $105,769. |
|-----|-------------------------------------------------------------------------------------------------------------|

----

|                 |   |      |   |   | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) |    |   | All OtherOptionAwards:Numberof SecuritiesUnderlying |   |    |  GrantDate FairValue ofStock andOption |   |   |  OptionExerciseor BasePrice of |   |
|----------------------|--------|-----------|--------|--------|---------------------------------------------------------------------|---------|--------|-----------------------------------------------------|--------|---------|---------------------------------------------|--------|--------|-------------------------------------|--------|
|   Name          |   | GrantDate |   |   | Threshold($)                                                        |    |   | Target($)                                           |   |    | Maximum($)                                  |   |   | Options(#) (2)                      |   |   | Awards($) |   |   | Awards($) |   |
| Frederick E. Purches |   | —   |   |   |                                                                | — |   |                                                | $      | 150,000 |                                        |   | $      | 250,000                             |   |   |   | — |   |   |   | — |   |   |   | — |   |
|                 |   | 04/01/10  |   |   |                                                                | — |   |                                                |   | — |                                        |   |   | —                             |   |   |   | 50,000 |   |   | $ | 59,611 |   |   | $ | 2.25 |   |
|                 |   |      |   |   |                                                                |    |   |                                                |   |    |                                        |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Frank A. Buttacavoli |   | —   |   |   |                                                                | — |   |                                                | $      | 108,000 |                                        |   | $      | 180,000                             |   |   |   | — |   |   |   | — |   |   |   | — |   |
|                 |   | 06/05/09  |   |   |                                                                | — |   |                                                |   | — |                                        |   |   | —                             |   |   |   | 100,000 |   |   | $ | 110,727 |   |   | $ | 1.84 |   |
|                 |   |      |   |   |                                                                |    |   |                                                |   |    |                                        |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Raymond J. Balsys    |   | —   |   |   |                                                                | — |   |                                                | $      | 67,500  |                                        |   | $      | 112,500                             |   |   |   | — |   |   |   | — |   |   |   | — |   |
|                 |   | 04/01/10  |   |   |                                                                | — |   |                                                |   | — |                                        |   |   | —                             |   |   |   | 20,000 |   |   | $ | 24,409 |   |   | $ | 2.25 |   |

| (1) | Represents annual cash incentive awards pursuant to Named Executive Officer’s employment agreements or Company incentive program, the actual payouts of which are shown in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation table on page 57. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Option award granted under our 2007 Stock Incentive Plan. |
|-----|-----------------------------------------------------------|

|                 |   | Option Awards                                                 |
|----------------------|--------|---------------------------------------------------------------|
|   Name          |   | Number ofSecuritiesUnderlyingUnexercisedOptions(#)Exercisable |   |   | Number ofSecuritiesUnderlyingUnexercisedOptions(#)Unexercisable |   |   | EquityIncentivePlan Awards:Number ofSecuritiesUnderlyingUnexercisedUnearnedOptions(#) |   |   | OptionExercisePrice($) |   |   OptionExpirationDate |
| Frederick E. Purches |   |                                                          | ― |   |   |   | 25,000 | (2) |   |   | — |   |   | $ | 2.25 |   | 04/01/2015 |
|                 |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Frank A. Buttacavoli |   |                                                          | 66,666 |   |   |   | 33,334 | (1) |   |   | — |   |   | $ | 1.84 |   | 06/05/2014 |
|                 |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Raymond J. Balsys    |   |                                                          | 60,000 |   |   |   | — |   |   |   | — |   |   | $ | 4.60 |   | 10/11/2012 |
|                 |   |                                                          | 10,000 |   |   |   | 10,000 | (3) |   |   | — |   |   | $ | 2.25 |   | 04/01/2015 |

| (1)   | The options vest with respect to the 33,334 shares on March 31,  2012. |
|-----------------|----------------------------------------------------------------------------------|

| (2)   | The options vest with respect to the 25,000 shares on April 1, 2011. |
|-----------------|----------------------------------------------------------------------|

| (3)   | The options vest with respect to the 10,000 shares on July 31, 2011. |
|-----------------|----------------------------------------------------------------------|

----

|                 |   | Option Awards                          |    |
|----------------------|--------|----------------------------------------|---------|
| Name                 |   | Number ofShares Acquiredon Exercise(#) |    |   | Value RealizedOn Exercise($) |   |
| Frederick E. Purches |   |                                   | 40,000  |   |   | $ | 26,600 | (1) |
| Frank A. Buttacavoli |   |                                   | 200,000 |   |   | $ | 384,000 | (2) |
| Raymond J. Balsys    |   |                                   | — |   |   |   | — |   |
|                 |   |                                   |    |   |   |   |   |   |

| (1)   | Based upon the difference between the closing market price on the date of exercise on June 24, 2010, for 15,000 shares, which was $1.71 per share and the exercise price of $0.82 per share ($13.350) and on December 8, 2010, for 25,000 shares, which was $2.78 per share and the exercise price of $2.25 per share ($13.250).  It does not take into account any taxes that may be payable in connection with the transaction. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Based upon the difference between the closing market price on the date of exercise on March 31, 2011, which was $3.14 per share and the exercise price of $1.22  per share and does not take into account any taxes that may be payable in connection with the transaction. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| Named Executive Officer |   | Consulting Fees |    |
|-------------------------|--------|-----------------|---------|
| Frederick E. Purches    |   | $               | 294,000 | (1)(2) |

| (1) | This amount would be paid to Mr. Purches or his affiliate, Cosmix, Inc., to provide transition and consulting services as we reasonably request until November 8, 2011 for a fee of $42,000 per month. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | The May 18, 2011, amendement extended Mr. Purches' term of employment through March 31, 2012, with all other provisions remaing unchanged. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (i) | Termination Payment. Mr. Buttacavoli, or his estate and heirs following his death, shall be entitled (A) to continue to receive one-half annual base salary in effect at the time of such termination for a period of 6 months following the date of such termination, (B) to be paid when otherwise payable as if employment was not terminated, any bonus earned by Mr. Buttacavoli through the date of termination pursuant to the terms of the bonus plan prorated to the date of termination, and (C) to have any unvested portion of his option fully vest as of the date of such termination. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Termination Benefits. We will continue to provide Mr. Buttacavoli with the executive benefits and perquisites available to executive officers of the Company, including any group health, dental, disability, or other form of executive benefit plan or program of the Company existing from time to time on the same terms and conditions as is available to all other executives for a period of 12 months following the date of termination, except the executive benefits shall cease should Mr. Buttacavoli commences employment with another employer during this twelve month period. |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (iii) | Condition to Severance. In the event Mr. Buttacavoli breaches any of the covenants contained in his employment agreement, then (A) we will have no further obligation to make termination payments to Mr. Buttacavoli or to continue to provide the termination benefits described above, and (B) any unexercised option shall be forfeited and be cancelled. |
|--------|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   Named Executive Officer |   | Base Salary |    |   | Bonus  |   |    | Value ofAccelerated Options |   |
|--------------------------------|--------|-------------|---------|--------|--------|--------|---------|-----------------------------|--------|
| Frank A. Buttacavoli           |   | $           | 400,000 | (1)    |   | $      | 200,000 | (2)                         |   | $ | 43,334 | (3) |

| (1) | This amount would be paid when otherwise payable as if employment had not been terminated on March 31, 2011. |
|-----|-------------------------------------------------------------------------------------------------------------------|

| (2) | This amount assumes Mr. Buttacavoli earned an annual bonus of 50% of his annual base salary, the maximum annual bonus provided for in his employment agreement. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Based upon the difference between the closing market price on March 31, 2011, which was $3.14 per share and the exercise price of $1.84 per share, $43,334 was realized on the acceleration of options to purchase 33,334 shares. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (i) | Termination Payment. Mr. Balsys, or his estate and heirs following his death, was entitled (A) to continue to receive his annual base salary in effect at the time of such termination for a period of 12 months following the date of such termination, (B) to be paid when otherwise payable as if employment was not terminated, any bonus earned by Mr. Balsys through the date of termination pursuant to the terms of the bonus plan prorated to the date of termination, and (C) to have any unvested portion of his option fully vest as of the date of such termination. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Termination Benefits. We will continue to provide Mr. Balsys with the executive benefits and perquisites available to our executive officers, including any group health, dental, disability, or other form of executive benefit plan or program of the Company existing from time to time on the same terms and conditions as is available to all other executives for a period of 12 months following the date of termination. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | Condition to Severance. In the event Mr. Balsys breaches any of the covenants contained in his employment agreement, then (A) we will have no further obligation to make termination payments to Mr. Balsys or to continue to provide the termination benefits described above, and (B) any unexercised option shall be forfeited and be cancelled. |
|--------|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   Named Executive Officer |   | Base Salary |    |   | Bonus  |   |    | Value ofAccelerated Options |   |
|--------------------------------|--------|-------------|---------|--------|--------|--------|---------|-----------------------------|--------|
| Raymond J. Balsys              |   | $           | 250,000 | (1)    |   | $      | 125,000 | (2)                         |   | $ | 8,900 | (3) |

| (1) | This amount would be paid when otherwise payable as if employment had not been terminated on March 31, 2011. |
|-----|-------------------------------------------------------------------------------------------------------------------|

| (2) | This amount assumes Mr. Balsys earned an annual bonus of 50% of his annual base salary, the maximum annual bonus provided for in his employment agreement. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Based upon the difference between the closing market price on March 31, 2011, which was $3.14 per share and the exercise price of $2.25 per share, $8,900 was realized on the acceleration of options to purchase 10,000 shares. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Named Executive Officer |   | Base Salary |    |
|-------------------------|--------|-------------|---------|
| Raymond J. Balsys       |   | $           | 112,500 | (1) |

| (1) | Represents Mr. Balsys’ salary for a period of 180 days. |
|-----|--------------------------------------------------------------------|

| Name                     |   | Fees Earned orPaid in Cash($) |   |   | Option Awards($)(1)(2)(3) |   |   | Total($) |   |
|--------------------------|--------|-------------------------------|--------|--------|---------------------------|--------|--------|----------|--------|
| Anthony D’Agostino |   | $                             | 69,000 |   |                      | $      | 19,759 |     |   | $ | 88,759 |   |
| Esther Egozi Choukroun   |   | $                             | 59,000 |   |                      | $      | 19,759 |     |   | $ | 78,759 |   |
| Glenn Gopman             |   | $                             | 62,000 |   |                      | $      | 19,759 |     |   | $ | 81,759 |   |
| Robert Mitzman           |   | $                             | 59,000 |   |                      | $      | 19,759 |     |   | $ | 78,759 |   |

| ——————— |
|---------------------------------------------------|

| (1) | All option awards were granted on October 12, 2010, at an exercise price of $2.23, the closing price of the Company’s common stock on that date. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | As of March 31, 2011, each of our current non-employee directors owned the following number of options: Anthony D’Agostino – 60,000; Esther Egozi Choukroun – 45,000; Glenn Gopman – 80,000; and Robert Mitzman – 60,000. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | The amounts reflect the aggregate grant date fair value of awards computed in accordance with FASB ASC Topic 718.  Assumptions made for the purpose of computing this amount are discussed in our 2011 Form 10-K in Note 10 to the Consolidated Financial Statements. Each director was awarded options to purchase 15,000 shares during fiscal 2011. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                                     |   | Common StockBeneficially Owned (1) |      |   | PercentageOwnership (1) |   |
|------------------------------------------------------------------------------------------|--------|----------------------------------------------|-----------|--------|------------------------------|--------|
| Directors and Named Executive Officers:                                                  |   |                                         |      |   |                         |   |
| Frederick E. Purches (2)                                                                 |   |                                         | 167,000   |   |                         |   | * |   |
| Frank A. Buttacavoli (3)                                                                 |   |                                         | 936,666   |   |                         |   | 4.5 | % |
| Raymond J. Balsys (4)                                                                    |   |                                         | 82,500    |   |                         |   | * |   |
| Anthony D’Agostino (5)                                                             |   |                                         | 65,000    |   |                         |   | * |   |
| Esther Egozi Choukroun (6)                                                               |   |                                         | 60,000    |   |                         |   | * |   |
| Glenn Gopman (7)                                                                         |   |                                         | 150,000   |   |                         |   | * |   |
| Robert Mitzman (8)                                                                       |   |                                         | 60,600    |   |                         |   | * |   |
| All Current Directors and Executive Officers as a Group (7 Persons)(9)                   |   |                                         | 1,521,766 |   |                         |   | 7.2 | % |
|                                                                                     |   |                                         |      |   |                         |   |   |   |
| Other Principal Stockholders, based on the most recent filings available to the Company: |   |
| Garcia Group (10)                                                                        |   |                                         | 3,970,527 |   |                         |   | 18.3 | % |
| Glenn H. Nussdorf (11)                                                                   |   |                                         | 2,050,013 |   |                         |   | 9.9 | % |
| Dimensional Fund Advisors, Inc. (12)                                                     |   |                                         | 1,580,603 |   |                         |   | 7.6 | % |

| * | Under one percent (1%). |
|---|------------------------------|

| (1) | Calculated pursuant to Rule 13d-3 of the Exchange Act. Under Rule 13d-3(d), shares not outstanding which are subject to options, warrants, rights or conversion privileges exercisable within 60 days are deemed outstanding for the purpose of calculating the number and percentage owned by such person, but not deemed outstanding for the purpose of calculating the percentage owned by each other person listed. As of May 25, 2011, we had 20,758,812 shares of Common Stock outstanding. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Includes (a) immediately exercisable options to purchase 25,000 shares of Common Stock under his employment agreement, dated April 1, 2010, and  (b) immediately exercisable options to purchase 50,000 shares of Common Stock under the amendment to his executive employment agreement, dated May 18, 2011. The address of Mr. Purches is 5900 N. Andrews Avenue, Suite 500, Fort Lauderdale, Florida 33309. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Includes immediately exercisable options to purchase 66,666 shares of Common Stock under his employment agreement, dated as of June 5, 2009.  The address of Mr. Buttacavoli is 5900 N. Andrews Avenue, Suite 500, Fort Lauderdale, Florida 33309. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Includes (a) immediately exercisable options to purchase 60,000 shares of Common Stock under his employment agreement, dated July 26, 2007, and (b) immediately exercisable options to purchase 10,000 shares of Common Stock under his employment agreement, dated April 1, 2010. The address of Mr. Balsys is 5900 N. Andrews Avenue, Suite 500, Fort Lauderdale, Florida 33309. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Includes immediately exercisable options to purchase 60,000 shares of Common Stock. The address of Mr. D’Agostino is 5900 N. Andrews Avenue, Suite 500, Fort Lauderdale, Florida 33309. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Includes immediately exercisable options to purchase 45,000 shares of Common Stock. The address of Ms. Egozi Choukroun is 5900 N. Andrews Avenue, Suite 500, Fort Lauderdale, Florida 33309. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (7) | Includes immediately exercisable options and warrants to purchase 60,000 and 20,000 shares of Common Stock, respectively. The address of Mr. Gopman is 5900 N. Andrews Avenue, Suite 500, Fort Lauderdale, Florida 33309. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (8) | Includes (a) immediately exercisable options to purchase 30,000 shares of Common Stock, and (b) 600 shares of Common Stock owned by Mr. Mitzman’s son. Mr. Mitzman disclaims beneficial ownership of the shares owned by his son, except to the extent of any pecuniary interest in such shares.  The address of Mr. Mitzman is 5900 N. Andrews Avenue, Suite 500, Fort Lauderdale, Florida 33309. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  (9) | Includes our current executive officers and directors.  Includes immediately exercisable options and warrants to purchase 356,666 and 20,000 shares of Common Stock, respectively. |
|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (10) | Based on Schedule 13D filed with the SEC on March 4, 2011, by that certain group comprised of JM-CO Capital Fund, LLC, Irrevocable Trust for Victor Garcia, Jacqueline Marie Garcia, Jacavi Investments, LLC, Carolina Marie Garcia 2006 Family Trust, Jacqueline Marie Garcia 2006 Family Trust, Carolina Marie Garcia and Aqua Capital Fund, LLC (the "Garcia Group").  Includes (i) 2,718,728 shares owned by JM-CO Capital Fund, LLC, of which Jacqueline Marie Garcia acts as Manager, (ii) 86,799 shares owned by Jacavi Investments, LLC, of which Jacqueline Marie Garcia is the Manager, (iii) 190,000 shares owned by Aqua Capital Fund, LLC, of which Jacavi Investments, LLC is the Manager, (iv) immediately exercisable warrants to purchase 325,000 shares of Common Stock held by the Carolina Marie Garcia 2006 Family Trust, (v) immediately exercisable warrants to purchase 325,000 shares of Common Stock held by the Jacqueline Marie Garcia 2006 Family Trust, and (vi) immediately exercisable warrants to purchase 325,000 shares of Common Stock held by the Irrevocable Trust for Victor Garcia.  The Garcia Group expressly disclaims (i) the existence of any group and (ii) beneficial ownership with respect to any shares other than the shares owned of record by such reporting person. The address of this reporting person is 200 S. Biscayne Blvd., Suite 1000, Miami, FL 33131. |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (11) | Based on a Form 4 filed with the SEC on December 12, 2007. The address of this reporting person is 2060 Ninth Avenue, Ronkonkoma, NY 11719. |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| (12) | Based on a Schedule 13G/A filed with the SEC on February 8, 2010. The address of this reporting person is Palisades West, Building One, 6300 Bee Cave Road, Austin, Texas  78746. |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                | Year Ended March 31, |   |
|---------------------|---------------------------|--------|
| (in millions)       | 2011                      |   | 2009 |   | 2008 |   |
|                |                      |   |   |   |   |   |   |   |   |
| Sales to Perfumania | $                    |   | 47.5 |   | $  |   | 37.6 |   | $  |   | 41.5 |   |

----

|                              | Year Ended March 31, |   |
|-----------------------------------|---------------------------|--------|
| (in millions)                     | 2011                      |   | 2010 |   | 2009 |   |
|                              |                      |   |   |   |   |   |   |   |   |
|   Sales to Quality King | $                    |   | ― |   | $  |   | 9.1 |   | $  |   | — |   |

----

|            | Year Ended March 31, |   |
|-----------------|---------------------------|--------|
| (in millions)   | 2011                      |   | 2010 |   | 2009 |   |
|            |                      |   |   |   |   |   |   |   |   |
| Sales to Jacavi | $                    |   | 3.7 |   | $  |   | 3.0 |   | $  |   | — |   |

|               |   | Fiscal Year Ended March 31, |    |
|--------------------|--------|----------------------------------|---------|
|               |   | 2011                             |    |   | 2010 |   |
|               |   |                             |    |   |   |   |
| Audit Fees (a)     |   | $                                | 357,656 |   |   | $ | 574,755 |   |
| Audit-Related Fees |   |                             | — |   |   |   | — |   |
| Tax Fees (b)       |   |                             | 109,450 |   |   |   | 103,700 |   |
| All Other Fees (c) |   |                             | 26,618  |   |   |   | 20,222 |   |

| (a)   | “Audit Fees” consist of fees billed for professional services rendered in connection with the audit of our consolidated annual financial statements, and the review of our interim consolidated financial statements included in quarterly reports. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b)   | “Tax Fees” consist of fees billed for professional services rendered in connection with income tax compliance, tax research, and income tax preparation services. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (c)   | “All Other Fees” consist of fees billed for professional services rendered in connection with Marcum LLP’s audit of our 401(k) Plan. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (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) | Exhibits – See Exhibit Index included elsewhere in this document. |
|-----------|------------------------------------------------------------------------------|

----

|                     | PARLUX FRAGRANCES, INC. |                                 |
|--------------------------|-------------------------|--------------------------------------|
|                     |                    |                                 |   |
| Dated: May 26, 2011 | By:                     | /s/ Frederick E. Purches             |   |
|                     |                    | Frederick E. Purches                 |   |
|                     |                    | Chairman and Chief Executive Officer |   |
|                     |                    | (Principal Executive Officer)        |   |

| Signature                    |   | Title                                                  |   | Date         |
|------------------------------|--------|--------------------------------------------------------|--------|--------------|
|                         |   |                                                   |   |         |
| /s/ Frederick E. Purches     |   | Chairman and Chief Executive Officer, Director         |   | May 26, 2011 |
| Frederick E. Purches         |   | (Principal Executive Officer)                          |   |         |
|                         |   |                                                   |   |         |
| /s/ Raymond J. Balsys        |   | Vice President and Chief Financial Officer             |   | May 26, 2011 |
| Raymond J. Balsys            |   | (Principal Financial and Principal Accounting Officer) |   |         |
|                         |   |                                                   |   |         |
| /s/ Glenn Gopman             |   | Director                                               |   | May 26, 2011 |
| Glenn Gopman                 |   |                                                   |   |         |
|                         |   |                                                   |   |         |
| /s/ Esther Egozi Choukroun   |   | Director                                               |   | May 26, 2011 |
| Esther Egozi Choukroun       |   |                                                   |   |         |
|                         |   |                                                   |   |         |
| /s/ Anthony D’Agostino |   | Director                                               |   | May 26, 2011 |
| Anthony D’Agostino     |   |                                                   |   |         |
|                         |   |                                                   |   |         |
| /s/ Robert Mitzman           |   | Director                                               |   | May 26, 2011 |
| Robert Mitzman               |   |                                                   |   |         |

----

| 2.1 | Asset Purchase Agreement, dated June 15, 1994, by and between Fred Hayman Beverly Hills Inc. and the Company (incorporated by reference to Exhibit 1 to the Company’s Report on Form 8-K, filed with the SEC on June 15, 1994 and as amended on June 29, 1994 and August 26, 1994). |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.1 | Certificate of Incorporation of the Company, as amended (incorporated by reference to Exhibits 3.1 through 3.5 to the Registration Statement on Form S-3 (File No. 33-89806), declared effective on March 13, 1995, Exhibit 4.6 of Registration Statement on Form S-3, declared effective on October 2, 1996 (File No. 333-11953) and Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2009, filed on February 4, 2010. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.2 | Amended and Restated Bylaws of the Company, as amended, (incorporated by reference to Exhibit 3 (b) to the Company’s Report on Form 8-K, filed on February 6, 2007) and Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2009, filed on February 4, 2010. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.1 | Form of Common Stock Certificate, filed as Exhibit 4.2 to the Company’s Registration Statement on Form S-3, filed on November 5, 2010. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------|

| 4.2 | Form of Warrant (included as Exhibit D to the Agreement, dated April 3, 2009, by and between Parlux Fragrances, Inc. and Artistic Brands Development, LLC (formerly known as Iconic Fragrances, LLC), filed as Exhibit 4.1 to the Company's Report on Form 10-Q for the quarter ended June 30, 2009). |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.1+ | Stock Option Plan (incorporated by reference to Annex A to the Company’s Preliminary Proxy Statement, filed on August 16, 1996). |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.2+ | Employee Stock Option Plan 2000 (incorporated by reference to Annex “A” to the Company’s Definitive Proxy Statement, filed on August 25, 2000). |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.3+ | Settlement Agreement, dated as of February 6, 2007 by and between the Company, Glenn H. Nussdorf and Ilia Lekach (incorporated by reference to Exhibit 10.1 to the Company’s Report on Form 8-K, filed on February 6, 2007). |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.4+ | Executive Employment Agreement, dated July 26, 2007, between Parlux Fragrances Inc. and Neil J. Katz (incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K, filed on July 30, 2007). |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.6+ | The Parlux Fragrances, Inc. 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-8 (File No. 333-148383) filed on December 28, 2007). |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| 10.65 | License Agreement, dated as of November 1, 2003, between the Company and GUESS?, Inc. and GUESS? IP Holder L.P. (“Portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission”) (incorporated by reference to Exhibit 10.66 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003, filed on November 14, 2003). |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.66 | License Agreement, dated as of June 1, 2004, between the Company and Paris Hilton Entertainment, Inc. (“Portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission) (incorporated by reference to Exhibit 10.67 to the Company’s Annual Report on Form 10-K for the year ended March 31, 2004, filed on June 28, 2004). |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.67 | License Agreement, dated as of December 8, 2004, between the Company and Andy Roddick. (“Portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission”) (incorporated by reference to Exhibit 10.69 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2004, filed on February 14, 2005). |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 10.68 | Asset Purchase Agreement, dated January 6, 2005, between the Company and Victory International (USA) LLC (incorporated by reference to Exhibit 10.70 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2004, filed on February 14, 2005). |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.69 | License Agreement, dated January 26, 2005, between the Company and Paris Hilton Entertainment, Inc. (“Portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission”) (incorporated by reference to Exhibit 10.71 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2004, filed on February 14, 2005). |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.70 | License Agreement, dated April 6, 2005, between the Company and Gund, Inc. (incorporated by reference to Exhibit 10.72 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2005, filed on July 8, 2005). |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.71 | License Agreement, dated May 11, 2005, between the Company and Paris Hilton Entertainment, Inc. (“Portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission”) (incorporated by reference to Exhibit 10.73 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2005, filed on July 8, 2005). |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.72 | License Agreement, dated May 13, 2005, between the Company and Paris Hilton Entertainment, Inc. (“Portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission”) (incorporated by reference to Exhibit 10.74 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2005, filed on July 8, 2005). |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.73+ | Employment Agreement, with Frank A. Buttacavoli, dated as of June 1, 2005 (incorporated by reference to Exhibit 10.76 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2005, filed on July 8, 2005). |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.74 | License Agreement, dated April 5, 2006, between the Company and Paris Hilton Entertainment, Inc. (“Portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission”) (incorporated by reference to Exhibit 10.81 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2006, filed on July 24, 2006). |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.75 | Facility Lease Agreement, dated April 7, 2006, between the Company and GreDel Properties, L.L.C. (incorporated by reference to Exhibit 10.82 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2006, filed on July 24, 2006). |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.76 | Facility Lease Agreement, dated May 2, 2006, between the Company and Port 95-2, Ltd. (incorporated by reference to Exhibit 10.83 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2006, filed on July 24, 2006). |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.77 | License Agreement, dated June 21, 2007, between the Company and VCJS, LLC (“Portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission”) (incorporated by reference to Exhibit 10.85 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, filed on August 14, 2007). |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.78 | Office Sublease Agreement, dated as of November 30, 2007, between the Company and Tarragon South Development Corp. (incorporated by reference to Exhibit 10.86 to the Company’s Report on Form 10-Q, filed on February 7, 2008). |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.79 | Loan and Security Agreement, dated as of July 22, 2008, between Parlux Fragrances, Inc. and Parlux Ltd., and Regions Bank (incorporated by reference to Exhibit 4.1 to the Company’s Report on Form 8-K filed with the SEC on July 25, 2008). |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.80 | First Amendment and Ratification of Loan and Security Agreement and Other Loan Documents dated March 9, 2009, to the Loan and Security Agreement, as of July 22, 2008, between Parlux Fragrances, Inc. and Parlux Ltd., and Regions Bank (incorporated by reference to Exhibit 4.1 to the Company’s Report on Form 8-K filed with the SEC on March 13, 2009). |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 10.81 | Acknowledgment of Assignment Agreement, dated as of January 31, 2009, between Parlux Fragrances, Inc. and Tarragon South Development Corp., Tarragon Corporation and Tricony CFC, L.L.C. |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.82 | Forbearance Agreement, effective as of August 31, 2009, by and between Parlux Fragrances, Inc. and Parlux Ltd. and Regions Bank (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed on September 2, 2009). |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.83 | Second Amendment to Loan Agreement and Amendment to Forbearance Agreement, dated as of October 29, 2009, by and between Parlux Fragrances, Inc. and Parlux Ltd. and Regions Bank (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed on October 30, 2009). |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.84 | Agreement, dated April 3, 2009, by and between Parlux Fragrances, Inc. and Artistic Brands Development, LLC (formerly known as Iconic Fragrances, LLC) (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2009). *** |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.85 | Sublicense Agreement, dated April 7, 2009, by and between Parlux Fragrances, Inc. and Artistic Brands Development, LLC (formerly known as Iconic Fragrances, LLC) regarding a license for Rihanna. License Agreement, dated April 3, 2009, by and between Combermere Entertainment Properties, LLC and Artistic Brands Development, LLC (formerly known as Iconic Fragrances, LLC) (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2009). *** |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.86 | First Amended and Restated Sublicense Agreement by and between Parlux Fragrances, Inc. and Artistic Brands Development, LLC regarding a license for Kanye West (effective as of March 2, 2011). First Amended and Restated License Agreement, dated April 3, 2009, by and between Mascotte Holdings, Inc. and Artistic Brands Development, LLC. (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on March 17, 2011). (Portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.) |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.87 | Letter Agreement, dated April 3, 2009, by and among Parlux Fragrances, Inc., Artistic Brands Development, LLC (formerly known as Iconic Fragrances, LLC) and Rene Garcia (incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2009). |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.88+ | Executive Employment Agreement, dated June 5, 2009, by and between Parlux Fragrances, Inc. and Frank A. Buttacavoli (incorporated by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2009). |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.89+ | Amendment to Executive Employment Agreement, dated as of March 31, 2010, between Parlux Fragrances, Inc. and Frank A. Buttacavoli (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed on April 5, 2010). |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.90+ | Executive Employment Agreement, dated as of November 8, 2010, between Parlux Fragrances, Inc. and Frederick E. Purches (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed on November 12, 2010). |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.91+ | Executive Employment Agreement, dated as of April 1, 2010, between Parlux Fragrances, Inc. and Raymond J. Balsys (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K, filed on April 5, 2010). |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.92 | Consulting Agreement, with Cambridge Development Corp., dated as of April 1, 2010 (incorporated by reference to Exhibit 10.92 to the Company’s Annual Report on Form 10-K for the year ended March 31, 2010, filed on June 29, 2010). |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 10.93 | Credit Agreement, dated as of June 25, 2010, among Parlux Ltd., as borrower, Parlux Fragrances, Inc., as guarantor, the lenders party thereto, and General Electric Capital Corporation, as administrative agent and collateral agent (incorporated by reference to Exhibit 10.93 to the Company’s Annual Report on Form 10-K for the year ended March 31, 2010, filed on June 29, 2010). (Portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.) |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.94 | Guaranty and Security Agreement, dated as of June 25, 2010, among Parlux Ltd., and each grantor from time to time party thereto and General Electric Capital Corporation, as administrative agent and collateral agent (incorporated by reference to Exhibit 10.94 to the Company’s Annual Report on Form 10-K for the year ended March 31, 2010, filed on June 29, 2010). |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.95 | First Amendment to Lease Agreement, dated November 24, 2010, between Parlux Fragrances, Inc. and GreDel Properties, L.L.C. (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the period ended December 31, 2010, filed on February 3, 2011) |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.96 | First Amendment to Credit Agreement, dated April 15, 2011, among Parlux Ltd.., Parlux Fragrances, Inc. and General Electric Capital Corporation.* |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.97+ | Amendment to Executive Employment Agreement, dated May 18, 2011, by and between Parlux Fragrances, Inc. and Frederick E. Purches (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 20, 2011. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 21.1 | Subsidiaries of the Company.* |
|------|-------------------------------|

| 23.1 | Consent of Marcum LLP, an independent registered public accounting firm.* |
|------|---------------------------------------------------------------------------|

| 31.1 | Certification of Chief Executive Officer Pursuant to § 302 of the Sarbanes-Oxley Act of 2002.* |
|------|-----------------------------------------------------------------------------------------------------|

| 31.2 | Certification of Chief Financial Officer Pursuant to § 302 of the Sarbanes-Oxley Act of 2002.* |
|------|-----------------------------------------------------------------------------------------------------|

| 32.1 | Certification of Chief Executive Officer Pursuant to § 906 of the Sarbanes-Oxley Act of 2002, as amended.** |
|------|------------------------------------------------------------------------------------------------------------------|

| 32.2 | Certification of Chief Financial Officer Pursuant to § 906 of the Sarbanes-Oxley Act of 2002, as amended.** |
|------|------------------------------------------------------------------------------------------------------------------|

| * | Filed herewith |
|---|----------------|

| ** | Furnished herewith |
|----|--------------------|

| *** | Confidential treatment has been granted with respect to certain portions of this exhibit. Omitted portions have been submitted separately with the SEC. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------|

| +  | Management contracts or compensatory plans, contracts or arrangements. |
|---------|------------------------------------------------------------------------|

----

|                                                             |   | Page   |   |
|------------------------------------------------------------------|--------|--------|--------|
| FINANCIAL STATEMENTS:                                            |   |   |   |
|                                                             |   |   |   |
| Report of Independent Registered Public Accounting Firm          |   |   | F-2    |   |
|                                                             |   |   |   |   |
| Consolidated Balance Sheets                                      |   |   | F-3    |   |
|                                                             |   |   |   |   |
| Consolidated Statements of Operations                            |   |   | F-4    |   |
|                                                             |   |   |   |   |
| Consolidated Statements of Changes in Stockholders’ Equity |   |   | F-5    |   |
|                                                             |   |   |   |   |
| Consolidated Statements of Cash Flows                            |   |   | F-6    |   |
|                                                             |   |   |   |   |
| Notes to Consolidated Financial Statements                       |   |   | F-7    |   |
|                                                             |   |   |   |   |
| FINANCIAL STATEMENT SCHEDULE:                                    |   |   |   |   |
|                                                             |   |   |   |   |
| Schedule II - Valuation and Qualifying Accounts                  |   |   | F-42   |   |

----

----

|                                                                                                                                                                                             |   | March 31, 2011 |    |   | March 31, 2010 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|---------|--------|---------------------|--------|
| ASSETS                                                                                                                                                                                           |   |                |    |   |                |   |
| CURRENT ASSETS:                                                                                                                                                                                  |   |                |    |   |                |   |
| Cash and cash equivalents                                                                                                                                                                        |   | $                   | 20,511  |   |                | $      | 17,579 |   |
| Trade receivables, net of allowance for doubtful accounts, sales returns and advertising allowances of $3,908 and $4,144, respectively                                                           |   |                | 12,050  |   |                |   | 3,372 |   |
| Trade receivables from related parties                                                                                                                                                           |   |                | 12,708  |   |                |   | 10,873 |   |
| Income taxes receivable                                                                                                                                                                          |   |                | 122     |   |                |   | 7,161 |   |
| Inventories                                                                                                                                                                                      |   |                | 37,373  |   |                |   | 41,846 |   |
| Prepaid promotional expenses, net                                                                                                                                                                |   |                | 7,519   |   |                |   | 7,867 |   |
| Prepaid expenses and other current assets, net                                                                                                                                                   |   |                | 8,251   |   |                |   | 9,437 |   |
| Deferred tax assets                                                                                                                                                                              |   |                | 5,460   |   |                |   | 5,238 |   |
| TOTAL CURRENT ASSETS                                                                                                                                                                             |   |                | 103,994 |   |                |   | 103,373 |   |
|                                                                                                                                                                                             |   |                |    |   |                |   |   |   |
| Equipment and leasehold improvements, net                                                                                                                                                        |   |                | 1,844   |   |                |   | 2,679 |   |
| Trademarks and licenses, net                                                                                                                                                                     |   |                | 4,195   |   |                |   | 4,654 |   |
| Deferred tax assets, net                                                                                                                                                                         |   |                | 687     |   |                |   | 1,667 |   |
| Other                                                                                                                                                                                            |   |                | 1,986   |   |                |   | 1,959 |   |
| TOTAL ASSETS                                                                                                                                                                                     |   | $                   | 112,706 |   |                | $      | 114,332 |   |
| LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                                                             |   |                |    |   |                |   |   |   |
| CURRENT LIABILITIES:                                                                                                                                                                             |   |                |    |   |                |   |   |   |
| Accounts payable                                                                                                                                                                                 |   | $                   | 8,637   |   |                | $      | 10,019 |   |
| Accrued expenses                                                                                                                                                                                 |   |                | 2,338   |   |                |   | 4,513 |   |
| TOTAL CURRENT LIABILITIES                                                                                                                                                                        |   |                | 10,975  |   |                |   | 14,532 |   |
| TOTAL LIABILITIES                                                                                                                                                                                |   |                | 10,975  |   |                |   | 14,532 |   |
| COMMITMENTS AND CONTINGENCIES                                                                                                                                                                    |   |                |    |   |                |   |   |   |
| STOCKHOLDERS' EQUITY :                                                                                                                                                                           |   |                |    |   |                |   |   |   |
| Preferred stock, $0.01 par value, 5,000,000 shares authorized, no shares issued and outstanding at March 31, 2011 and 2010                                                                  |   |                | — |   |                |   | — |   |
| Common stock, $0.01 par value, 40,000,000 shares authorized at March 31, 2011 and 2010, respectively, 30,397,789 and 30,143,789 shares issued at March 31, 2011 and 2010, respectively |   |                | 304     |   |                |   | 301 |   |
| Additional paid-in capital                                                                                                                                                                       |   |                | 106,629 |   |                |   | 105,943 |   |
| Retained earnings                                                                                                                                                                                |   |                | 30,071  |   |                |   | 28,829 |   |
|                                                                                                                                                                                             |   |                | 137,004 |   |                |   | 135,073 |   |
| Less 9,668,977 shares of common stock in treasury, at cost, at March 31, 2011 and 2010                                                                                                      |   |                | (35,273 | )      |                |   | (35,273 | ) |
| TOTAL STOCKHOLDERS' EQUITY                                                                                                                                                                       |   |                | 101,731 |   |                |   | 99,800 |   |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                                                       |   | $                   | 112,706 |   |                | $      | 114,332 |   |

----

|                                                                                                                        |   | For the Years Ended March 31, |       |
|-----------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|------------|
|                                                                                                                        |   | 2011                               |       |   | 2010 |   |   | 2009 |   |
| Net sales:                                                                                                                  |   |                               |       |   |   |   |   |   |   |
| Unrelated customers, including licensing fees of $87 in 2011, and $75 in 2010 and 2009                                      |   | $                                  | 70,421     |   |   | $ | 93,861 |   |   | $ | 109,685 |   |
| Related parties                                                                                                             |   |                               | 51,162     |   |   |   | 49,615 |   |   |   | 41,470 |   |
| Sales – expired license                                                                                               |   |                               | 1,423      |   |   |   | 4,626 |   |   |   | — |   |
|                                                                                                                        |   |                               | 123,006    |   |   |   | 148,102 |   |   |   | 151,155 |   |
| Cost of goods sold:                                                                                                         |   |                               |       |   |   |   |   |   |   |   |   |   |
| Unrelated customers                                                                                                         |   |                               | 29,419     |   |   |   | 44,942 |   |   |   | 51,294 |   |
| Related parties                                                                                                             |   |                               | 24,024     |   |   |   | 29,147 |   |   |   | 19,261 |   |
| Cost of sales – expired license                                                                                       |   |                               | 1,422      |   |   |   | 11,871 |   |   |   | — |   |
|                                                                                                                        |   |                               | 54,865     |   |   |   | 85,960 |   |   |   | 70,555 |   |
|                                                                                                                        |   |                               |       |   |   |   |   |   |   |   |   |   |
| Gross margin                                                                                                                |   |                               | 68,141     |   |   |   | 62,142 |   |   |   | 80,600 |   |
|                                                                                                                        |   |                               |       |   |   |   |   |   |   |   |   |   |
| Operating expenses:                                                                                                         |   |                               |       |   |   |   |   |   |   |   |   |   |
| Advertising and promotional                                                                                                 |   |                               | 32,652     |   |   |   | 44,927 |   |   |   | 45,442 |   |
| Selling and distribution                                                                                                    |   |                               | 12,273     |   |   |   | 14,157 |   |   |   | 15,891 |   |
| Royalties                                                                                                                   |   |                               | 10,305     |   |   |   | 13,357 |   |   |   | 13,009 |   |
| General and administrative, including share-based compensation expense of $305 in 2011, $587 in 2010, and $348 in 2009 |   |                               | 8,129      |   |   |   | 10,337 |   |   |   | 10,555 |   |
| Depreciation and amortization                                                                                               |   |                               | 2,309      |   |   |   | 2,873 |   |   |   | 2,506 |   |
| Total operating expenses                                                                                                    |   |                               | 65,668     |   |   |   | 85,651 |   |   |   | 87,403 |   |
| Operating income (loss)                                                                                                     |   |                               | 2,473      |   |   |   | (23,509 | ) |   |   | (6,803 | ) |
|                                                                                                                        |   |                               |       |   |   |   |   |   |   |   |   |   |
| Interest income                                                                                                             |   |                               | 18         |   |   |   | 77 |   |   |   | 314 |   |
| Interest expense and bank charges                                                                                           |   |                               | (615       | ) |   |   | (313 | ) |   |   | (81 | ) |
| Foreign exchange loss                                                                                                       |   |                               | (1         | ) |   |   | (1 | ) |   |   | (1 | ) |
| Income (loss) before income taxes                                                                                           |   |                               | 1,875      |   |   |   | (23,746 | ) |   |   | (6,571 | ) |
| Income tax provision (benefit)                                                                                              |   |                               | 633        |   |   |   | (8,987 | ) |   |   | (2,287 | ) |
| Net income (loss)                                                                                                           |   | $                                  | 1,242      |   |   | $ | (14,759 | ) |   | $ | (4,284 | ) |
| Income (loss) per common share:                                                                                             |   |                               |       |   |   |   |   |   |   |   |   |   |
|      Basic                                                                                         |   | $                                  | 0.06       |   |   | $ | (0.73 | ) |   | $ | (0.21 | ) |
|      Diluted                                                                                       |   | $                                  | 0.06       |   |   | $ | (0.73 | ) |   | $ | (0.21 | ) |
| Weighted average number of shares outstanding:                                                                              |   |                               |       |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                                       |   |                               | 20,497,701 |   |   |   | 20,330,395 |   |   |   | 20,537,624 |   |
| Diluted                                                                                                                     |   |                               | 20,653,305 |   |   |   | 20,330,395 |   |   |   | 20,537,624 |   |

----

|                                                                                         |   | Common Stock    |       |   | Additional |   |    |           |   |   | Treasury Stock   |   |   |            |    |
|----------------------------------------------------------------------------------------------|--------|-----------------|------------|--------|------------|--------|---------|----------------|--------|--------|------------------|--------|--------|-----------------|---------|
|                                                                                         |   | Numberof Shares |       |   | ParValue   |   |    | Paid-InCapital |   |   | RetainedEarnings |   |   | Numberof Shares |    |   | Cost |   |   | Total |   |
| BALANCE at March 31, 2008                                                               |   |            | 29,977,289 |   |       | $      | 300     |           |   | $      | 101,575          |   |   | $               | 47,927  |   |   |   | 9,397,377 |   |   | $ | (34,237 | ) |   | $ | 115,565 |   |
| Net (loss)                                                                                   |   |            | —    |   |       |   | — |           |   |   | —          |   |   |            | (4,284  | ) |   |   | — |   |   |   | — |   |   |   | (4,284 | ) |
| Excess tax deficiency                                                                        |   |            | —    |   |       |   | — |           |   |   | (114             | )      |   |            | — |   |   |   | — |   |   |   | — |   |   |   | (114 | ) |
| Issuance of common stock upon exercise of stock options and warrants                         |   |            | 16,500     |   |       |   | — |           |   |   | 60               |   |   |            | — |   |   |   | — |   |   |   | — |   |   |   | 60 |   |
| Issuance of common stock from treasury shares upon exercise of warrants                      |   |            | —    |   |       |   | — |           |   |   | —          |   |   |            | (55     | ) |   |   | (100,000 | ) |   |   | 177 |   |   |   | 122 |   |
| Share-based compensation from option grants                                                  |   |            | —    |   |       |   | — |           |   |   | 348              |   |   |            | — |   |   |   | — |   |   |   | — |   |   |   | 348 |   |
| Purchase of treasury stock, at cost                                                          |   |            | —    |   |       |   | — |           |   |   | —          |   |   |            | — |   |   |   | 371,600 |   |   |   | (1,213 | ) |   |   | (1,213 | ) |
| BALANCE at March 31, 2009                                                               |   |            | 29,993,789 |   |       |   | 300     |           |   |   | 101,869          |   |   |            | 43,588  |   |   |   | 9,668,977 |   |   |   | (35,273 | ) |   |   | 110,484 |   |
| Net (loss)                                                                                   |   |            | —    |   |       |   | — |           |   |   | —          |   |   |            | (14,759 | ) |   |   | — |   |   |   | — |   |   |   | (14,759 | ) |
| Excess tax deficiency                                                                        |   |            | —    |   |       |   | — |           |   |   | (246             | )      |   |            | — |   |   |   | — |   |   |   | — |   |   |   | (246 | ) |
| Issuance of common stock upon exercise of warrants                                           |   |            | 150,000    |   |       |   | 1       |           |   |   | 179              |   |   |            | — |   |   |   | — |   |   |   | — |   |   |   | 180 |   |
| Issuance of warrants in connection with sublicense agreements                                |   |            | —    |   |       |   | — |           |   |   | 3,554            |   |   |            | — |   |   |   | — |   |   |   | — |   |   |   | 3,554 |   |
| Share-based compensation from option grants                                                  |   |            | —    |   |       |   | — |           |   |   | 587              |   |   |            | — |   |   |   | — |   |   |   | — |   |   |   | 587 |   |
| BALANCE at March 31, 2010                                                               |   |            | 30,143,789 |   |       |   | 301     |           |   |   | 105,943          |   |   |            | 28,829  |   |   |   | 9,668,977 |   |   |   | (35,273 | ) |   |   | 99,800 |   |
| Net income                                                                                   |   |            | —    |   |       |   | — |           |   |   | —          |   |   |            | 1,242   |   |   |   | — |   |   |   | — |   |   |   | 1,242 |   |
| Excess tax surplus                                                                           |   |            | —    |   |       |   | — |           |   |   | 4                |   |   |            | — |   |   |   | — |   |   |   | — |   |   |   | 4 |   |
| Issuance of common stock uponexercise of options and warrants                                |   |            | 254,000    |   |       |   | 3       |           |   |   | 324              |   |   |            | — |   |   |   | — |   |   |   | — |   |   |   | 327 |   |
| Recovery of profits under Section 16(b) on the sale of common stock, net of legal fees of $8 |   |            | —    |   |       |   | — |           |   |   | 53               |   |   |            | — |   |   |   | — |   |   |   | — |   |   |   | 53 |   |
| Share-based compensation from option grants                                                  |   |            | —    |   |       |   | — |           |   |   | 305              |   |   |            | — |   |   |   | — |   |   |   | — |   |   |   | 305 |   |
| BALANCE at March 31, 2011                                                               |   |            | 30,397,789 |   |       | $      | 304     |           |   | $      | 106,629          |   |   | $               | 30,071  |   |   |   | 9,668,977 |   |   | $ | (35,273 | ) |   | $ | 101,731 |   |

----

|                                                                                                |   | For the Years Ended March 31, |    |
|-----------------------------------------------------------------------------------------------------|--------|------------------------------------|---------|
|                                                                                                |   | 2011                               |    |   | 2010 |   |   | 2009 |   |
| Cash flows from operating activities:                                                               |   |                               |    |   |   |   |   |   |   |
| Net income (loss)                                                                                   |   | $                                  | 1,242   |   |   | $ | (14,759 | ) |   | $ | (4,284 | ) |
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:  |   |                               |    |   |   |   |   |   |   |   |   |   |
| Share-based compensation expense                                                                    |   |                               | 305     |   |   |   | 587 |   |   |   | 348 |   |
| Depreciation and amortization                                                                       |   |                               | 2,309   |   |   |   | 2,873 |   |   |   | 2,480 |   |
| Provision for doubtful accounts                                                                     |   |                               | 135     |   |   |   | 636 |   |   |   | 836 |   |
| Write-downs of inventories                                                                          |   |                               | 776     |   |   |   | 11,202 |   |   |   | 183 |   |
| Write-downs of prepaid promotional supplies                                                         |   |                               | 426     |   |   |   | 2,368 |   |   |   | 511 |   |
| Deferred income tax provision (benefit)                                                             |   |                               | 762     |   |   |   | (1,655 | ) |   |   | 86 |   |
| Changes in operating assets and liabilities:                                                        |   |                               |    |   |   |   |   |   |   |   |   |   |
| (Increase) decrease in trade receivables – customers                                          |   |                               | (8,813  | ) |   |   | 11,103 |   |   |   | 3,354 |   |
| (Increase) decrease in trade receivables - related parties                                          |   |                               | (1,835  | ) |   |   | 1,550 |   |   |   | 2,969 |   |
| Decrease (increase) in income taxes receivable                                                      |   |                               | 7,039   |   |   |   | (4,005 | ) |   |   | (413 | ) |
| Decrease (increase) in inventories                                                                  |   |                               | 3,697   |   |   |   | 13,689 |   |   |   | (18,852 | ) |
| Increase in prepaid promotional expenses                                                            |   |                               | (78     | ) |   |   | (222 | ) |   |   | (4,078 | ) |
| Decrease (increase) in prepaid expenses and other current assets                                    |   |                               | 1,186   |   |   |   | 1,661 |   |   |   | (6,200 | ) |
| (Increase) decrease in other non-current assets                                                     |   |                               | (27     | ) |   |   | 3 |   |   |   | (1,629 | ) |
| (Decrease) increase in accounts payable                                                             |   |                               | (1,382  | ) |   |   | (13,728 | ) |   |   | 12,299 |   |
| (Decrease) increase in accrued expenses                                                             |   |                               | (2,175  | ) |   |   | 2,579 |   |   |   | (667 | ) |
| Total adjustments                                                                                   |   |                               | 2,325   |   |   |   | 28,641 |   |   |   | (8,773 | ) |
| Net cash provided by (used in) operating activities                                                 |   |                               | 3,567   |   |   |   | 13,882 |   |   |   | (13,057 | ) |
| Cash flows from investing activities:                                                               |   |                               |    |   |   |   |   |   |   |   |   |   |
| Purchases of equipment and leasehold improvements                                                   |   |                               | (964    | ) |   |   | (1,977 | ) |   |   | (143 | ) |
| Purchases of trademarks                                                                             |   |                               | (51     | ) |   |   | (55 | ) |   |   | (94 | ) |
| Net cash used in investing activities                                                               |   |                               | (1,015  | ) |   |   | (2,032 | ) |   |   | (237 | ) |
| Cash flows from financing activities:                                                               |   |                               |    |   |   |   |   |   |   |   |   |   |
| Repayments of capital leases                                                                        |   |                               | — |   |   |   | (539 | ) |   |   | (995 | ) |
| Purchases of treasury shares                                                                        |   |                               | — |   |   |   | — |   |   |   | (1,213 | ) |
| Proceeds from issuance of common stock from treasury shares                                         |   |                               | — |   |   |   | — |   |   |   | 122 |   |
| Recovery of profits under Section 16(b) on the sale of common stock (net of legal fees of $8)       |   |                               | 53      |   |   |   | — |   |   |   | — |   |
| Proceeds from issuance of common stock upon exercise of stock options   and warrants |   |                               | 327     |   |   |   | 180 |   |   |   | 60 |   |
| Net cash provided by (used in) financing activities                                                 |   |                               | 380     |   |   |   | (359 | ) |   |   | (2,026 | ) |
| Net increase (decrease) in cash and cash equivalents                                                |   |                               | 2,932   |   |   |   | 11,491 |   |   |   | (15,320 | ) |
| Cash and cash equivalents, beginning of year                                                        |   |                               | 17,579  |   |   |   | 6,088 |   |   |   | 21,408 |   |
| Cash and cash equivalents, end of year                                                              |   | $                                  | 20,511  |   |   | $ | 17,579 |   |   | $ | 6,088 |   |

----

| 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 engaged in the creation, design, manufacture, and distribution and sale of prestige fragrances and beauty related products, on a worldwide basis. See Note 8(B) to the Consolidated Financial Statements for further discussion of signed license and sublicense agreements. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | B. | Principles of consolidation The consolidated financial statements include the accounts of Parlux Fragrances, Inc., and its wholly-owned subsidiaries, Parlux S.A., a French company, and Parlux, Ltd. (jointly referred to as “Parlux”, “Company”, “us”, and “we”). All material intercompany accounts and transactions have been eliminated in consolidation. The accompanying Consolidated Financial Statements and the Notes to the Consolidated Financial Statements are presented in thousands, except for number of shares and per share data. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | C. | Liquidity and profitability considerations As a result of the economic downturn over the past several years and the impact of the expiration of the GUESS? license on December 31, 2009, the Company incurred significant net losses of $14,759 and $4,284 for the years ended March 31, 2010 and 2009, respectively. During the year ended March 31, 2011, the economy began to improve and the cost-cutting initiatives the Company implemented in prior years resulted in the Company reporting net income of $1,242.  Net cash used in operations during the year ended March 31, 2009, was $13,057, while net cash provided by operations during the years ended March 31, 2011 and 2010, was $3,567 and $13,882, respectively. As reflected in the accompanying Consolidated Balance Sheets as of March 31, 2011 and 2010, the Company had unrestricted cash and cash equivalents of approximately $20,511 and $17,579, respectively, and positive working capital of $93,019 at March 31, 2011, and $88,841 at March 31, 2010. Cost Reductions During fiscal years 2009 and 2010, the Company implemented a number of cost reduction initiatives including a targeted reduction in staff, along with a reduction in committed advertising and promotional spending, and reduced our production levels. The reductions during fiscal year 2010 were partially offset by approximately $1,700 in advertising and promotional expense relating to the write-off of the Company’s remaining GUESS? collateral material.  During the year ended March 31, 2011, the Company’s management continued to implement various operational efficiencies and monitor all facets of the Company’s operations. Credit Facility On June 25, 2010, the Company entered into a new Loan Agreement (the “New Loan Agreement”) with General Electric Capital Corporation (“GE Capital”), as lender, administrative agent and collateral agent.  The New Loan Agreement, as amended April 15, 2011, provides a credit line of up to $20,000, depending upon the availability of a borrowing base and certain reserves established by GE Capital from time to time, at an interest rate equal to the highest of (a) the prime rate, (b) the federal funds rate plus 3.0%, or (c) the London InterBank Offered Rate (“LIBOR”) over one minus any Euro dollar reserve requirement (the “Eurodollar Rate”),  in each case plus 3.50%, or the Eurodollar Rate plus 4.50%, at the Company’s option except in certain circumstances including defaults in the payment of any amounts under the revolving credit facility or the unavailability of the LIBOR rate. The term of the credit facility under the New Loan Agreement is two years.  As of March 31, 2011, the Company has not borrowed any amounts against the New Loan Agreement. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 1. | NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
|----|-------------------------------------------------------------------------------|

|   |   | Summary Management believes that the actions taken, along with the new credit facility will continue to provide the Company an opportunity to improve liquidity and profitability, and the Company’s new financing will be sufficient to meet the Company’s current operating and seasonal needs. However, if the Company were to expand operations through acquisitions, new licensing arrangements or both, the Company may need to obtain additional financing.  There can be no assurances that the Company could obtain additional financing or what the terms of such financing, if available, would be. In addition, the current business environment may increase the difficulty of obtaining additional financing, if necessary. |
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|   | D. | Accounting estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The more significant estimates relate to the carrying value of accounts receivable from related parties, allowance for doubtful accounts, sales returns and advertising allowances, inventory obsolescence, periods of depreciation and amortization for trademarks, licenses, and equipment, the carrying value of intangibles, and valuation allowance on deferred tax assets. Actual results could differ from those estimates. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | E. | Revenue recognition Revenue is recognized when the product is shipped to a customer, or in limited circumstances, at destination, when terms provide that title passes at destination. Estimated amounts for sales returns and allowances are recorded at the time of sale and reviewed and adjusted on a quarterly basis, if needed. Accounts receivable are recorded concurrently with revenue. The Company continuously monitors the collectability of the receivables by analyzing the aging, assessing its customers’ credit worthiness, and evaluating the impact of changes in economic conditions. Licensing income, which is included in sales to unrelated customers, is recognized ratably over the terms of the contractual license agreements. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | F. | Prepaid promotional expenses, net Prepaid promotional expenses, net consists of collateral inventory items such as testers, samples, gifts with purchases, and other advertising materials to support the sales of our products. The collateral inventory is stated at the lower of cost (using the first-in, first-out method) or market. During the years ended March 31, 2011, 2010 and 2009, the carrying value of collateral items inventory was reduced by $426, $2,368, and $511, respectively, as excess collateral items for older brands were marked down to the lower of cost or market. These adjustments are included in advertising and promotional expense in the accompanying Consolidated Statements of Operations. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | G. | Inventories, cost of goods sold and gross margin Inventories are stated at the lower of cost (using the first-in, first-out method) or market. The cost of inventories includes product costs, inbound freight and handling charges, including an allocation of the Company’s applicable overhead in an amount of $3,799 and $3,246 at March 31, 2011 and 2010, respectively. The Company classifies certain inventories as non-current when projected sales indicate that such inventory will not be sold within the next twelve month period. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 1. | NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
|----|-------------------------------------------------------------------------------|

|   |   | Cost of goods sold includes the cost of inventories discussed above, as well as gift-with-purchase products. The Company’s  gross margins may not be comparable to other entities that include all of the costs related to their distribution network in costs of goods sold, since the Company allocates a portion of these distribution costs to costs of goods sold and includes the remaining unallocated amounts as selling and distribution expenses. |
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|   | H. | Equipment and leasehold improvements Equipment and leasehold improvements are carried at cost. Equipment is depreciated using the straight-line method over the estimated useful life of the asset. Leasehold improvements are amortized over the lesser of the estimated useful life or the lease period. Repairs and maintenance charges are expensed as incurred, while betterments and major renewals are capitalized. The cost of assets and related accumulated depreciation are removed from the accounts when such assets are disposed of, and any related gains or losses are reflected in current earnings. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | I. | Property held for sale The Company considers property to be held for sale when management and the Board of Directors approves and commits to a formal plan to actively market the property for sale. Upon designation as held for sale, the carrying value of the property is adjusted to the lower of its current carrying value or its estimated fair value, less costs to sell. The Company ceases to record depreciation expense at that time. |
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|   | J. | Trademarks and licenses Trademarks, licenses and sublicenses are recorded at cost and those with a finite life are amortized over the estimated periods of benefit. Amortization expense was $510, $840, and $980 for the years ended March 31, 2011, 2010 and 2009, respectively. Indefinite-lived intangible assets, when present, are reviewed annually for impairment, during the Company’s fourth quarter of each fiscal year, or sooner, if events indicate a potential impairment. The identification and measurement of impairment of indefinite-lived intangible assets involves the estimation of the fair value of the related asset. The estimates of fair value are based on the best information available as of the date of the assessment, which primarily incorporates management assumptions about discounted expected future cash flows. Future cash flows can be affected by changes in industry or market conditions. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | K. | Long-lived assets Long-lived assets are reviewed for impairment whenever events or changes in business circumstances indicate that the carrying value of the assets may not be recoverable. On an annual basis, long-lived assets are reviewed for impairment, or sooner, if events or circumstances have occurred that indicate a potential impairment. Impairment losses are recognized if expected undiscounted future cash flows of the related assets are less than their carrying values. Management does not believe that there are any unrecorded impairment losses as of March 31, 2011. See Note 6 to the accompanying Consolidated Financial Statements for further discussion. |
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| 1. | NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
|----|-------------------------------------------------------------------------------|

|   | L. | Advertising and promotion costs Advertising and promotional expenditures are expensed to operations as incurred. These expenditures include print and media advertising, as well as in-store cooperative advertising and promotions. Cooperative advertising, which is under the direct control of our customer and includes a percentage rebate or deduction based on net sales to the customer, is accrued and recorded as a reduction of net sales at the time of sale. Cooperative advertising with our customers, which is under the direct control of, and at the option of the Company, including catalogue and other forms of print advertising, are included in advertising and promotional expense. The costs associated with the specific advertisements are recorded as incurred, and when applicable, are applied against trade accounts receivable. Such cooperative advertising costs under our direct control which amounted to approximately $6,355, $9,245, and $10,744 have been included in advertising and promotional expenses for the years ended March 31, 2011, 2010 and 2009, respectively. |
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|   | M. | Selling and distribution expenses Selling and distribution expenses include labor costs (wages and other benefits) for employees directly involved in the selling and marketing of the Company’s products, sales commissions to independent sales representatives, and the other overhead costs relating to these areas. Additionally, this caption includes approximately $3,868, $4,447, and $4,881 for the years ended March 31, 2011, 2010 and 2009, respectively, relating to the cost of warehouse operations not allocated to inventories and other related distribution expenses (excluding inbound shipping expenses which are recorded as cost of goods sold). A portion of warehouse operation expenses is allocated to inventory in accordance with US GAAP. |
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|   | N. | General and administrative expenses General and administrative expenses include labor costs (wages and other benefits) for employees not directly involved in the selling and distribution of the Company’s products, professional service fees, corporate activities and other overhead costs relating to these areas. Additionally, this caption includes share-based compensation expense of $305, $587, and $348 for the years ended March 31, 2011, 2010 and 2009, respectively. |
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|   | O. | Shipping and handling fees and costs Amounts billed to customers for shipping and handling, which was not significant, are included in net sales. The Company classifies the cost related to inbound shipping and handling in cost of goods sold. |
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|   | P. | Product development costs Product development costs, which amounted to $1,742, $1,819, and $754 for the years ended March 31, 2011, 2010 and 2009, respectively, are expensed as incurred. |
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|   | Q. | 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. The Company classifies interest and penalties associated with income tax obligations in general and administrative expenses, which was not significant for the years ended March 31, 2011, 2010, and 2009. |
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| 1. | NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
|----|-------------------------------------------------------------------------------|

|   |   | 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 or recoverable for the period and the change during the period in deferred tax assets and liabilities less amounts recorded directly to stockholders’ equity. The accounting for uncertainty in income taxes recognized in the financial statements prescribes a recognition threshold of more-likely-than-not and a measurement attribute on all tax positions taken or expected to be taken in a tax return in order to be recognized in the financial statements. In making this assessment, a company must determine whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based solely on the technical merits of the position and must assume that the tax position will be examined by appropriate taxing authority that would have full knowledge of all relevant information. Once the recognition threshold is met, the tax position is then measured to determine the actual amount of benefit to recognize in the financial statements. In addition, the recognition threshold of more-likely-than-not must continue to be met in each reporting period to support continued recognition of the tax benefit. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the financial reporting period in which that threshold is no longer met. The Company did not recognize a liability for unrecognized tax benefits or adjust any recorded liabilities for uncertain tax positions. As of the years ended March 31, 2011 and 2010, there was no material liability for income tax associated with unrecognized tax benefits. The Company does not anticipate any material adjustments relating to unrecognized tax benefits within the next twelve months, however; the outcome of tax matters is uncertain and unforeseen results can occur. The Company is under an Internal Revenue Service (“IRS”) audit of its fiscal years 2007 through 2010 Federal income tax returns, as a result of the carry back of its net operating losses incurred in fiscal years ended March 31, 2009 and 2010. |
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|   | R. | Foreign currency translation and transactions The Company’s functional currency for its French foreign subsidiary is the local currency (Euro). Other income and expense includes foreign currency gains and losses on transactions denominated in foreign currencies, which are recognized as incurred. |
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|   | S. | Fair value of financial instruments The carrying value of the Company’s financial instruments, consisting principally of cash and cash equivalents, receivables, accounts payable and borrowings approximate fair value due to either the short-term maturity of the instruments or borrowings with similar interest rates and maturities. |
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|   | T. | Basic and diluted earnings (loss) per share Basic earnings (loss) per common share calculations are determined by dividing earnings (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding during the year. Diluted earnings (loss) per common share calculations are determined by dividing earnings (loss) attributable to common stockholders by the weighted average number of shares of common stock and, when applicable, dilutive potential common stock equivalents outstanding during the year.  Antidilutive shares are not included in diluted earnings per share computations for the years ended March 31, 2010 and 2009, as we incurred a loss for those periods. |
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| 1. | NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
|----|-------------------------------------------------------------------------------|

|   | U. | Share-based compensation The Company recognizes the cost of share-based compensation expense in the accompanying Consolidated Financial Statements for stock options and warrants granted, based on the fair value of the awards at the date of grant over the vesting period. The Company uses the Black-Scholes valuation model to determine the compensation expense. When estimating forfeitures, the Company considers an analysis of actual option forfeitures, as well as management judgment. The employee forfeiture rate used when calculating the value of stock options granted for the years ended March 31, 2011 and 2010, was approximately 7% and 5%, respectively. |
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|   | V. | Cash flow information The Company considers temporary investments with an original maturity of three months or less to be cash equivalents. Supplemental disclosures of cash flow information are as follows: |
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|               |   | For the Years Ended March 31, |   |
|--------------------|--------|------------------------------------|--------|
|               |   | 2011                               |   |   | 2010 |   |   | 2009 |   |
| Cash received for: |   |                               |   |   |   |   |   |   |   |
| Income taxes       |   | $                                  | 7,352  |   |   | $ | 3,628 |   |   | $ | 2,002 |   |
| Cash paid for:     |   |                               |   |   |   |   |   |   |   |   |   |   |
| Interest           |   | $                                  | 615    |   |   | $ | 313 |   |   | $ | 81 |   |
| Income taxes  |   | $                                  | 184    |   |   | $ | 421 |   |   | $ | 43 |   |

|   |   | Supplemental disclosures of non-cash investing and financing activities are as follows:  Year ended March 31, 2010: |
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|   | · | The Company granted warrants to acquire the fragrance sublicensing rights of entertainers Rihanna and Kanye West. The fair value of the warrants was $3,554 which is included in additional paid-in capital and trademarks and licenses, net in the accompanying Consolidated Balance Sheets (see Notes 6 and 10 to the Consolidated Financial Statements for further discussion). |
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|   |   | There were no non-cash investing and financing activities during fiscal years ended March 31, 2011 and 2009. |
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|   | W. | Segment Information The Company determined its operating segments on the same basis that it uses to evaluate performance internally. |
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|   | Prior to the quarter ended December 31, 2005, the Company operated in one operating segment as a manufacturer and distributor of one product line consisting of prestige fragrances and beauty related products. During December 2005, the Company commenced sales of watches, and in March 2006, sales of handbags, both of which were under license agreements with Paris Hilton Entertainment, Inc. Gross revenues from the sale of watches and handbags during the year ended March 31, 2011, totaled $455 and $19 ($981 and $4 in 2010), respectively.  At March 31, 2011, the Company sold all remaining inventories of the Paris Hilton brand watches and handbags (inventories were $346 and $62, respectively, at March 31, 2010). The Company does not anticipate preparing full segment disclosure for these activities, as the Paris Hilton watch license expired on June 30, 2010, and the Paris Hilton handbag license expired on January 15, 2011. |
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| 2. | RELATED PARTY TRANSACTIONS Related party transactions include the following balances: |
|----|--------------------------------------------------------------------------------------------|

|                                      |   | March 31, |    |
|-------------------------------------------|--------|----------------|---------|
|                                      |   | 2011           |    |   | 2010 |   |
| Accounts receivable from related parties: |   |           |    |   |   |   |
| Perfumania                                |   | $              | 12,708  |   |   | $ | 10,496 |   |
| Quality King                              |   |           | — |   |   |   | — |   |
| Other related parties                     |   |           | — |   |   |   | 377 |   |
|                                      |   | $              | 12,708  |   |   | $ | 10,873 |   |

|                      |   | For the Years Ended March 31, |    |
|---------------------------|--------|------------------------------------|---------|
|                      |   | 2011                               |    |   | 2010 |   |   | 2009 |   |
| Sales to related parties: |   |                               |    |   |   |   |   |   |   |
| Perfumania                |   | $                                  | 47,508  |   |   | $ | 37,562 |   |   | $ | 41,470 |   |
| Quality King              |   |                               | — |   |   |   | 9,096 |   |   |   | — |   |
| Other related parties     |   |                               | 3,654   |   |   |   | 2,957 |   |   |   | — |   |
|                      |   | $                                  | 51,162  |   |   | $ | 49,615 |   |   | $ | 41,470 |   |

|   | The Company had net sales of $47,508, $46,658, and $41,470 during the years ended March 31, 2011, 2010 and 2009, respectively, to Perfumania, Inc., a wholly-owned subsidiary of Perfumania Holdings, Inc. (“Perfumania”) and to Quality King Distributors, Inc. (“Quality King”). Perfumania is one of the Company’s largest customers, and transactions with Perfumania are closely monitored by management, and any unusual trends or issues are brought to the attention of the Company’s Audit Committee and Board of Directors. Perfumania offers the Company the opportunity to sell its products in approximately 360 retail outlets and its terms with Perfumania take into consideration the relationship existing between the companies for approximately twenty years. Pricing and terms with Perfumania reflect (a) the volume of Perfumania’s purchases, (b) a policy of no returns from Perfumania, (c) minimal spending for advertising and promotion, (d) exposure of the Company’s products provided in Perfumania’s store windows and (e) minimal distribution costs to fulfill Perfumania orders shipped directly to their distribution center. Perfumania Holdings, Inc.’s majority shareholders acquired an approximate 12.2% ownership interest in the Company during fiscal year 2007 (equivalent to 9.9% at March 31, 2011), and accordingly, transactions with Perfumania continue to be presented as related party transactions. The majority shareholders of Perfumania Holdings, Inc. are also the owners of Quality King, a privately-held, wholesale distributor of pharmaceuticals and beauty care products. Transactions with Quality King are presented as related party transactions.   During the years ended March 31, 2011 and 2009, there were no sales to Quality King. |
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| 2. | RELATED PARTY TRANSACTIONS (Continued) While the Company’s invoice terms to Perfumania are stated as net ninety days, for more than fifteen years management has granted longer payment terms, taking into consideration the factors discussed above. Management evaluates the credit risk involved, which is determined based on Perfumania’s reported results and comparable store sales performance. Management monitors the account activity to ensure compliance with their limits. Net trade accounts receivable owed by Perfumania to the Company totaled $12,708 and $10,496 at March 31, 2011 and 2010, respectively.  Between April 1, 2011, and May 25, 2011, the Company received $1,470 from Perfumania in payment of its outstanding balance.  Amounts due from Perfumania are non-interest bearing and were paid in accordance with the terms established by the Board. The Company’s invoice terms to Quality King were stated as sixty days. No amounts were owed to the Company by Quality King at March 31, 2011 and 2010. Given the relationship between Perfumania and Quality King, management performs similar reviews and analyses as it does for Perfumania, monitoring the activity of Quality King for compliance with their terms and limits. (See Note 13 to the Consolidated Financial Statements for further discussion of this concentration of credit risk.) Any significant reduction in business with Perfumania as a customer of the Company would have a material adverse effect on the Company's net sales. Management closely monitors the Company’s activity with Perfumania and holds periodic discussions with Perfumania in order to review the anticipated payments for each quarter. In addition to its sales to Perfumania and Quality King, the Company had net sales of $3,654 and $2,957 for years ended March 31, 2011 and 2010, respectively, to Jacavi Beauty Supply, LLC (“Jacavi”), a fragrance distributor. Jacavi’s managing member is Rene Garcia. Rene Garcia owns approximately 8.4% of the outstanding stock of Perfumania Holdings, Inc. as of March 31, 2011, and is one of the principals of Artistic Brands Development, LLC, see Note 6 for further discussion. Sales to Jacavi are also included as related party sales in the accompanying Consolidated Statements of Operations for the years ended March 31, 2011 and 2010.  At March 31, 2011 and 2010, net trade account receivables from Jacavi totaled $0 and $377, respectively.  Invoice terms to Jacavi are normally payment upon shipment, however, in anticipation of the holiday season, management extended 75 day terms on Jacavi’s holiday purchases, which payment was received as scheduled. On June 14, 2010, certain persons related to Mr. Garcia (the “Garcia Group”) acquired 2,718,728 shares of the Company’s common stock. The Garcia Group refers to that certain group comprised of JM-CO Capital Fund, LLC, Irrevocable Trust for Victor Garcia, Jacqueline Marie Garcia, Jacavi Investments, LLC, Carolina Marie Garcia 2006 Family Trust, Jacqueline Marie Garcia 2006 Family Trust, Carolina Marie Garcia and Aqua Capital Fund, LLC, which filed a Schedule 13G with the SEC on June 23, 2010.  In that filing, the Garcia Group reported having beneficial ownership of a total of 2,995,527 shares, or approximately 14.7% of the Company’s outstanding shares as of June 14, 2010 (equivalent to 14.5% as of March 31, 2011), excluding warrants owned by the Garcia Group. On March 4, 2011, the Garcia Group replaced their original joint filing by jointly filing a Schedule 13D.  Other than the addition of certain warrants to purchase shares, which vested between the initial and subsequent filing dates, there were no changes in beneficial shares ownership included in the updated joint filing. |
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| 3. | INVENTORIES The components of inventories are as follows: |
|----|----------------------------------------------------------------|

|                                     |   | March 31, |    |
|------------------------------------------|--------|----------------|---------|
|                                     |   | 2011           |    |   | 2010 |   |
| Finished products:                       |   |           |    |   |   |   |
| Fragrances                               |   | $              | 21,171  |   |   | $ | 22,857 |   |
| Watches                                  |   |           | — |   |   |   | 342 |   |
| Handbags                                 |   |           | — |   |   |   | 62 |   |
| Components and packaging material:  |   |           |    |   |   |   |   |   |
| Fragrances                               |   |           | 14,051  |   |   |   | 16,240 |   |
| Watches                                  |   |           | — |   |   |   | 4 |   |
| Raw material                             |   |           | 2,151   |   |   |   | 2,341 |   |
|                                     |   | $              | 37,373  |   |   | $ | 41,846 |   |

|   | Inventories are stated at the lower of cost (using the first-in, first-out method) or market. The cost of inventories includes product costs, inbound freight and handling charges, including an allocation of our applicable overhead in an amount of $3,799 and $3,246 at March 31, 2011 and 2010, respectively. The lead time for certain of the Company’s raw materials and components inventory (up to 180 days) requires the Company to maintain at least a three to nine-month supply of some items in order to ensure timely production schedules. These lead times are most affected for glass and plastic component orders, as many of the Company’s unique designs require the production of molds in addition to the normal production process. This may take 180 to 240 days, or longer, to receive in stock. In addition, when the Company launches a new brand or Stock Keeping Unit (“SKU”), it frequently produces a six to nine-month supply to ensure adequate inventories if the new products exceed forecasted expectations. Generally gross margins on its products outweigh the potential loss due to out-of-stock situations, and the additional carrying costs to maintain higher inventory levels. Also, the composition of the Company’s inventory at any given point can vary considerably depending on whether there is a launch of a new product, or a planned sale of a significant amount of product to one or more of the Company’s major distributors. However, if future sales do not reach forecasted levels, it could result in excess inventories and may cause the Company to decrease prices to reduce inventory levels. The Company classifies its inventory into three major categories: finished goods, raw materials, and components and packaging materials. Finished goods include items that are ready for sale to our customers, or essentially complete and ready for use in value sets or other special offers. Raw material consists of fragrance oils or bulk. Components and packaging materials (such as bottles, caps, boxes, etc.) are the individual elements used to manufacture our finished goods. The levels of inventory maintained by the Company vary depending on the age of a brand, its commercial success and market distribution. The Company normally carries higher levels of new products and older products for which demand remains high. Older, slower moving products are periodically reviewed, and inventory levels adjusted, based upon expected future sales. If inventory levels exceed projected demand, management determines whether a product requires a write-down in order to sell the inventory at discounted prices. Management also reviews whether there are any excess components which should be written down or scrapped due to decreased product demand. |
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| 3. | INVENTORIES (Continued) Inventories and write-downs, by major categories, as of March 31, 2011 and 2010, are as follows: |
|----|------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                         | March 31, 2011 |   |
|------------------------------------------------------------------------------------------------------------------------------|---------------------|--------|
|                                                                                                                         | FinishedGoods       |   | Componentsand PackagingMaterial |   | RawMaterial |   | Total |   |
|                                                                                                                         |                |   |   |   |   |   |   |   |   |   |   |   |
| Inventories                                                                                                                  |                | $      | 21,441 |   |   | $ | 14,504 |   |   | $ | 2,204 |   |   | $ | 38,149 |   |
| Less write-downs                   |                |   | 270 |   |   |   | 453 |   |   |   | 53 |   |   |   | 776 |   |
| Net inventories                                                                                                              |                | $      | 21,171 |   |   | $ | 14,051 |   |   | $ | 2,151 |   |   | $ | 37,373 |   |
|                                                                                                                         |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                         | March 31, 2010 |   |
|                                                                                                                         | FinishedGoods       |   | Componentsand PackagingMaterial |   | RawMaterial |   | Total |   |
|                                                                                                                         |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Inventories                                                                                                                  |                | $      | 28,195 |   |   | $ | 22,268 |   |   | $ | 2,585 |   |   | $ | 53,048 |   |
| Less write-downs                                                                                                             |                |   | 4,934 |   |   |   | 6,024 |   |   |   | 244 |   |   |   | 11,202 |   |
| Net inventories                                                                                                              |                | $      | 23,261 |   |   | $ | 16,244 |   |   | $ | 2,341 |   |   | $ | 41,846 |   |

|   | The Company performs a review of its inventory on a quarterly basis, unless events or circumstances indicate a need for review more frequently. The write-down of inventory results from the application of an analytical approach that incorporates a comparison of sales expectations to the amount of inventory on hand. Other qualitative reasons for writing down selected inventory may include, but are not limited to, product expiration, licensor restrictions, damages, and general economic conditions.  As of March 31, 2011 and 2010, of our total inventories of $38,149 and $53,048, respectively, management determined that approximately $5,899 and $9,453, respectively, of the finished goods inventory was either selling slower than anticipated or showed signs of deterioration. This inventory was written-down by $270 and $4,934 in fiscal year 2011 and 2010, respectively. Components and packaging materials are reviewed in light of estimated future sales for finished goods or damages sustained during the production of finished goods. As of March 31, 2011 and 2010, approximately $1,699 and $7,692, respectively, were identified as problematic and the inventory was written-down by $453 and $6,024, respectively.  Raw materials are usually scrapped due to spoilage or stability issues.  As of March 31, 2011 and 2010, approximately $53 and $244 were identified as problematic and the inventory was written-down by $53 and $244, respectively. The Company’s license with GUESS? expired on December 31, 2009, and was not renewed.  During the year ended March 31, 2010, the Company recorded charges of $7,567, which was included in the $11,202 write-down noted above, to cost of sales – expired license, in the accompanying Consolidated Statements of Operations for the year ended March 31, 2010, to reduce the recorded value of such inventories to the amounts, which the Company estimated could be realized upon their sale or liquidation. During the year ended March 31, 2011 and 2010, the Company transferred $1,423 and $4,626, respectively, of GUESS? brand inventory to GUESS? and/or its new fragrance licensee at net carrying value. This transfer of inventory, along with the cost of sales and inventory write-downs, have been classified as “Sales-expired license” and “Cost of sales-expired license” in the accompanying Consolidated Statements of Operations for the years ended March 31, 2011 and 2010. |
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| 4. | PREPAID PROMOTIONAL, PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid promotional, prepaid expenses and other current assets are as follows: |
|----|----------------------------------------------------------------------------------------------------------------------------------------------------|

|                                      |   | March 31, |   |
|-------------------------------------------|--------|----------------|--------|
|                                      |   | 2011           |   |   | 2010 |   |
|                                      |   |           |   |   |   |   |
| Prepaid promotional expenses, net    |   | $              | 7,519  |   |   | $ | 7,867 |   |
|                                      |   |           |   |   |   |   |   |   |
| Prepaid advertising                       |   | $              | 1,143  |   |   | $ | 935 |   |
| Prepaid royalties                         |   |           | 4,789  |   |   |   | 5,637 |   |
| Prepaid development                       |   |           | 1,404  |   |   |   | 1,843 |   |
| Other                                     |   |           | 915    |   |   |   | 1,022 |   |
| Prepaid expenses and other current assets |   | $              | 8,251  |   |   | $ | 9,437 |   |

|   | During the year ended March 31, 2009, the Company entered into agreements with two media companies to exchange inventory for future advertising credits on print, broadcasting, internet, and other media formats. The advertising credits are redeemable over three and seven (extended an additional three years from its original four year period) year periods, and were recorded based on the net cost of the inventory exchanged. During the years ended March 31, 2011 and 2010, the Company utilized $66 and $72, respectively, of the advertising credits. The prepaid advertising credits are as follows: |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                      |   | March 31, |   |
|---------------------------------------------------------------------------------------------------------------------------|--------|----------------|--------|
|                                                                                                                      |   | 2011           |   |   | 2010 |   |
|                                                                                                                      |   |           |   |   |   |   |
| Prepaid advertising credits - current                                                                                     |   | $              | 456    |   |   | $ | 531 |   |
| Prepaid advertising credits – noncurrent (included in Other Assets in the accompanying Consolidated Balance Sheets) |   |           | 1,699  |   |   |   | 1,690 |   |
|                                                                                                                      |   | $              | 2,155  |   |   | $ | 2,221 |   |

| 5. | EQUIPMENT AND LEASEHOLD IMPROVEMENTS Equipment and leasehold improvements are comprised of the following: |
|----|----------------------------------------------------------------------------------------------------------------|

|                                             |   | March 31, |   |   | Estimated useful |   |
|--------------------------------------------------|--------|----------------|--------|--------|------------------|--------|
|                                             |   | 2011           |   |   | 2010             |   |   | Lives (in Years) |   |
|                                             |   |           |   |   |             |   |   |   |   |
| Molds and equipment                              |   | $              | 7,019  |   |             | $      | 6,358 |   |   |   | 3-7 |   |
| Furniture and fixtures                           |   |           | 1,690  |   |             |   | 1,693 |   |   |   | 3-5 |   |
| Leasehold improvements                           |   |           | 1,322  |   |             |   | 1,601 |   |   |   | 2-7 |   |
|                                             |   |           | 10,031 |   |             |   | 9,652 |   |   |   |   |   |
| Less - accumulated depreciation and amortization |   |           | (8,187 | )      |             |   | (6,973 | ) |   |   |   |   |
|                                             |   | $              | 1,844  |   |             | $      | 2,679 |   |   |   |   |   |

|   | Depreciation and amortization expense on equipment and leasehold improvements for the years ended March 31, 2011, 2010 and 2009, was $1,800, $2,033, and $1,526, respectively. Amounts subject to capital leases at March 31, 2011 and 2010, included in equipment and leasehold improvements above, totaled $286 and $782, respectively, net of accumulated depreciation and amortization of $2,849 and $2,103, respectively. As a result of various factors, including the Company’s anticipated growth, the increase in trucking costs resulting primarily from the increase in fuel prices and South Florida’s susceptibility to major storms, management and the Company’s Board of Directors determined that it would be more cost effective and prudent to relocate a major part of the Company’s warehousing and distribution activities to the New Jersey area, close to where the Company’s products are filled and packaged. Accordingly, on April 17, 2006, the Company entered into a five-year lease for 198,500 square feet of warehouse space in New Jersey, to also serve as a backup information technology site if the current Fort Lauderdale, Florida location encounters unplanned disruptions. The Company commenced activities in the New Jersey facility during the latter part of August 2006.  On November 24, 2010, the Company amended the lease agreement and extended the lease term an additional four years through August 31, 2015. |
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| 5. | EQUIPMENT AND LEASEHOLD IMPROVEMENTS (Continued) The Company currently maintains a lease for its former corporate headquarters and distribution center in Ft. Lauderdale, Florida and during May 2006, entered into a new five-year lease on the property, commencing October 1, 2006, at an initial annual cost of approximately $900, increasing approximately 3% per annum. On January 29, 2009, the Company entered into a sublease agreement to sublease 40,000 square feet of the 99,000 square feet of space in the facility at the approximate per square foot cost under the Company’s lease. The sublease commenced on April 1, 2009, and terminates on September 30, 2011, the expiration date of the lease (see Note 8A to the Consolidated Financial Statements for further discussion). |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 6. | TRADEMARKS AND LICENSES Trademarks and licenses are attributable to the following brands: |
|----|------------------------------------------------------------------------------------------------|

|                                           |   | March 31, |    |   | Estimated Life |   |
|------------------------------------------------|--------|----------------|---------|--------|----------------|--------|
|                                           |   | 2011           |    |   | 2010           |   |   | (in years) |   |
|                                           |   |           |    |   |           |   |   |   |   |
| XOXO                                           |   | $              | — |   |           | $      | 4,285 |   |   |   | 5 |   |
| Fred Hayman Beverly Hills (“FHBH”) |   |           | 2,820   |   |           |   | 2,820 |   |   |   | 10 |   |
| Paris Hilton                                   |   |           | 942     |   |           |   | 892 |   |   |   | 5 |   |
| Rihanna                                        |   |           | 1,778   |   |           |   | 1,777 |   |   |   | 5 |   |
| Kanye West                                     |   |           | 1,777   |   |           |   | 1,777 |   |   |   | 5 |   |
| Other                                          |   |           | 217     |   |           |   | 217 |   |   |   | 5-25 |   |
|                                           |   |           | 7,534   |   |           |   | 11,768 |   |   |   |   |   |
| Less – accumulated amortization          |   |           | (3,339  | )      |           |   | (7,114 | ) |   |   |   |   |
|                                           |   | $              | 4,195   |   |           | $      | 4,654 |   |   |   |   |   |

| For the Years Ending March 31, |   | Amount |   |
|-------------------------------------|--------|--------|--------|
|                                |   |   |   |
| 2012                                |   | $      | 685    |   |
| 2013                                |   |   | 1,011  |   |
| 2014                                |   |   | 813    |   |
| 2015                                |   |   | 737    |   |
| 2016                                |   |   | 622    |   |
|                                |   | $      | 3,868  |   |

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| 6. | TRADEMARKS AND LICENSES (Continued) During the years ended March 31, 2011 and 2010, the Company performed a review of its trademark and license intangible assets on a quarterly basis. As a result, the Company determined that there were no impairment charges. On April 3, 2009, the Company entered into an agreement (the “Agreement”) with Artistic Brands, a licensing company in which entertainment mogul and icon Shawn “JAY-Z” Carter and Rene Garcia are principals (Rene Garcia owns approximately 8.4% of the outstanding stock of Perfumania Holdings, Inc. as of March 31, 2011). The Agreement allows for the sublicensing of certain worldwide fragrance licenses to the Company. Pursuant to the Agreement, on April 7, 2009, the Company entered into sublicense agreements with Artistic Brands for the exclusive rights to worldwide fragrance licenses for multiple Grammy® award winning and multi-platinum selling international entertainers Rihanna and Kanye West. At this time, Artistic Brands is in continuing negotiations for a worldwide fragrance license with Shawn Carter which, if executed, would be sublicensed to the Company.  Further, a fourth celebrity has not been identified by Artistic Brands, and therefore, the Company does not have any plans at the present to launch a fourth celebrity fragrance. Pursuant to the Agreement, the Company will pay Artistic Brands and the licensors and their designated affiliates, on an annual basis so long as each sublicense agreement remains in effect, a percentage of the cumulative net profits, as defined in the Agreement, earned by the Company on sales of products developed and sold under each license. Also, the Company will assume Artistic Brands’ obligation to make royalty payments to the licensors, including any initial guaranteed minimum royalty advance payable to any licensor. Furthermore, in connection with the sublicense agreements, the Company issued, and may issue in the future, warrants to purchase shares of Parlux common stock, $0.01 par value, at a purchase price of $5.00 per share (“Warrants”) to Artistic Brands, the licensors, the celebrities, and their respective designated affiliates. The Warrants vest in four equal annual installments beginning on the first anniversary of the date of issuance and will expire on the eighth anniversary of the date of issuance, or the fifth anniversary of the date of issuance, if the applicable licenses are not renewed by the Company as the sub-licensee. The Company issued Warrants to purchase a total of 4,000,000 shares, consisting of Warrants for 2,000,000 shares in connection with the sublicense agreement for Rihanna, and Warrants for 2,000,000 shares in connection with the sublicense agreement for Kanye West. On December 18, 2009, the Company’s stockholders approved the issuance of additional Warrants to Artistic Brands and its designated affiliates to purchase a total of 2,000,000 shares of the Company’s common stock, $0.01 par value, at a purchase price of $5.00 per share, pursuant to an agreement, dated April 3, 2009. The Warrants which consist of Warrants for 1,000,000 shares each in connection with the sublicense agreements, dated April 7, 2009, with Rihanna and Kanye West were issued on December 18, 2009, for a total of 3,000,000 shares per sublicense. In addition, the Company may issue Warrants for 3,000,000 shares each in connection with the sublicense agreements for Shawn Carter and the fourth artist, if and when such sublicenses are entered into. If all of the sublicenses are entered into, Warrants to purchase a total of 12,000,000 shares will be outstanding in connection with the four sublicenses (3,000,000 shares per sublicense). The executed licenses are recorded at the fair value of the warrants issued and will be amortized over a five-year period, commencing as of the launch of the first fragrance under each of the licenses (see Note 10 to the Consolidated Financial Statements for further discussion). In addition, on April 3, 2009, the Company entered into a letter agreement with Artistic Brands and Rene Garcia, the manager of Artistic Brands, individually, allowing for the acceleration of vesting and immediate exercise of the Warrants for 4,000,000 shares allocable to Rihanna and Kanye West in the event that the Company is acquired by another person or entity (other than Artistic Brands or its affiliates, Rene Garcia or Shawn “JAY-Z” Carter) or concludes a similar change of control transaction prior to April 3, 2012, or if definitive agreements for such a transaction are entered into by April 3, 2012, and consummated within ninety (90) days. In certain circumstances, the letter agreement provides for Artistic Brands to receive cash and/or securities valued up to $10 per share in the event that the Company is acquired by another person or entity (other than Artistic Brands or its affiliates, Rene Garcia or Shawn “JAY-Z” Carter) or concludes a similar change of control transaction prior to April 3, 2012, with respect to the Warrants for 4,000,000 shares allocable to Rihanna and Kanye West to the extent such shares have not been previously sold by the holder into the market or otherwise disposed of by the holder in a bona fide third party transaction. |
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------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 6. | TRADEMARKS AND LICENSES (Continued) The Warrants vest in four equal annual installments beginning on the first anniversary of the date of issuance and expire on the eighth anniversary of the date of issuance, or the fifth anniversary of the date of issuance, if the applicable licenses are not renewed by the Company as the sub-licensee. On March 2, 2011, the Company entered into an amended and restated sublicense agreement (the "Sublicense") with Artistic Brands, which amends and restates in its entirety the Agreement, dated April 7, 2009, between the Company and Artistic Brands.  Pursuant to the Sublicense, the Company has the exclusive right and license to manufacture, promote, distribute and sell prestige fragrances and related products under the Kanye West name. The initial term of the sublicense expires on March 31, 2017, and is renewable for an additional three-year term if certain sales levels are met.  Pursuant to the Sublicense, the Company assumes Artistic Brands' obligation to make royalty payments to the licensor, including any guaranteed minimum royalties. |
|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 7. | BORROWINGS Bank Financing On July 22, 2008, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Regions Bank (“Regions”). The Loan Agreement provided up to $20,000, depending upon the availability of a borrowing base, at an interest rate of LIBOR plus 2.00% or Regions’ prime rate, at the Company’s option. During the period of July 22, 2008, through February 15, 2010, substantially all of the Company’s assets collateralized the Loan Agreement. The Loan Agreement contained customary events of default and covenants which prohibited, among other things, incurring additional indebtedness in excess of a specified amount, paying dividends, creating liens, and engaging in mergers and acquisitions without the prior consent of Regions. The Loan Agreement also contained certain financial covenants as noted below. On March 9, 2009, the Company entered into the First Amendment and Ratification of Loan and Security Agreement and Other Loan Documents (the “Amendment”) to the Loan Agreement with Regions. The Amendment changed certain terms of the Loan Agreement. Under the Amendment, the interest rate for any borrowings is LIBOR rate plus the applicable margin. The applicable margin for any borrowings is calculated on a sliding scale basis and is tied to our fixed charge coverage ratio, with rates calculated between 3% and 4%, with an initial starting rate at 4.25%. Prior to December 31, 2009, the borrowing base amount was the lesser of the sum of an amount equal to 75% of the net amount (after deduction of such reserves and allowances as Regions deemed reasonably proper and necessary) of all eligible accounts plus an amount equal to the lesser of $10,000 or 25% of the lower of cost or market value (after deduction of such reserves and allowances as Regions deemed reasonably proper and necessary) of all eligible inventory or the product of two times the sum of EBITDA measured from January 1, 2009, to the date of measurement, minus non-cash expenses related to the issuance of options and warrants, minus other non-cash expenses. After December 31, 2009, the borrowing base amount was the sum of an amount equal to 75% of the net amount (after deduction of such reserves and allowances as Regions deemed reasonably proper and necessary) of all eligible accounts plus an amount equal to the lesser of $10,000 or 25% of the lower of cost or market value (after deduction of such reserves and allowances as Regions deemed reasonably proper and necessary) of all eligible inventory. In addition, receivables due from Perfumania, Inc., a related party, were not considered an eligible account. A tangible net worth covenant was added, which required the Company to maintain a tangible net worth of not less than $85,000 at all times. The Company was required to obtain written consent from Regions prior to repurchasing shares of our common stock, including repurchases which have been previously authorized under our existing stock buy-back program. The Company was no longer required to pay a non-utilization fee. |
|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 7. | BORROWINGS (Continued) On August 31, 2009, the Company entered into a Forbearance Agreement (“Forbearance Agreement”) regarding the Loan Agreement with Regions. The Forbearance Agreement was entered into to address the Company’s outstanding borrowings as of June 30, 2009, in excess of the limitation in the Loan Agreement, as amended. As of June 30, 2009, the Company’s outstanding principle balance under the Loan Agreement was $6,681. Pursuant to the Loan Agreement, the outstanding principal balance at no time should exceed the revolving loan availability, as defined in the Loan Agreement. The revolving loan availability as of June 30, 2009, was $208, resulting in an excess of the revolving loan availability in the amount of $6,473. Under the Forbearance Agreement, Regions agreed to forbear from any legal action to accelerate the Company’s obligation to the bank until October 28, 2009, subject to no further events of default under the terms of the Loan Agreement, as amended. On October 29, 2009, the Company entered into a Second Amendment to Loan Agreement and Amendment to Forbearance Agreement (the “Second Amendment”) with Regions extending the forbearance period through February 15, 2010, which called for the Company to repay the remaining loan balance over the course of the extension period, as noted in the table below. The Second Amendment called for the Company to continue to comply with certain covenants with Regions under the Loan Agreement, as amended by the Second Amendment. The Company was required and repaid the remaining outstanding principal balance over the course of the extension period as follows: |
|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Payment Date           |   | Payment Amount |   |
|------------------------|--------|----------------|--------|
|                   |   |           |   |
| November 30, 2009 |   | $              | 1,000  |   |
| December 31, 2009 |   | $              | 1,600  |   |
| February 1, 2010  |   | $              | 1,000  |   |
| February 16, 2010 |   | Fully paid     |   |

|   | On February 16, 2010, the Company repaid the remaining outstanding principal balance plus interest and fees in the amount of $1,089 and the Loan Agreement, as amended by the Second Amendment, was terminated. On June 25, 2010, the Company entered into a New Loan Agreement with GE Capital, as amended April 15, 2011.  The New Loan Agreement is a revolving credit facility that provides a credit line of up to $20,000, depending upon the availability of a borrowing base and certain reserves established by GE Capital from time to time, at an interest rate equal to the highest of (a) the prime rate, (b) the federal funds rate plus 3.0%, or (c) LIBOR over one minus any Euro dollar reserve requirement (the Eurodollar Rate), in each case plus 3.50%; or the Eurodollar Rate plus 4.50%, at the Company’s option except in certain circumstances including defaults in the payment of any amounts under the revolving credit facility or the unavailability of the LIBOR rate. The term of the revolving credit facility under the New Loan Agreement is two years.  In connection with obtaining the revolving credit facility, the Company incurred approximately $710 in deferred loan fees, which are being amortized over the life of the loan on a straight-line basis to interest expense, in the accompanying Consolidated Statements of Operations.  In addition, under the terms of the New Loan Agreement the Company incurs monthly loan monitoring and unused commitment fees, which are recorded to interest expense, in the accompanying Consolidated Statements of Operations.  During the year ended March 31, 2011, the Company amortized $269 of the deferred loan fees and incurred $346 in loan monitoring and unused commitment fees. The New Loan Agreement contains customary events of default and covenants which prohibit, among other things, incurring additional indebtedness in excess of a specified amount, paying dividends, creating liens, and engaging in mergers and acquisitions without the prior consent of GE Capital. The New Loan Agreement requires the Company to maintain a minimum net liquidity balance of $12,500 through October 31, 2010, and $15,000, thereafter through the end of the term. Under the New Loan Agreement, net liquidity is the sum of the Company’s unrestricted cash assets plus the excess availability under the revolving credit facility. At any point if the Company falls below the net liquidity requirements, the New Loan Agreement contains certain additional financial covenants relating to minimum consolidated EBITDA, minimum consolidated interest coverage ratios and maximum capital expenditure limits. In addition, the Company’s subsidiary, Parlux Ltd., and its affiliates must have a minimum net liquidity balance of $12,500 to borrow under the New Loan Agreement.  As of March 31, 2011, the Company and its subsidiary, Parlux Ltd., met the minimum liquidity requirements under the New Loan Agreement. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 7. | BORROWINGS (Continued) Borrowings under the New Loan Agreement are secured by all of the Company’s assets and the assets of the Company’s subsidiary, Parlux Ltd., pursuant to a Guaranty and Security Agreement. In addition, GE Capital has a security interest in and to certain of the Company’s patents and trademarks, as well as those of Parlux Ltd., pursuant to a Patent Security Agreement and Trademark Security Agreement, respectively. The Company has provided to GE Capital a full guaranty of payment of the obligations under the New Loan Agreement. As of March 31, 2011, no amounts have been borrowed under the New Loan Agreement and the Company’s availability under the New Loan Agreement was $10,439. The Company believes that funds from operations will be sufficient to meet its current operating and seasonal needs through fiscal year 2012.  In addition, the revolving credit facility will provide the Company an opportunity to improve liquidity and profitability.  However, if the Company were to expand operations through acquisitions, new licensing arrangements or both, the Company may need to obtain additional financing.  There can be no assurances that the Company could obtain additional financing or what the terms of such financing, if available, would be. In addition, the current business environment may increase the difficulty of obtaining, and the cost of, additional financing, if necessary. Capital Lease Financing During May 2006, the Company entered into an agreement with Provident Equipment Leasing (“Provident”) covering approximately $2,761 of certain warehouse equipment and leasehold improvements to be purchased for the Company’s new leased distribution center in New Jersey. Provident advanced, on behalf of the Company, progress payments to various suppliers based on the work completed. In accordance with the terms of the agreement, the advances bore interest at a rate of 1% per month until all payments were made, at which time the arrangement converted to a thirty-six month lease, which has been classified as a capital lease. In July 2009, the Company exercised its option to purchase the equipment and leasehold improvements at the end of the lease term for one dollar. On December 15, 2006, the Company entered into a lease agreement with International Business Machines (“IBM”) covering approximately $124 of computer equipment which has been classified as a capital lease. In December 2009, the Company exercised its option to purchase the computer equipment at the end of the lease term for one dollar. |
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| 8. | COMMITMENTS AND CONTINGENCIES |
|----|-------------------------------|

|   | A. | Leases: The Company leases office and warehouse space, as well as certain equipment under non-cancellable operating leases expiring on various dates through fiscal year 2016. Total rent expense charged to operations for the years ended March 31, 2011, 2010 and 2009, was approximately $2,481, $2,559, and $2,786, respectively. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 8. | COMMITMENTS AND CONTINGENCIES (Continued) |
|----|-------------------------------------------|

|   |   | At March 31, 2011, the future minimum annual rental commitments under non-cancellable operating leases are as follows: |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------|

| For the Year Ending March 31, |   | Amount |    |
|------------------------------------|--------|--------|---------|
|                               |   |   |    |
| 2012                               |   | $      | 2,166   |   |
| 2013                               |   |   | 1,945   |   |
| 2014                               |   |   | 1,977   |   |
| 2015                               |   |   | 2,021   |   |
| 2016                               |   |   | 1,118   |   |
| Thereafter                         |   |   | ― |   |
| Total                              |   | $      | 9,227   |   |

|   |   | The future minimum annual rental commitments are net of future minimum annual rental income of $186 in fiscal year 2012. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------|

|   | B. | License and Distribution Agreements: During the year ended March 31, 2011, the Company held exclusive worldwide licenses and sublicenses to manufacture and sell fragrance and other related products for XOXO, Paris Hilton, babyGund, Jessica Simpson, Nicole Miller, Josie Natori, Queen Latifah, Marc Ecko, Rihanna, Kanye West, and Vince Camuto.  During the year ended March 31, 2011, the Company’s license with XOXO expired on June 30, 2010, the license with babyGund expired September 30, 2010, and the license with GUESS? expired December 31, 2009, and were not renewed. XOXO On December 1, 2003, Victory International (USA), LLC (“Victory”) had entered into a license agreement with Global Brand Holdings, LLC (the “Fragrance License”) to manufacture and distribute XOXO branded fragrances. The first XOXO fragrances were introduced by Victory during December 2004. On January 7, 2005, the Company entered into a purchase and sale agreement, effective January 6, 2005, (the “Purchase Agreement”) with Victory, whereby it acquired the exclusive worldwide licensing rights, along with inventories, molds, designs and other assets, relating to the XOXO fragrance brand. Under the Purchase Agreement, Victory assigned its rights, and the Company assumed the obligations, under the Fragrance License. As consideration, Victory was paid approximately $7,460, of which $2,550 was in the form of a 60-day promissory note payable in two equal installments on February 6, and March 6, 2005. The payments were made as scheduled. During June 2006, the Company negotiated renewal terms which, among other items, reduced minimum royalty requirements and extended the Fragrance License for an additional three years through June 30, 2010.  On June 30, 2010, the XOXO license expired and was not renewed.  As of March 31, 2011, the Company has sold all remaining XOXO fragrance brand inventory in accordance with the provisions of the agreement. Paris Hilton Effective June 1, 2004, the Company entered into an exclusive license agreement with Paris Hilton Entertainment, Inc. (“PHEI”), to develop, manufacture and distribute prestige fragrances and related products, on an exclusive basis, under the Paris Hilton name, which was scheduled to expire on June 30, 2009. During June 2009, we renewed, at the Company’s option, the license agreement for an additional five-year period through June 30, 2014. The first Paris Hilton women’s fragrance was launched during November 2004, and was followed by a launch of a men’s fragrance in April 2005. On January 26, 2005, the Company entered into an exclusive worldwide license agreement with PHEI, to develop, manufacture and distribute watches and other time pieces under the Paris Hilton name. The initial term of the agreement expired on June 30, 2010, and was renewable for an additional five-year period. The first “limited edition” watches under this agreement were launched during December 2005 and a line of “fashion watches” were launched during spring 2006. The Company did not exercise its option to renew this license. As of March 31, 2011, the Company has sold all remaining inventory of the Paris Hilton brand watches in accordance with the provisions of the agreement. |
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| 8. | COMMITMENTS AND CONTINGENCIES (Continued) |
|----|-------------------------------------------|

|   |   | On May 11, 2005, the Company entered into an exclusive worldwide license agreement with PHEI, to develop, manufacture and distribute cosmetics under the Paris Hilton name. The initial term of the agreement expired on January 15, 2011, and was renewable for an additional five-year period. No products were launched under this license. As the cosmetic license was due to expire in fiscal year 2011, all remaining royalty obligations were expensed in fiscal year 2010. The Company did not exercise its option to renew this license. On May 13, 2005, the Company entered into an exclusive worldwide license agreement with PHEI, to develop, manufacture and distribute handbags, purses, wallets and other small leather goods, under the Paris Hilton name. The initial term of the agreement expired on January 15, 2011, and was renewable for an additional five-year period. The first products under this agreement were launched during summer 2006. During fiscal 2008, the Company sublicensed the international rights under this license. The Company remained contingently liable for the minimum guaranteed royalties due through the remainder of this agreement. The Company did not exercise its option to renew this license.  As of March 31, 2011, the Company has sold all remaining inventory of the Paris Hilton brand handbags in accordance with the provisions of the agreement. On April 5, 2006, the Company entered into an exclusive worldwide license agreement with PHEI, to develop, manufacture and distribute sunglasses under the Paris Hilton name. The initial term of the agreement expires on January 15, 2012, and is renewable for an additional five-year period. In January 2009, the Company entered into an agreement with Gripping Eyewear, Inc. (”GEI”), assigning the worldwide rights with PHEI, for the production and distribution of Paris Hilton sunglasses. The Company remains contingently liable for the minimum guaranteed royalties due through the remainder of this agreement. The Company does not anticipate any further renewals of this license. babyGUND Effective April 6, 2005, the Company entered into an exclusive license agreement with GUND, Inc., to develop, manufacture and distribute children’s fragrances and related products on a worldwide basis under the babyGund trademark. The agreement continued through September 30, 2010, and was renewable for an additional two years if certain sales levels were met. The Company did not exercise its option to renew this license.  As of March 31, 2011, the Company has sold all remaining babyGUND fragrance brand inventory in accordance with the provisions of the agreement.  Jessica Simpson On June 21, 2007, the Company entered into an exclusive license agreement with VCJS, LLC, to develop, manufacture and distribute prestige fragrances and related products under the Jessica Simpson name. The initial term of the agreement expires five years from the date of the first product sales and is renewable for an additional five years if certain sales levels are met. The Company launched the first fragrance under this license during August 2008. Nicole Miller On August 1, 2007, the Company entered into an exclusive license agreement with Kobra International, Ltd., to develop, manufacture and distribute prestige fragrances and related products under the Nicole Miller name. The initial term of the agreement expires on September 30, 2013, and is renewable for two additional terms of three years each, if certain sales levels are met. The Company launched a new fragrance under this license in April 2010.  The license agreement was amended on January 17, 2011, which, among other items, reduced minimum royalty and advertising commitments. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 8. | COMMITMENTS AND CONTINGENCIES (Continued) |
|----|-------------------------------------------|

|   |   | Josie Natori Effective May 1, 2008, the Company entered into an exclusive license agreement with J.N. Concepts, Inc., to develop, manufacture and distribute prestige fragrances and related products under the Josie Natori name. The initial term of the agreement expires on December 31, 2012, and is renewable for an additional three-year term if certain sales levels are met. The Company launched the first fragrance under this license in July 2009. The license agreement was amended on December 10, 2010, which, among other items, reduced minimum royalties. Queen Latifah Effective May 22, 2008, the Company entered into an exclusive license agreement with Queen Latifah Inc., to develop, manufacture and distribute prestige fragrances and related products under the Queen Latifah name. The initial term of the agreement expires on March 31, 2014, and is renewable for an additional five-year term if certain sales levels are met. The Company launched the first fragrance under this license in late June 2009. Marc Ecko Effective November 5, 2008, the Company entered into an exclusive license agreement with Ecko Complex LLC, to develop, manufacture and distribute fragrances under the Marc Ecko trademarks. The initial term of the agreement expires on December 31, 2014, and is renewable for an additional three-year term if certain sales levels are met. The Company launched the first fragrance under this license in late September 2009. The license agreement was amended on November 2, 2010, which, among other items, reduced minimum royalty and advertising commitments. Rihanna On April 7, 2009, the Company entered into a sublicense agreement with Artistic Brands for the exclusive worldwide rights to develop, manufacture and distribute prestige fragrances and related products under the Rihanna name. The initial term of the agreement expires on the fifth anniversary of the first date products are shipped and is renewable for an additional three-year term if certain sales levels are met. Under the terms of the sublicense agreement, the Company assumes the obligation to pay a minimum royalty, whether or not any product sales are made, and spend minimum amounts for advertising based upon minimum sales volume. The Company launched a new fragrance under this license in late January 2011. Kanye West On April 7, 2009, the Company entered into a sublicense agreement with Artistic Brands for the exclusive worldwide rights to develop, manufacture and distribute prestige fragrances and related products under the Kanye West name. On March 2, 2011, the Company entered into an amended and restated sublicense agreement with Artistic Brands.  The initial term of the sublicense expires on March 31, 2017, and is renewable for an additional three-year term if certain sales levels are met. Under the terms of the amended and restated sublicense agreement, the Company assumes the obligation to pay a minimum royalty, whether or not any product sales are made, and spend minimum amounts for advertising based upon sales volume.  The Company anticipates launching a new fragrance under this license in late fiscal year 2012. Vince Camuto On June 4, 2010, the Company entered into an exclusive fragrance licensing agreement with Vince Camuto, Chief Designer and Chief Executive Officer of Camuto Group, to develop, manufacture and distribute prestige fragrances and related products under the Vince Camuto trademark. The initial term of the agreement expires on March 31, 2016, and is renewable for an additional five-year term if certain sales levels are met. The Company must pay a minimum royalty, whether or not any product sales are made, and spend minimum amounts for advertising based upon sales volume. The Company anticipates launching a new women's fragrance under this license in the fall of 2011. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 8. | COMMITMENTS AND CONTINGENCIES (Continued) |
|----|-------------------------------------------|

|   |   | Minimum Royalty Payments Under all of these license agreements, the Company must pay a minimum royalty, whether or not any product sales are made, and spend minimum amounts for advertising based on sales volume. The Company believes it is in compliance with all material obligations under the above agreements. GUESS? Effective November 1, 2003, we entered into an exclusive license agreement with GUESS? and GUESS? IP Holder L.P., to develop, manufacture and distribute prestige fragrances and related products on a worldwide basis. This license expired on December 31, 2009, and was not renewed. Continuing Obligations for Advertising and Royalty The Company expects to incur continuing obligations for advertising and royalty expense under these license agreements. As of March 31, 2011, 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: |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|        |   | For the Year Ending March 31, |   |
|-------------|--------|------------------------------------|--------|
|        |   | 2012                               |   |   | 2013 |   |   | 2014 |   |   | 2015 |   |   | 2016 |   |   | Thereafter |   |
| Advertising |   | $                                  | 28,403 |   |   | $ | 33,134 |   |   | $ | 27,144 |   |   | $ | 15,864 |   |   | $ | 13,117 |   |   | $ | 3,890 |   |
| Royalties   |   | $                                  | 7,724  |   |   | $ | 8,737 |   |   | $ | 7,552 |   |   | $ | 4,785 |   |   | $ | 4,301 |   |   | $ | 1,167 |   |

|   | C. | Trademarks: Through various acquisitions since 1991, the Company acquired worldwide trademarks and distribution rights including those for LIMOUSINE. In addition during 1994, Fred Hayman Beverly Hills, Inc. (“FHBH”) granted the Company an exclusive 55-year royalty free license. Accordingly, there are no licensing agreements requiring the payment of royalties by the Company on these trademarks and the Company has the rights to license all of these trademarks, other than FHBH, for all classes of merchandise. On March 28, 2003, the Company entered into an exclusive agreement to sublicense the FHBH rights to Victory for a royalty of 2% of net sales, with a guaranteed minimum annual royalty of $50 (the “FHBH Sublicense”). The initial term of the FHBH Sublicense expired on December 31, 2008, and is automatically renewable every five years at the sublicensee’s option. The FHBH Sublicense excluded the rights to “273 Indigo” for men and women, the latest fragrance introduction for the FHBH brand, as well as all new FHBH product development rights. On October 17, 2003, the parties amended the FHBH Sublicense, granting new FHBH product development rights to the sublicensee. In addition, the guaranteed minimum annual royalty increased to $75 and royalty percentage on sales of new FHBH products increased to 3% of net sales. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | D. | Employment and Consulting Agreements: As of March 31, 2011, the Company had contracts with certain officers, employees and consultants which expire from July 2011 through March 2012. Minimum commitments under these contracts total approximately $803 for the year ending March 31, 2012. On May 18, 2011, in connection with an amendment to an executive officer's employment agreement, the Company granted, to the executive officer, options under the 2007 Plan to acquire 50,000 shares of its common stock at $3.15 per share, the closing price of the stock on May 18, 2011. These options have a life of five years from the date of grant, and vested immediately. The fair value of the options was determined to be $76, which will be expensed as share-based compensation in the quarter ending June 30, 2011. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 8. | COMMITMENTS AND CONTINGENCIES (Continued) |
|----|-------------------------------------------|

|   |   | On April 1, 2010, the Company granted, to two executive officers, options to acquire 50,000 and 20,000 shares, respectively, of common stock at $2.25 per share, the closing price of the stock on April 1, 2010. These options have a life of five years from the date of grant. The options vest 50% immediately and 50% on April 1, 2011, for one executive officer, and July 31, 2011, for the other executive officer, respectively. The fair value of the options was determined to be $60 and $24, respectively. On June 5, 2009, the Company granted, to an executive officer, 100,000 options to acquire shares of common stock at $1.84 per share, the closing price of the stock on June 5, 2009. These options have a life of five years from the date of grant, and vest 33% each year over a three-year period. The fair value of the options was determined to be $111, which is being expensed as share-based compensation over a three-year period in accordance with the vesting period of the options. See Notes 10 and 16 to the Consolidated Financial Statements for further discussion of all options. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | E. | Purchase Commitments: As of March 31, 2011, the Company is contingently liable in the amount of approximately $26,184 for purchase orders issued in the normal course of business for components, raw materials and promotional supplies. The purchase orders, for the most part, stipulate delivery dates ranging from thirty days to periods exceeding one year, based on forecasted production needs. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | F. | Litigation: The Company is a party to legal and administrative proceedings arising in the ordinary course of business. The outcome of these actions is not expected to have a material effect on the Company’s financial position or results of operations. See Note 12 to the Consolidated Financial Statements for further discussion. |
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| 9. | INCOME TAXES The components of the provision (benefit) for income taxes for each of the years ended March 31 are as follows: |
|----|----------------------------------------------------------------------------------------------------------------------------------------|

|                           |   | Year Ended March 31, |   |
|--------------------------------|--------|---------------------------|--------|
|                           |   | 2011                      |   |   | 2010 |   |   | 2009 |   |
| Current taxes:                 |   |                      |   |   |   |   |   |   |   |
| U.S. federal                   |   | $                         | (285   | ) |   | $ | (7,412 | ) |   | $ | (2,407 | ) |
| U.S. state and local           |   |                      | 160    |   |   |   | 76 |   |   |   | 34 |   |
|                           |   |                      | (125   | ) |   |   | (7,336 | ) |   |   | (2,373 | ) |
| Deferred taxes:                |   |                      |   |   |   |   |   |   |   |   |   |   |
| U.S. federal                   |   |                      | 1,019  |   |   |   | (996 | ) |   |   | 308 |   |
| U.S. state                     |   |                      | (261   | ) |   |   | (655 | ) |   |   | (222 | ) |
|                           |   |                      | 758    |   |   |   | (1,651 | ) |   |   | 86 |   |
| Income tax provision (benefit) |   | $                         | 633    |   |   | $ | (8,987 | ) |   | $ | (2,287 | ) |

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| 9. | INCOME TAXES (Continued) The following table reconciles the statutory federal income tax rate to the Company’s effective tax rate for the years ended March 31 as follows: |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                          |   | 2011   |   |   | 2010   |   |    | 2009     |   |
|-----------------------------------------------|--------|--------|--------|--------|--------|--------|---------|----------|--------|
|                                          |   |   |   |   |   |   |    |     |   |
| Statutory federal income tax rate             |   |   | 35.0   | %      |   |   | 35.0    | %   |   |   | 35.0 | % |
| (Decrease) increase resulting from:           |   |   |   |   |   |   |    |     |   |   |   |   |
| Revisions of prior year’s tax estimates |   |   | (8.6   | )%     |   |   | ― |     |   |   | ― |   |
| Other, including state taxes                  |   |   | 7.4    | %      |   |   | 2.8     | %        |   |   | (0.2 | )% |
|                                          |   |   | 33.8   | %      |   |   | 37.8    | %        |   |   | 34.8 | % |

|   | The tax provision for the year ended March 31, 2011, reflects an estimated effective tax rate of 33.8%.  The lower effective tax rate is a result of $162 in revisions to the prior year’s tax estimates for net operating losses (“NOL”) state rates adjustments and other state provision estimates for fiscal year 2010. The tax provision for the year ended March 31, 2011, reflects the carry forward of approximately $4,355 in U.S. federal and state tax NOL generated during the current year, which can be carried forward for federal tax purposes twenty years and for the various states tax purposes for a period of seven to twenty years. During the year ended March 31, 2011, the Company received tax refunds of $7,143 and $209 relating to prior year federal and state income taxes, respectively.  In connection with the filing of the Company’s income tax returns for the fiscal year ended March 31, 2010, the Company accelerated certain deductions for income tax purposes, which resulted in an additional $345 of federal tax refunds over the amount initially estimated at March 31, 2010.  The tax provision for the year ended March 31, 2010, reflects the carry back of approximately $19,422 in U.S. federal tax operating losses generated during the year ended March 31, 2010, to offset taxes paid during the year ended March 31, 2006, in the amounts of approximately $6,798, which is included in income taxes receivable in the accompanying Consolidated Balance Sheet at March 31, 2010. Deferred income taxes as of March 31, 2011 and 2010, are provided for temporary differences between financial reporting carrying value and the tax basis of the Company’s assets and liabilities. The tax effects of temporary differences are as follows: |
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|                                                                  |   | March 31, |    |
|-----------------------------------------------------------------------|--------|----------------|---------|
|                                                                  |   | 2011           |    |   | 2010 |   |
| Deferred Tax Assets:                                                  |   |           |    |   |   |   |
| Current:                                                              |   |           |    |   |   |   |
| Allowance for doubtful accounts, sales returns and allowances         |   | $              | 1,321   |   |   | $ | 1,390 |   |
| Inventory write-downs                                                 |   |           | 1,182   |   |   |   | 2,151 |   |
| Shared-based compensation                                             |   |           | 38      |   |   |   | 151 |   |
| NOL carry forwards                                                    |   |           | 3,176   |   |   |   | 1,227 |   |
| Other, net                                                            |   |           | (257    | ) |   |   | 319 |   |
|                                                                  |   | $              | 5,460   |   |   | $ | 5,238 |   |
| Long-term, net:                                                       |   |           |    |   |   |   |   |   |
| Depreciation on intangibles                                           |   | $              | 22      |   |   | $ | 1,300 |   |
| Share-based compensation                                              |   |           | 548     |   |   |   | 439 |   |
| Other                                                                 |   |           | ― |   |   |   | 63 |   |
| Depreciation and amortization on equipment and leasehold improvements |   |           | 117     |   |   |   | (135 | ) |
|                                                                  |   | $              | 687     |   |   | $ | 1,667 |   |

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| 9. | INCOME TAXES (Continued) As of March 31, 2011, the Company had  NOL carry forwards for federal income tax purposes of approximately $5,420, which will expire for federal tax purposes beginning March 2028 through March 2031.  The Company also has NOL carry forwards for states income tax purposes which will expire beginning March 2015 through March 2031.  The realization of the NOL carry forwards included in deferred tax assets is dependent on generating sufficient taxable income prior to expiration of the loss carry forwards. Although realization is not assured, the Company believes it is more likely than not that all of the deferred tax assets will be realized. The amount of the deferred tax assets is considered realizable; however, it could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced. The Company did not recognize a liability for unrecognized tax benefits or adjust any recorded liabilities for uncertain tax positions. As of the years ended March 31, 2011 and 2010, there was no material liability for income tax associated with unrecognized tax benefits. The Company does not anticipate any material adjustments relating to unrecognized tax benefits within the next twelve months, however; the outcome of tax matters is uncertain and unforeseen results can occur. The Company classifies interest and penalties associated with income tax obligations in general and administrative expenses, which was not significant for the years ended March 31, 2011, 2010, and 2009. The Company is under an IRS audit of its fiscal years 2007 through 2010 Federal income tax returns, as a result of the carry back of its net operating losses incurred in fiscal years ended March 31, 2009 and 2010. |
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| 10. | STOCK OPTION AND OTHER PLANS |
|-----|------------------------------|

|   | 2007 Plan |
|--------|-----------|

|   | The Parlux Fragrances, Inc. 2007 Stock Incentive Plan (the “2007 Plan”) provides for the grant of equity-based awards to employees, officers, directors, consultants and/or independent contractors of the Company.  A maximum of 1,500,000 shares of common stock may be issued under the 2007 Plan, of which 986,800 options were granted as of March 31, 2011. The 2007 Plan was adopted by the Board of Directors on June 20, 2007, subsequently approved by the stockholders on October 11, 2007. The shares underlying the options were registered with the Securities and Exchange Commission on a Form S-8 registration statement declared effective on December 28, 2007. On April 1, 2009, the Company granted options to acquire 30,000 shares of its common stock (which vested on the grant date) under the 2007 Plan to consultants, to acquire shares of common stock during a five-year period at $0.82 per share, the closing price of the stock on April 1, 2009. The fair value of the options was determined to be $13, which was expensed as share-based compensation during the quarter ended June 30, 2009. The fair value of these options at the date of grant was estimated using a Black-Scholes option pricing model with the following weighted average assumptions. |
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| Expected life (years)   |   |   | 3  |   |
|-------------------------|--------|--------|----|--------|
| Expected volatility     |   |   | 77 | %      |
| Risk-free interest rate |   |   | 2  | %      |
| Dividend yield          |   |   | 0  | %      |

|   | On June 5, 2009, the Company granted, to an executive officer, options under the 2007 Plan to acquire 100,000 shares of its common stock at $1.84 per share, the closing price of the stock on June 5, 2009. These options have a life of five years from the date of grant, and vest 33% each year over a three-year period. The fair value of the options was determined to be $111, which is being expensed as share-based compensation over a three-year period in accordance with the vesting period of the options. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 10. | STOCK OPTION AND OTHER PLANS (Continued) The fair value of these options at the date of grant was estimated using a Black-Scholes option pricing model with the following weighted average assumptions. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Expected life (years)   |   |   | 4  |   |
|-------------------------|--------|--------|----|--------|
| Expected volatility     |   |   | 82 | %      |
| Risk-free interest rate |   |   | 2  | %      |
| Dividend yield          |   |   | 0  | %      |

|   | On October 13, 2009, the Company granted options under the 2007 Plan to acquire 60,000 shares of its common stock (15,000 each, which vested on the grant date) to its four non-employee directors, to acquire common stock during a five-year period at $2.18 per share, the closing price of the stock on October 13, 2009. The fair value of the options was determined to be $79, which was expensed as share-based compensation during the quarter ended December 31, 2009. The fair value of these options at the date of grant was estimated using a Black-Scholes option pricing model with the following weighted average assumptions. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Expected life (years)   |   |   | 4  |   |
|-------------------------|--------|--------|----|--------|
| Expected volatility     |   |   | 82 | %      |
| Risk-free interest rate |   |   | 2  | %      |
| Dividend yield          |   |   | 0  | %      |

|   | On March 1, 2010, the Company granted, to various employees, options under the 2007 Plan to acquire 4,000 shares of its common stock at $1.75 per share, the closing price of the stock on March 1, 2010. On March 2, 2010, the Company granted, to various employees, options under the 2007 Plan to acquire 4,000 shares of common stock at $1.76 per share, the closing price of the stock on March 2, 2010. These options have a life of five years from the date of grant (or thirty days after termination of employment for any reason), and vest 25% after each of the first two years, and 50% after the third. The fair value of the options was determined to be $8, which is being expensed as share-based compensation over a three-year period in accordance with the vesting period of the options. The fair value of these options at the date of grant was estimated using a Black-Scholes option pricing model with the following weighted average assumptions. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Expected life (years)   |   |   | 4  |   |
|-------------------------|--------|--------|----|--------|
| Expected volatility     |   |   | 81 | %      |
| Risk-free interest rate |   |   | 2  | %      |
| Dividend yield          |   |   | 0  | %      |

|   | On April 1, 2010, the Company granted, to two executive officers and a consultant, options under the 2007 Plan to acquire 50,000, 20,000 and 15,000 shares, respectively, of its common stock at $2.25 per share, the closing price of the stock on April 1, 2010. These options have a life of five years from the date of grant. The executive officer’s options vested 50% immediately, with the remaining 50% vesting on April 1, 2011, for one executive officer, and July 31, 2011, for the other executive officer, respectively, and are being expensed as share-based compensation in accordance with the vesting period.  The consultant’s options vested immediately and were expensed as share-based compensation. The fair value of the options was determined to be $60, $24, and $17, respectively. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 10. | STOCK OPTION AND OTHER PLANS (Continued) The fair value of these options at the date of grant was estimated using a Black-Scholes option pricing model with the following weighted average assumptions. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Expected life (years)   |   |   | 3  |   |
|-------------------------|--------|--------|----|--------|
| Expected volatility     |   |   | 81 | %      |
| Risk-free interest rate |   |   | 2  | %      |
| Dividend yield          |   |   | 0  | %      |

|   | On July 1, 2010, the Company granted, to various employees, options under the 2007 Plan to acquire 253,800 shares of its common stock at $1.74 per share, the closing price of the stock on July 1, 2010. These options have a life of five years from the date of grant (or thirty days after termination of employment for any reason), and vest 25% after each of the first two years, and 50% after the third year.  The fair value of the options was determined to be $261, which is being expensed as share-based compensation over a three year period in accordance with the vesting period of the options. The fair value of these options at the date of grant was estimated using a Black-Scholes option pricing model with the following weighted average assumptions. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Expected life (years)   |   |   | 4  |   |
|-------------------------|--------|--------|----|--------|
| Expected volatility     |   |   | 79 | %      |
| Risk-free interest rate |   |   | 2  | %      |
| Dividend yield          |   |   | 0  | %      |

|   | On October 12, 2010, the Company granted options under the 2007 Plan to acquire 60,000 shares of its common stock (15,000 each, which vested on the grant date) to its four non-employee directors, to acquire common stock during a five-year period at $2.23 per share, the closing price of the stock on October 12, 2010.  The fair value of the options was determined to be $79, which was expensed as share-based compensation during the quarter ended December 31, 2010. The fair value of these options at the date of grant was estimated using a Black-Scholes option pricing model with the following weighted average assumptions. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Expected life (years)   |   |   | 4  |   |
|-------------------------|--------|--------|----|--------|
| Expected volatility     |   |   | 80 | %      |
| Risk-free interest rate |   |   | 2  | %      |
| Dividend yield          |   |   | 0  | %      |

|   | Employee Plans and Warrants Additionally, the Company had two stock option plans which provided for equity-based awards to its employees other than its directors and officers (collectively, the "Employee Plans").  Under the Employee Plans, the Company reserved 1,000,000 shares of common stock; options to acquire 470,774 shares of its common stock were granted of which 369,774 were exercised. All stock options had an exercise price that was equal to the market value of the Company's stock on the date the options were granted. The term of the stock option awards is five years from the date of grant. In addition, the Company had previously issued 3,440,000 warrants to certain officers, employees, consultants and directors (20,000 of which are outstanding at March 31, 2011), all of which were granted at or in excess of the market value of the underlying shares at the date of grant, and are exercisable for a ten-year period.  No further equity-based awards are allowed under these plans. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 10. | STOCK OPTION AND OTHER PLANS (Continued) On April 7, 2009, the Company granted warrants, in connection with the sublicenses for Rihanna and Kanye West, to Artistic Brands (a licensing company in which entertainment mogul and icon Shawn “JAY-Z” Carter and Rene Garcia are principals) and the celebrities and their respective affiliates, for the purchase of 4,000,000 shares of the Company’s common stock at an exercise price of $5.00 per share.  On December 18, 2009, the Company’s stockholders approved an amendment to the Company's certificate of incorporation to increase the total number of shares of common stock that the Company is authorized to issue from 30,000,000 to 40,000,000 shares and the issuance of warrants to purchase an aggregate of up to an additional 8,000,000 shares of its common stock at an exercise price of $5.00 per share in connection with the Artistic Brands licenses. On December 18, 2009, the Company granted additional warrants in connection with the two sublicenses (as noted above), upon stockholder’s approval, for the purchase of 2,000,000 shares of the Company’s common stock at a purchase price of $5.00 per share, pursuant to the agreement, dated April 3, 2009, described below. The warrants, which were granted at an exercise price in excess of the market value of the underlying shares at the grant date, vest over four years, and are exercisable for an eight-year period (see Note 6 for further discussion). The fair value of the warrants was determined to be $3,554 ($1,282 for the warrants issued on April 7, 2009, and $2,272 for the warrants issued December 18, 2009), which is included in additional paid-in capital in the accompanying Consolidated Balance Sheets as of March 31, 2011 and 2010. The sublicenses are recorded at the fair value of the warrants and are included in trademarks and licenses, net in the accompanying Consolidated Balance Sheets as of March 31, 2011 and 2010. The fair value of these warrants at the date of grant was estimated using a Black-Scholes option pricing model with the following weighted average assumptions. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Expected life (years)   |   |   | 6         |   |
|-------------------------|--------|--------|-----------|--------|
| Expected volatility     |   |   | 77 % - 82 | %      |
| Risk-free interest rate |   |   | 2         | %      |
| Dividend yield          |   |   | 0         | %      |

|   | Option and Warranty Activity The expected life of all of the various options and warrants represented the estimated period of time until exercise based on historical experience of similar awards, giving consideration to the remaining contractual terms and expectations of future employee behavior. The expected volatility was estimated using the historical volatility of the Company's stock, which management believes is the best indicator at this time. The risk-free interest rate was based on the implied yield available on U.S. Treasury zero coupon issues with an equivalent term. The Company has not paid dividends in the past and does not intend to in the foreseeable future. When estimating forfeitures, the Company considers an analysis of actual option forfeitures, as well as management judgment. The employee forfeiture rate used when calculating the value of stock options granted during the years ended March 31, 2011 and 2010, was approximately 7% and 5%, respectively. Share-based compensation included in general and administrative expenses for the years ended March 31, 2011, 2010 and 2009, was $305, $587, and $348, respectively. At March 31, 2011, there was approximately $335 of unrecognized compensation cost relating to stock options and warrants outstanding, which is expected to be recognized over a period of three years. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 10. | STOCK OPTION AND OTHER PLANS (Continued) A summary of stock option and warrant activity during the three years ended March 31, 2011, follows: |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                  |   | Number ofShares |      |   | WeightedAverageExercisePrice |   |   | WeightedAverageRemainingContractualLife |   |   | AggregateIntrinsicValue(in thousands) |   |
|---------------------------------------|--------|-----------------|-----------|--------|------------------------------|--------|--------|-----------------------------------------|--------|--------|---------------------------------------|--------|
|                                  |   |            |      |   |                         |   |   |                                    |   |   |                                  |   |
| Outstanding as of March 31, 2008 |   |            | 901,850   |   |                         | $      | 2.64   |                                    |   |   | 3.57                                  |   |   | $ | 826 |   |
| Granted                               |   |            | 209,225   |   |                         |   | 3.10   |                                    |   |   | 4.75                                  |   |   |   | — |   |
| Exercised                             |   |            | (116,500  | )      |                         |   | 1.57   |                                    |   |   | 3.27                                  |   |   |   | (212 | ) |
| Forfeited                             |   |            | (12,400   | )      |                         |   | 2.95   |                                    |   |   | 4.47                                  |   |   |   | — |   |
| Outstanding as of March 31, 2009 |   |            | 982,175   |   |                         |   | 2.87   |                                    |   |   | 3.04                                  |   |   |   | — |   |
| Granted                               |   |            | 6,198,000 |   |                         |   | 4.90   |                                    |   |   | 7.32                                  |   |   |   | — |   |
| Exercised                             |   |            | (150,000  | )      |                         |   | 1.20   |                                    |   |   | 0.25                                  |   |   |   | (113 | ) |
| Forfeited                             |   |            | (13,025   | )      |                         |   | 2.85   |                                    |   |   | 3.95                                  |   |   |   | — |   |
| Outstanding as of March 31, 2010 |   |            | 7,017,150 |   |                         |   | 4.70   |                                    |   |   | 6.75                                  |   |   |   | 227 |   |
| Granted                               |   |            | 398,800   |   |                         |   | 1.92   |                                    |   |   | 4.11                                  |   |   |   | — |   |
| Exercised                             |   |            | (254,000  | )      |                         |   | 1.29   |                                    |   |   | 0.87                                  |   |   |   | (444 | ) |
| Forfeited                             |   |            | (55,325   | )      |                         |   | 0.83   |                                    |   |   | 3.69                                  |   |   |   | — |   |
| Outstanding as of March 31, 2011 |   |            | 7,106,625 |   |                         | $      | 4.68   |                                    |   |   | 5.87                                  |   |   | $ | 341 |   |
| Exercisable as of March 31, 2011 |   |            | 2,281,543 |   |                         | $      | 4.44   |                                    |   |   | 5.08                                  |   |   | $ | 341 |   |

|   | Prior to July 24, 2007, upon exercise of options and warrants, the Company issued previously authorized but unissued common stock to the holders. Commencing July 24, 2007, upon exercise of options and warrants, the Company issued shares from treasury shares to the holders, including the 100,000 warrants exercised during the first quarter of fiscal 2009. The difference between the original cost of the treasury shares $177 and the proceeds received from the warrant holder $122 was recorded as a reduction in retained earnings. As of March 31, 2008, a deferred tax benefit of $192 was provided on the 100,000 warrants in connection with the share-based compensation charge from fiscal year 2007. During the year ended March 31, 2009, the Company adjusted the deferred tax asset and reduced additional paid-in capital by $114 as a result of the exercise. As of March 31, 2010, a deferred tax benefit of $289 was provided on 150,000 warrants exercised in connection with the share- based compensation charge from fiscal year 2007. During the year ended March 31, 2010, the Company adjusted the deferred tax asset and reduced additional paid-in capital by $246 as a result of the exercise.  As of March 31, 2011, a deferred tax benefit of $151 was provided on 214,000 warrants exercised in connection with the share-based compensation charge from fiscal year 2007.  During the year ended March 31, 2011, the Company adjusted the deferred tax asset and increased additional paid-in capital by $8 as a result of the warrants exercised and reduced additional paid-in capital by $4 as a result of the 40,000 options exercised during the year. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 10. | STOCK OPTION AND OTHER PLANS (Continued) The following table summarizes information about the stock options and warrants outstanding at March 31, 2011, of which 2,281,543 are exercisable: |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                    |   |   |   | Options and Warrants Outstanding |      |
|-------------------------|--------|--------|--------|----------------------------------|-----------|
| Range ofExercise Prices |   | Amount |   | Weighted AverageExercise Price   |      | Weighted AverageRemainingContractual Life |   | AggregateIntrinsicValue (in thousands) |   |
|                    |   |   |   |                             |      |   |   |   |   |   |   |   |   |
|                    |   | $0.82  |   |                        | 15,000    |   | $0.82 |   | 3.25 |   | $ | 35 |   |
| $1.74                   | -      | $1.84  |   |                             | 349,900   |   |   1.77 |   | 3.83 |   |   | 150 |   |
| $2.18                   | -      | $2.71  |   |                             | 279,475   |   |   2.39 |   | 3.66 |   |   | 156 |   |
| $3.30                   | -      | $4.60  |   |                             | 459,750   |   |   4.24 |   | 1.66 |   |   | — |   |
| $5.00                   | -      | $5.55  |   |                             | 6,002,500 |   |   5.00 |   | 6.42 |   |   | — |   |
|                    |   |   |   |                             | 7,106,625 |   | $4.68 |   | 5.87 |   | $ | 341 |   |

|   | The intrinsic value of the stock options and warrants exercised during the years ended March 31, 2011, 2010 and 2009, was approximately $444, $113, and $212, respectively, and the tax benefit from the exercise of the options and warrants during the years ended March 31, 2011, 2010 and 2009, amounted to $169, $43, and $78, respectively.Proceeds relating to the exercise of all options and warrants during the years ended March 31, 2011, 2010 and 2009, were $327, $180, and $182, respectively.401k PlanThe Company established a 401-K plan covering substantially all of its U.S. employees.  Commencing on April 1, 1996, the Company matched 25% up to 6% of employee contributions, within annual limitations established by the Internal Revenue Code. Beginning on September 2, 2007, the Company increased its matching contribution to 50% up to 6% of employee contributions. During the year ended March 31, 2010, the Company suspended the 401-K matching program, due to the economic climate.  On April 1, 2010, the Company reinstated the matching contribution of 25% up to 6% of the employee contributions. The cost of the matching program totaled approximately $90, $0, and $218 for the years ended March 31, 2011, 2010 and 2009, respectively. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 11. | BASIC AND DILUTED EARNINGS PER COMMON SHARE The following is the reconciliation of the numerators and denominators of the basic and diluted net income per common share calculations: |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                         |   | For the Year Ended March 31, |          |
|----------------------------------------------------------------------------------------------|--------|-----------------------------------|---------------|
|                                                                                         |   | 2011                              |          | 2010 |   | 2009 |   |
|                                                                                         |   |                              |          |   |   |   |   |   |   |
| Net income (loss)                                                                            |   | $                                 | 1,242         |   |   | $ | (14,759 | ) |   | $ | (4,284 | ) |
| Weighted average number of shares issued                                                     |   |                              | 30,166,678    |   |   |   | 29,999,372 |   |   |   | 29,984,704 |   |
| Weighted average number of treasury shares                                                   |   |                              | (9,668,977    | ) |   |   | (9,668,977 | ) |   |   | (9,447,080 | ) |
| Weighted average number of shares outstanding used in basic earnings per share calculation   |   |                              | 20,497,701    |   |   |   | 20,330,395 |   |   |   | 20,537,624 |   |
| Basic net income (loss) per common share                                                     |   | $                                 | 0.06          |   |   | $ | (0.73 | ) |   | $ | (0.21 | ) |
| Weighted average number of shares outstanding used in basic earnings per share calculation   |   |                              | 20,497,701    |   |   |   | 20,330,395 |   |   |   | 20,537,624 |   |
| Effect of dilutive securities:                                                               |   |                              |          |   |   |   |   |   |   |   |   |   |
| Stock options and warrants(1)                                                                |   |                              | 155,604       |   |   |   | — |   |   |   | — |   |
| Weighted average number of shares outstanding used in diluted earnings per share calculation |   |                              | 20,653,305    |   |   |   | 20,330,395 |   |   |   | 20,537,624 |   |
| Diluted net income (loss) per common share(1)                                                |   | $                                 | 0.06          |   |   | $ | (0.73 | ) |   | $ | (0.21 | ) |
| Antidilutive securities not included in diluted earnings per share computation(1):           |   |                              |          |   |   |   |   |   |   |   |   |   |
| Options and warrants to purchase common stock                                                |   |                              | 6,525,059     |   |   |   | 7,017,150 |   |   |   | 982,175 |   |
| Exercise price                                                                               |   | $                                 | 3.70 to $5.55 |   |   | $ | 2.71 to 5.55 |   |   | $ | 1.04 to 5.55 |   |

| (1) | The number of shares utilized in the calculation of diluted (loss) earnings per share and net (loss) income were the same as those used in the basic calculation of earnings per share for the years ended March 31, 2010 and 2009, as we incurred a loss for those periods. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 12. | LEGAL PROCEEDINGS Litigation On June 21, 2006, the Company was served with a stockholder derivative action (the “Derivative Action”) filed in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida by NECA-IBEW Pension Fund, purporting to act derivatively on behalf of the Company. The Derivative Action named Parlux Fragrances, Inc. as a defendant, along with Ilia Lekach, Frank A. Buttacavoli, Glenn Gopman, Esther Egozi Choukroun, David Stone, Jaya Kader Zebede and Isaac Lekach, each of whom at that date was one of our directors. The Derivative Action related to the June 2006 proposal from PF Acquisition of Florida LLC (“PFA”), which was owned by Ilia Lekach, to acquire all of the Company’s outstanding shares of common stock for $29.00 ($14.50 after the Company’s June 16, 2006, Stock Split) per share in cash (the “Proposal”). The original Derivative Action sought to remedy the alleged breaches of fiduciary duties, waste of corporate assets, and other violations of law and sought injunctive relief from the Court appointing a receiver or other truly neutral third party to conduct and/or oversee any negotiations regarding the terms of the Proposal, or any alternative transaction, on behalf of Parlux and its public shareholders, and to report to the Court and plaintiff’s counsel regarding the same. The Derivative Action alleged that the unlawful plan to attempt to buy out the public shareholders of Parlux without having proper financing in place, and for inadequate consideration, violated applicable law by directly breaching and/or aiding the other defendants’ breaches of their fiduciary duties of loyalty, candor, due care, independence, good faith and fair dealing, causing the complete waste of corporate assets, and constituting an abuse of control by the defendants. Before any response to the original complaint was due, counsel for plaintiffs indicated that an amended complaint would be filed. That First Amended Complaint (the "Amended Complaint") was served to the Company’s counsel on August 17, 2006. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 12.  | LEGAL PROCEEDINGS (Continued) The Amended Complaint continued to name the then Board of Directors as defendants along with Parlux, as a nominal defendant. The Amended Complaint was largely a collection of claims previously asserted in a 2003 derivative action, which the plaintiffs in that action, when provided with additional information, simply elected not to pursue. It added to those claims, assertions regarding a 2003 buy-out effort and an abandoned buy-out effort of PFA. It also contained allegations regarding the prospect that the Company's stock might be delisted because of a delay in meeting SEC filing requirements. The Company and the other defendants engaged Florida securities counsel, including the counsel who successfully represented the Company in the previous failed derivative action, and on September 18, 2006, moved to dismiss the Amended Complaint. A Second Amended Complaint was filed on October 26, 2006, which added alleged violations of securities laws, which the Company moved to dismiss on December 1, 2006. A hearing on the dismissal was held on March 8, 2007. On March 22, 2007, the motion to dismiss was denied and the defendants were provided twenty (20) days to respond, and a response was filed on March 29, 2007. During fiscal year 2008, there followed extremely limited discovery. A number of the factual allegations upon which the various complaints were based have fallen away, simply by operation of time. The Company was then advised that one of the two plaintiffs was withdrawing from the case. No explanation was given. The remaining plaintiff then spent several months obtaining documents. The Company believes the documents provide no support for any of the claims. The Company then sought to take the deposition of the remaining plaintiff, who lives in Seattle. He declined to travel due to a long-standing “fear of flying” and filed a motion on August 4, 2008, for a protective order from the Court. The Court denied the motion and required him to appear in Florida for his deposition. As a consequence of this ruling, his counsel then informed us that this plaintiff, too, was withdrawing from the case due to this travel requirement, leaving no plaintiff. The Company was then served with a motion on September 15, 2008, to further amend the complaint by inserting a new plaintiff. Our counsel opposed that motion on the grounds that a person not a party to the case has no standing to move to amend the complaint. A hearing on that motion was held on December 19, 2008, and the motion to amend was denied by the Court. The plaintiff's counsel was given leave to amend the complaint and intervene on behalf of a new plaintiff. Counsel also moved to amend the complaint yet again. After a lengthy hearing, the Court permitted the new plaintiff to intervene and to file a Third Amended Complaint on July 29, 2009. The Third Amended Complaint claims damages to the Company based on allegations of (1) insider trading; (2) failing to have proper internal controls resulting in delays in the filing of an Annual Report on Form 10-K for 2006 and a Quarterly Report on Form 10-Q for June 2006 and (3) intentionally stifling Parlux’s independent outside auditors in the commencement of the Company’s Sarbanes-Oxley review. Based on that preliminary review and discussions with the directors and detailed discussions with the Company’s counsel, the Company believes that there are meaningful defenses to the claims although discovery will be required to reach a final conclusion as to these matters. An answer was filed to the Third Amended Complaint on September 14, 2009, essentially denying the substantive allegations. Discovery has commenced. A number of depositions were taken of the brokerage firms through which the stock trades were conducted by the then Board of Directors. Two representatives of the Company’s former independent outside auditors, as well as one of the Company’s consultants have been deposed. A deposition of the new plaintiff was completed in February 2010. The new plaintiff had no personal knowledge of any of the basic factual allegations and was simply unhappy that the Company’s stock declined in value.  Depositions of the Company’s Board of Directors, both former and current, named in the suit were commenced.  No completion date has been scheduled and there has been no effort by the plaintiff to complete their depositions. On January 19, 2010, the plaintiff filed a motion for leave to file under seal a motion for partial summary judgment. That motion was granted. The motion for partial summary judgment was filed and was initially scheduled for a hearing on June 25, 2010. That hearing was postponed until September 17, 2010, and then postponed again until January 7, 2011. The hearing scheduled for January 7, 2011, was postponed as well.  A hearing has been scheduled for June 9, 2011.  The motion seeks a ruling that one of the Company’s directors engaged in insider trading. A comprehensive opposing memorandum has been filed on behalf of the director. It directly rebuts the facts upon which the motion is based. |
|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 12.  | LEGAL PROCEEDINGS (Continued) Based on the manner in which this case has been conducted to date, and based on the investigations into the earlier complaint the Company feels the Third Amended Complaint is without merit and subject to challenge and to an effective defense. The plaintiffs have informally initiated settlement inquiries.  Discussions with the Company and the insurer were undertaken by counsel.  No decision has been reached by the Company as to a response. While management is unable to predict with certainty the outcome of the legal proceedings described above, based on current knowledge management believes that the ultimate outcome of these matters will not have a material effect on the Company’s financial position or results of operations. |
|-----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| 13.  | CONCENTRATIONS AND CREDIT RISKS Brands During the last three fiscal years, the following brands (including accessories) have accounted for 10% or more of the Company’s sales: |
|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                           |   | Year Ended March 31, |   |
|------------------------------------------------|--------|---------------------------|--------|
|                                           |   | 2011                      |   |   | 2010 |   |   | 2009 |   |
|                                           |   |                      |   |   |   |   |   |   |   |
| PARIS HILTON                                   |   |                      | 60     | % |   |   | 42 | % |   |   | 55 | % |
| GUESS? (license expired in December 2009) |   |                      | N/A    |   |   |   | 28 | % |   |   | 30 | % |
| JESSICA SIMPSON                                |   |                      | 19     | % |   |   | 15 | % |   |   | 13 | % |

----

|   | Major Customers During the last three fiscal years, the following sales by major customers have accounted for 10% or more of the Company’s sales: |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                        |   | Year Ended March 31, |   |
|-----------------------------|--------|---------------------------|--------|
|                        |   | 2011                      |   |   | 2010 |   |   | 2009 |   |
|                        |   |                      |   |   |   |   |   |   |   |
| Perfumania and Quality King |   | $                         | 47,508 |   |   | $ | 46,658 |   |   | $ | 41,470 |   |
| Macy’s                |   |                      | 27,564 |   |   |   | 34,123 |   |   |   | 34,720 |   |
|                        |   | $                         | 75,072 |   |   | $ | 80,781 |   |   | $ | 76,190 |   |

|   | As of the last two fiscal year ends, net trade accounts receivable owed by major customers are as follows: |
|--------|------------------------------------------------------------------------------------------------------------|

|         |   | March 31, |   |
|--------------|--------|----------------|--------|
|         |   | 2011           |   |   | 2010 |   |
|         |   |           |   |   |   |   |
| Perfumania   |   | $              | 12,708 |   |   | $ | 10,496 |   |
| Macy’s |   |           | 6,843  |   |   |   | 304 |   |
|         |   | $              | 19,551 |   |   | $ | 10,800 |   |

|   | Related parties Related parties are those parties that are known to the Company as having a related party relationship (see Note 2 to the Consolidated Financial Statements for additional information regarding related parties). |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 13.  | CONCENTRATIONS AND CREDIT RISKS (Continued) Revenues from Perfumania (which is a wholly-owned subsidiary of Perfumania Holdings, Inc.) represented 39%, 25%, and 27% of the Company’s net sales during the years ended March 31, 2011, 2010 and 2009, respectively. During the years ended March 31, 2011, 2010 and 2009, revenues from other related parties represented approximately 3%, 8%, and 0%, respectively, of the Company’s net sales. In addition, net trade accounts receivable owed by Perfumania to the Company totaled $12,708 and $10,496 at March 31, 2011 and 2010, respectively. Management continues to evaluate its credit risk and assess the collectability of the Perfumania receivables. Perfumania’s reported financial information, as well as the Company’s payment history with Perfumania, indicates that, historically, Perfumania’s first quarter ended approximately April 30, is Perfumania’s most difficult quarter as is the case with most U.S. based retailers. The Company has, in the past, received significant payments from Perfumania during the last three months of the calendar year, and has no reason to believe that this will not continue. Based on management’s evaluation, no allowances have been recorded as of March 31, 2011 and 2010. Management will continue to evaluate Perfumania’s financial condition on an ongoing basis and consider the possible alternatives and effects, if any, on the Company. Credit risks – international sales Total gross sales to unrelated international customers totaled approximately $30,868, $46,983, and $56,173 for the years ended March 31, 2011, 2010 and 2009, respectively. These gross sales by region were as follows: |
|-----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|          |   | Year Ended March 31, |   |
|---------------|--------|---------------------------|--------|
|          |   | 2011                      |   |   | 2010 |   |   | 2009 |   |
|          |   |                      |   |   |   |   |   |   |   |
| Latin America |   | $                         | 11,691 |   |   | $ | 11,386 |   |   | $ | 19,142 |   |
| Europe        |   |                      | 3,870  |   |   |   | 16,362 |   |   |   | 15,582 |   |
| Caribbean     |   |                      | 2,393  |   |   |   | 1,652 |   |   |   | 2,121 |   |
| Asia/Pacific  |   |                      | 4,711  |   |   |   | 3,928 |   |   |   | 5,751 |   |
| Canada        |   |                      | 4,916  |   |   |   | 3,755 |   |   |   | 4,455 |   |
| Middle East   |   |                      | 3,228  |   |   |   | 5,027 |   |   |   | 4,720 |   |
| Other    |   |                      | 59     |   |   |   | 4,873 |   |   |   | 4,402 |   |
|          |   | $                         | 30,868 |   |   | $ | 46,983 |   |   | $ | 56,173 |   |

|   | No single foreign country or foreign customer accounted for more than 10% of the Company’s gross sales during the years ended March 31, 2011, 2010 and 2009. At March 31, 2011 and 2010, trade receivables from unrelated foreign customers amounted to approximately $3,338 and $1,804, respectively (substantially all of which are payable in U.S. dollars). |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 13.  | CONCENTRATIONS AND CREDIT RISKS (Continued) |
|-----------|---------------------------------------------|

|   | Other Financial instruments which potentially subject the Company to credit risk consist primarily of trade receivables from department and specialty stores in the United States, distributors throughout the world, and related parties. To reduce credit risk for trade receivables from unaffiliated parties, the Company performs ongoing evaluations of its customers’ financial condition but does not generally require collateral. Management has established an allowance for doubtful accounts for estimated losses. The allowances for doubtful accounts are considered adequate to cover estimated credit losses. The Company maintains its cash with financial institutions. From time to time, these balances exceed the federally insured limits. These balances are maintained with high quality financial institutions, which management believes limits the risk. As of March 31, 2011 and 2010, approximately $7,859 and $7,785, respectively, was in excess of the federal depository insurance coverage limit. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 14.  | RECENT ACCOUNTING UPDATES In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2010-06 (“ASU No. 2010-06”), Improving Disclosure about Fair Value Measurements, under Topic 820, Fair Value Measurements and Disclosures, to improve and provide new disclosures for recurring and nonrecurring fair value measurements under the three-level hierarchy of inputs for transfers in and out of Levels 1 (quoted prices in active markets for identical assets or liabilities) and 2 (significant other observable inputs), and activity in Level 3 (significant unobservable inputs). This update also clarifies existing disclosures of the level of disaggregation for the classes of assets and liabilities and the disclosure about inputs and valuation techniques. ASU No. 2010-06 new disclosures and clarification of existing disclosures is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for financial statements issued for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of ASU No. 2010-06, as it relates to new disclosures and clarifications of existing disclosures did not have a material impact on the Company’s consolidated financial statements.  The Company does not expect the adoption of ASU No. 2010-06, as it relates to certain disclosures of activity in Level 3 fair value measurements to have a material impact on its consolidated financial statements. |
|-----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 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, 2011 and 2010: |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                            |   | For the Quarters Ended |   |
|---------------------------------|--------|------------------------|--------|
|                            |   | June 30,2010      |   |   | September 30,2010 |   |   | December 31,2010 |   |   | March 31,2011 |   |
|                            |   |                   |   |   |   |   |   |   |   |   |   |   |
| Net sales                       |   | $                      | 24,114 |   |   | $ | 38,579 |   |   | $ | 31,397 |   |   | $ | 28,916 |   |
| Net income (loss)               |   | $                      | 232    |   |   | $ | 1,099 |   |   | $ | (273 | ) |   | $ | 184 |   |
| Income (loss) per common share: |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                           |   | $                      | 0.01   |   |   | $ | 0.05 |   |   | $ | (0.01 | ) |   | $ | 0.01 |   |
| Diluted                         |   | $                      | 0.01   |   |   | $ | 0.05 |   |   | $ | (0.01 | ) |   | $ | 0.01 |   |

----

|                            |   | For the Quarters Ended |   |
|---------------------------------|--------|------------------------|--------|
|                            |   | June 30,2009      |   |   | September 30,2009 |   |   | December 31,2009 |   |   | March 31,2010 |   |
|                            |   |                   |   |   |   |   |   |   |   |   |   |   |
| Net sales                       |   | $                      | 23,644 |   |   | $ | 56,461 |   |   | $ | 50,280 |   |   | $ | 17,717 |   |
| Net (loss) income               |   | $                      | (2,467 | ) |   | $ | 2,969 |   |   | $ | (5,426 | ) |   | $ | (9,835 | ) |
| (Loss) income per common share: |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                           |   | $                      | (0.12  | ) |   | $ | 0.15 |   |   | $ | (0.27 | ) |   | $ | (0.48 | ) |
| Diluted                         |   | $                      | (0.12  | ) |   | $ | 0.14 |   |   | $ | (0.27 | ) |   | $ | (0.48 | ) |

| 16. | SUBSEQUENT EVENT On May 18, 2011, in connection with an amendment to an executive officer's employment agreement, the Company granted, to the executive officer, options under the 2007 Plan to acquire 50,000 shares of its common stock at $3.15 per share, the closing price of the stock on May 18, 2011. These options have a life of five years from the date of grant, and vested immediately. The fair value of the options was determined to be $76, which will be expensed as share-based compensation in the quarter ending June 30, 2011. The fair value of these options at the date of grant was estimated using a Black-Scholes option pricing model with the following weighted average assumptions. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Expected life (years)   |   |   | 3  |   |
|-------------------------|--------|--------|----|--------|
| Expected volatility     |   |   | 80 | %      |
| Risk-free interest rate |   |   | 2  | %      |
| Dividend yield          |   |   | 0  | %      |

----

| Description                                    |   | Balance atBeginning ofPeriod |   |   | Additions Charged toCosts andExpenses |   |   | NetDeductions/Recoveries |   |   | Balance atEnd of Period |   |
|------------------------------------------------|--------|------------------------------|--------|--------|---------------------------------------|--------|--------|--------------------------|--------|--------|-------------------------|--------|
|                                           |   |                         |   |   |                                  |   |   |                     |   |   |                    |   |
| Year ended March 31, 2011                 |   |                         |   |   |                                  |   |   |                     |   |   |                    |   |
| Reserves for:                                  |   |                         |   |   |                                  |   |   |                     |   |   |                    |   |
| Doubtful accounts                              |   | $                            | 716    |   |                                  | $      | 135    |                     |   | $      | (17                     | )      |   | $ | 868 |   |
| Sales returns                                  |   |                         | 2,310  |   |                                  |   | 9,085  |                     |   |   | 9,699                   |   |   |   | 1,696 |   |
| Demonstration and co-op advertising allowances |   |                         | 1,118  |   |                                  |   | 10,207 |                     |   |   | 9,981                   |   |   |   | 1,344 |   |
|                                           |   | $                            | 4,144  |   |                                  | $      | 19,427 |                     |   | $      | 19,663                  |   |   | $ | 3,908 |   |
|                                           |   |                         |   |   |                                  |   |   |                     |   |   |                    |   |   |   |   |   |
| Year ended March 31, 2010                 |   |                         |   |   |                                  |   |   |                     |   |   |                    |   |   |   |   |   |
| Reserves for:                                  |   |                         |   |   |                                  |   |   |                     |   |   |                    |   |   |   |   |   |
| Doubtful accounts                              |   | $                            | 428    |   |                                  | $      | 636    |                     |   | $      | 348                     |   |   | $ | 716 |   |
| Sales returns                                  |   |                         | 1,300  |   |                                  |   | 13,524 |                     |   |   | 12,514                  |   |   |   | 2,310 |   |
| Demonstration and co-op advertising allowances |   |                         | 1,748  |   |                                  |   | 13,770 |                     |   |   | 14,400                  |   |   |   | 1,118 |   |
|                                           |   | $                            | 3,476  |   |                                  | $      | 27,930 |                     |   | $      | 27,262                  |   |   | $ | 4,144 |   |
|                                           |   |                         |   |   |                                  |   |   |                     |   |   |                    |   |   |   |   |   |
| Year ended March 31, 2009                 |   |                         |   |   |                                  |   |   |                     |   |   |                    |   |   |   |   |   |
| Reserves for:                                  |   |                         |   |   |                                  |   |   |                     |   |   |                    |   |   |   |   |   |
| Doubtful accounts                              |   | $                            | 1,045  |   |                                  | $      | 836    |                     |   | $      | 1,453                   |   |   | $ | 428 |   |
| Sales returns                                  |   |                         | 1,000  |   |                                  |   | 6,512  |                     |   |   | 6,212                   |   |   |   | 1,300 |   |
| Demonstration and co-op advertising allowances |   |                         | 2,442  |   |                                  |   | 16,849 |                     |   |   | 17,543                  |   |   |   | 1,748 |   |
|                                           |   | $                            | 4,487  |   |                                  | $      | 24,197 |                     |   | $      | 25,208                  |   |   | $ | 3,476 |   |