<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------------------
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIE EXCHANGE ACT OF 1934
For the quarterly period ended: December 31, 1996
-----------------
Or______
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________________ to _____________________
Commission file number: 0-15491
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PARLUX FRAGRANCES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 22-2562955
- -------------------------------------------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization) (IRS employer identification no. )
3725 S.W. 30th Avenue, Ft. Lauderdale, FL 33312
- --------------------------------------------------------------------------------------------------------
( Address of principal executive offices ) (Zip code)
</TABLE>
Registrant's telephone number, including area code 954-316-9008
-----------------------------
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
Indicate with an "X" whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate with an "X" whether the registrant has filed all documents and
reports required to be filed by Section 12, 13, or 15( d ) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of February 11, 1997, 17,054,123 shares of the issuer's common stock
were outstanding.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
See pages 8 to 11.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Registrant's (the Company's) financial position
and operating results during the periods included in the accompanying financial
statements and notes. This discussion and analysis should be read in conjunction
with such financial statements and notes.
RECENT DEVELOPMENTS
On February 10, 1997, the Company consummated an agreement with Cosmetic
Essence, Inc., one of the Company's third-party fillers, to sublease the
manufacturing and distribution areas, and purchase certain fixed assets, at the
Orange, Connecticut facility, which was assumed as part of the Richard Barrie
Fragrances, Inc. ("RBF") acquisition. See Note K, "Subsequent Events" for
further discussion.
In January 1997, the Company completed Phase I of its common stock buyback
program of 350,000 shares, and the Board of Directors authorized Phase II of the
program covering 500,000 shares. See "Liquidity and Capital Resources" for
further discussion.
During October 1996, the Company entered into agreements to redeem approximately
$5,232,000 of previously issued convertible debentures by issuing $6,134,000 of
10% bonds which were repaid in accordance with their terms. See "Liquidity and
Capital Resources" for further discussion.
On October 17, 1996, the Company amended its credit agreement with Finova
Capital Corporation, increasing the line of credit from $5,000,000 to
$10,000,000. See "Liquidity and Capital Resources" for further discussion.
Effective October 1, 1996, the Company entered into an agreement with Hirel
Holdings, Inc., a publicly traded company, to sublease the Company's previous
corporate headquarters and distribution center in Pompano Beach, Florida, for
the approximate lease commitment, including escalations.
RESULTS OF OPERATIONS
COMPARISON OF THE THREE-MONTH PERIOD ENDED DECEMBER 31, 1996 WITH THE
THREE-MONTH PERIOD ENDED DECEMBER 31, 1995.
During the quarter ended December 31, 1996, net sales increased 13% to
$27,019,820 compared to $23,834,025 for the same period for the prior year. Of
these, net sales of Parlux continued brands (brands which the Company owned or
held licenses for at March 31, 1995 and December 31, 1996) were $23,523,600, an
increase of 14% from the prior year. Net
2
<PAGE> 3
sales of Alexandra de Markoff (AdM) brand cosmetics, and Bal A Versailles and
Baryshnikov brand fragrances, which were acquired in December 1995, and March
and June 1996, respectively, totaled $3,496,220 in the current period compared
to $199,075 in the prior year. There were no sales in the current period of
Francesco Smalto brand products, which were discontinued as of September 30,
1996, as compared to $2,915,600 in the same period in the prior year.
Sales to related parties represented 33% of total sales in the current period as
compared to 43% in the prior year as a result of the Company's continuing
strategic effort to diversify its sales mix and reduce accounts receivable.
Sales to unrelated parties increased 35% to $18,173,040 in the current period
compared to $13,470,763 in the same period in the prior year. Sales to related
parties decreased 15% to $8,846,780 in the current quarter compared to
$10,363,262 in the same period in the prior fiscal year.
Cost of goods sold for the quarter ended December 31, 1996 decreased to 39% of
net sales as compared to 43% of net sales in the same period in the prior year.
The decrease was mainly attributable to the significant increase in sales to
unrelated parties noted above, as these sales carry a lower cost of goods than
sales to related parties.
Operating expenses increased by 71% compared to the prior fiscal year from
$8,294,114 to $14,156,122, and increased as a percentage of net sales to 52%
compared to 35% in the prior year. The major portion of this increase was due to
the strategic increase in advertising and promotional expenses which increased
85% to $8,958,317 compared to $4,835,918 in the prior year period, reflecting
markedly increased print advertising and in-store promotional spending in
connection with the U.S. domestic department and specialty store business
relating mainly to Perry Ellis and AdM brand activities. Selling and
distribution costs increased by 58% to $2,287,200 in the current fiscal period
as compared to $1,446,053 in the same period of the prior fiscal year, and
increased as a percentage of net sales from 6% to 8%. General and administrative
expenses increased by 60% compared to the prior year period from $1,413,736 to
$2,259,342, and increased as a percentage of net sales from 6% to 8%. These
increases were mainly attributable to certain duplication of expenses between
the Connecticut and Florida locations which will be eliminated during the
quarter ending March 31, 1997. (See Note K "Subsequent Events".) Royalties
increased to $651,263 for the current period compared to $598,407 in the prior
year, but remained relatively constant as a percentage of net sales.
As a result of the above, the Company had operating income of $2,222,337 or 8%
of net sales for the three-month period ended December 31, 1996, compared to
$5,393,348 or 23% of net sales for the comparable period in the prior year.
Interest expense increased by 28% to $611,473 in the current fiscal year as
compared to $479,150 in the same period in the prior year, reflecting increased
borrowings offset by lower interest rates on convertible debentures outstanding
during the period and the conversion of certain convertible debentures into
equity. Exchange losses were $49,225 in the current year as compared to $22,562
in the same period in the prior year. Due to the redemption of $5,232,440 in
convertible debentures in October 1996, the Company incurred a one-time charge
of $901,648 in the current period, which is not deductible for income tax
purposes. As a result of the above, income before taxes for the current fiscal
year was $660,031 or 2% of net sales, compared to $4,891,636 or 21% of net
sales, in the same period in the prior year.
3
<PAGE> 4
Giving effect to the tax provision which reflects the non-deductible nature of
the loss on the convertible debenture redemption, the Company reported net
income of $87,705 for the current quarter ended December 31, 1996, as compared
to $2,990,754 for the same quarter in the prior fiscal year.
COMPARISON OF THE NINE-MONTH PERIOD ENDED DECEMBER 31, 1996 WITH THE NINE-MONTH
PERIOD ENDED DECEMBER 31, 1995.
During the nine months ended December 31, 1996, net sales increased 49% to
$71,262,620 as compared to $47,968,008 for the same period for the prior year.
Of these, sales of Parlux "continued brands" were $56,254,249, an increase of
27% from the prior year. Net sales of AdM brand cosmetics, and Bal a Versailles
and Baryshnikov brand fragrances totaled $13,977,906 in the current period as
compared to $199,075 in the prior year. These brands were acquired in December
1995, and March and June 1996, respectively. Sales of Francesco Smalto brand
products, which were discontinued as of September 30, 1996, were $1,030,465 in
the current period compared to $3,493,827 in the prior year.
As a percentage of total sales, sales to related parties were 32% in the current
period, compared to 37% in the same period in the prior year as a result of the
Company's continuing strategic effort to diversify its sales mix and reduce
accounts receivable. Sales to unrelated parties increased 61% to $48,471,824 in
the current period compared to $30,182,604 in the same period in the prior year.
Sales to related parties increased 28% to $22,790,796 in the current period
compared to $17,785,404 in the same period in the prior fiscal year.
Cost of goods sold for the nine months ended December 31, 1996 increased to 40%
of net sales as compared to 39% of net sales in the same period in the prior
year. The increase was mainly attributable to the closeout of the remaining
Francesco Smalto merchandise in accordance with the Transition and Termination
Agreement which terminated on September 30, 1996, and to the closeout of
ancillary brands purchased as part of the RBF acquisition.
Operating expenses increased by 77% compared to the prior fiscal year from
$18,628,098 to $33,049,841. As a percentage of sales, operating expenses
increased to 46% of net sales compared to 39% of net sales in the prior year.
The major portion of the increase is due to advertising and promotional expenses
which almost doubled to $19,679,049 compared to $9,898,653 in the prior year
period, reflecting markedly increased print advertising and promotional expenses
in connection with the U.S. department and specialty store business relating
mainly to Perry Ellis and AdM brand activities. Selling and distribution costs
increased by 75% to $5,941,718 in the current fiscal period as compared to
$3,398,960 in the same period of the prior fiscal year, and increased as a
percentage of net sales to 8% compared to 7% in the prior year. General and
administrative expenses increased by 36% compared to the prior year period from
$4,239,257 to $5,760,535, but decreased as a percentage of net sales from 9% to
8%, reflecting the economies of scale realized from the Company's acquisitions.
Royalties increased to $1,668,539 for the current period compared to $1,091,228
in the prior year, principally due to the royalties required on the sale of
Perry Ellis brand products.
As a result of the above, the Company had operating income of $9,769,658 or 14%
of net sales for the nine-month period ended December 31, 1996, compared to
$10,629,781 or 22% of net sales for the comparable period in the prior year.
Interest expense increased by 19%,
4
<PAGE> 5
with $1,677,538 being recorded in the current fiscal year as compared to
$1,414,240 in the same period in the prior year, reflecting increased borrowings
offset by lower interest rates on convertible debentures outstanding during the
current period and the conversion of certain convertible debentures into equity.
Exchange gains were $54,360 in the current year as compared to losses of
$117,802 in the same period in the prior year. Due to the redemption of
$5,232,440 in convertible debentures in October 1996, the Company incurred a
one-time charge of $901,648 in the period, which is not deductible for income
tax purposes. As a result of the above, income before taxes for the current
fiscal year was $7,244,832 or 10% of the net sales, compared to $9,097,739 or
19% of net sales, in the same period in the prior year.
Giving effect to the tax provision which reflects the non-deductible nature of
the loss on the convertible debenture redemption, the Company reported net
income of $4,170,460 or 6% of net sales for the nine months ended December 31,
1996, as compared to $5,640,599 or 12% of net sales for the same period in the
prior fiscal year.
Liquidity and Capital Resources
Working capital increased to $53,289,770 at December 31, 1996 from $30,800,351
at March 31, 1996. The increase during the nine-month period was mainly
attributable to: (i) During May 1996, the Company issued $10,000,000 of 5%
convertible debentures, due May 1, 1998 (the "May Debentures"), in private
placements pursuant to Regulation D. The net proceeds were used to repay current
liabilities. As of September 30, 1996, $4,300,000 of the May Debentures, plus
accrued interest of $56,473, were converted into 1,005,632 shares of common
stock (an additional $2,055,324, plus accrued interest of $54,032, were
converted into 553,913 shares of common stock during October 1996); (ii) During
April 1996, the Company issued $3,000,000 of 5% convertible debentures in
private placements pursuant to Regulation S. In June 1996, the debentures, plus
accrued interest of $20,411, were converted into 308,727 shares of common stock,
increasing working capital and stockholders' equity by approximately $2,950,000,
net of placement costs; (iii) During July 1996, the Company issued an additional
$10,000,000 of 5% convertible debentures, due June 1, 1997 (the "July
Debentures"), in private placements pursuant to Regulation D. During October
1996, $8,412,236 of the July Debentures, plus accrued interest of $72,466, were
converted into 2,154,222 shares of common stock; and, (iv) current period net
income.
On July 24, 1996, the Board of Directors authorized the repurchase of up to
350,000 shares of the Company's common stock. As of December 31, 1996, the
Company had acquired 318,355 shares at a cost of $1,494,764. The remaining
31,645 shares were acquired during January 1997, at which time the Board of
Directors authorized the repurchase of an additional 500,000 shares.
During October 1996, the Company entered into agreements to redeem $5,232,440 of
the May and July Debentures which had not been converted, plus $105,638 of
accrued interest thereon, by issuing $6,239,726 of 10% bonds which were repaid
in accordance with their terms in December 1996. The redemption resulted in a
one-time charge to net income of $901,648 during the quarter ended December 31,
1996, which is not deductible for income tax purposes.
In August 1995, the Company entered into an agreement to borrow, on an unsecured
basis, $500,000 from Distribudora de Perfumes Senderos, Ltda., with an
additional $500,000
5
<PAGE> 6
available at the option of the Company, to be drawn upon prior to October 31,
1995. The note bore interest at 12% per annum and was originally due on February
23, 1996, but was subsequently extended through August 1996. In connection with
the note, the Company issued warrants to purchase 53,978 shares of Parlux common
stock at a price of $8.11 per share, which expire on August 21, 1997. The
Company borrowed a total of $674,722 under the agreement, which was repaid in
installments of $500,000 and $174,722 in May and August 1996, respectively.
In June 1995, the Company borrowed, on an unsecured basis, $300,000 from an
individual related to the Company's Chairman of the Board. The note bore
interest at 11% per annum and was due on June 27, 1997. In connection with the
note, the Company issued warrants to purchase 60,000 shares of Parlux common
stock at a price of $6.94 per share, which were to expire on June 27, 1997. On
July 15, 1996, these warrants were exercised, effectively converting the loan to
equity.
In December 1994, the Company entered into a Loan and Security Agreement (the
Credit Agreement) with Finova Capital Corporation, pursuant to which the
Company is able to borrow, on a revolving basis for a three-year period, up to
$5,000,000 at an interest rate of 2% in excess of the Citibank, N.A. base or
prime rate ("prime"). Finova has taken a security interest in substantially all
of the domestic assets of the Company. The Credit Agreement contains customary
events of default and covenants which prohibit, among other things, incurring
additional indebtedness in excess of a specified amount, paying dividends,
creating liens, and engaging in mergers and consolidations without the prior
consent of Finova. The Credit Agreement also contains certain financial
covenants relating to net worth, interest coverage and other financial ratios.
In May 1996, the Credit Agreement was amended to provide for a temporary
increase in the line up to $6,000,000 until September 28, 1996.
On October 17, 1996, the Credit Agreement was further amended to increase the
availability under the line to $10,000,000 . The $5,000,000 permanent increase
was funded by Merrill Lynch Financial Services, Inc., through a participation
agreement with Finova. The addition to the line of credit will bear interest at
1/2% over prime.
Simultaneously with the December 1994 closing of the Credit Agreement, the
Company restructured a prior loan extended by the National Bank of Kuwait SAK
(NBK) by paying NBK approximately $2,120,000, including interest, from
borrowings under the Credit Agreement. In exchange for such payment, NBK
released Parlux, and its subsidiaries, from all outstanding liabilities and
guarantees owed to NBK except for those obligations relating to a new $560,000
term loan, and a $1,000,000 letter of credit made available to support the
Finova loan. The combined $1,560,000 facility was fully cash collateralized by
certain shareholders' deposits. In addition, these shareholders have signed a
subordination agreement in connection with the Credit Agreement. The term loan
was repaid during February 1996.
The Company is currently pursuing additional facilities to finance future
growth. There can be no assurance that such financing facilities will become
available, or, if available, that they will be on terms satisfactory to the
Company.
6
<PAGE> 7
Impact of Currency Exchange
The Company's sales and purchases are virtually all in U.S. dollars or French
francs. Since approximately 5% of the Company's products during the nine-month
period ended December 31, 1996, were manufactured in France, a strengthening of
the French franc vis-a-vis the U.S. dollar results in exchange rate losses for
the Company. Conversely, a weakening of the French franc vis-a-vis the U.S.
dollar results in exchange rate gains for the Company.
The Company monitors exchange rates on a daily basis and regularly seeks to
evaluate long-term expectations for the French franc in order to minimize its
exchange rate risk. To date, the Company has not elected to engage in currency
hedging transactions.
The Company continues to centralize manufacturing in the United States which
will minimize the currency exchange impact on intercompany transactions for the
future.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no legal proceedings of any significance.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit No. Description
10.39 Sublease Agreement dated as of December 1996,
between the Company and Cosmetic Essence, Inc.
27 Financial Data Schedule (for SEC use only)
(b) There were no filings on Form 8-K during the period.
7
<PAGE> 8
PARLUX FRAGRANCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31 March 31,
ASSETS 1996 1996
- ------------------------------------------------------------------ ------------- -------------
CURRENT ASSETS: (Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 511,121 $ 339,423
Receivables, net of allowance for
doubtful accounts, sales returns and
allowances of approximately $4,437,000 and $2,121,000
at December 31, 1996 and March 31, 1996, respectively 14,413,821 10,892,347
Trade receivables from related parties 23,365,058 13,482,423
Inventories, net 40,574,523 35,762,570
Prepaid expenses and other current assets 9,043,217 7,189,213
------------- ------------
TOTAL CURRENT ASSETS 87,907,740 67,665,976
Equipment and leasehold improvements, net 3,613,993 2,475,919
Trademarks, licenses and goodwill, net 27,185,217 24,623,417
Other 151,113 473,611
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TOTAL ASSETS $ 118,858,063 $ 95,238,923
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Borrowings, current portion $ 10,027,185 $ 11,564,917
Convertible debentures -- 250,000
Accounts payable 15,823,789 18,739,117
Accrued expenses 1,030,524 1,543,591
Income taxes payable 7,736,472 4,768,000
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TOTAL CURRENT LIABILITIES 34,617,970 36,865,625
Borrowings, less current portion 5,483,364 4,694,239
Convertible debentures -- 11,450,000
Deferred tax liability 183,864 183,864
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TOTAL LIABILITIES 40,285,198 53,193,728
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COMMITMENTS -- --
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STOCKHOLDERS' EQUITY :
Preferred stock, $0.01 par value, 5,000,000 shares
authorized, 0 issued and outstanding -- --
Common stock, $0.01 par value, 30,000,000
shares authorized, 17,447,478 and 11,456,426
shares issued at December 31, 1996 and March 31, 1996, respectively 174,475 114,564
Additional paid-in capital 66,753,596 32,881,207
Retained earnings 13,171,109 9,000,649
Cumulative translation adjustment 101,921 182,247
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80,201,101 42,178,667
Less - 357,355 and 39,000 shares of common stock in treasury, at cost,
at December 31, 1996 and March 31, 1996, respectively (1,628,236) (133,472)
------------- ------------
TOTAL STOCKHOLDERS' EQUITY 78,572,865 42,045,195
------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 118,858,063 $ 95,238,923
============= ============
</TABLE>
See notes to consolidated financial statements.
8
<PAGE> 9
PARLUX FRAGRANCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three months ended December 31, Nine months ended December 31,
------------------------------- ------------------------------
1996 1995 1996 1995
----------- ----------- ------------ -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales:
Unrelated customers $18,173,040 $13,470,763 $ 48,471,824 $30,182,604
Related parties 8,846,780 10,363,262 22,790,796 17,785,404
----------- ----------- ------------ -----------
27,019,820 23,834,025 71,262,620 47,968,008
Cost of goods sold 10,641,321 10,146,563 28,443,121 18,710,129
----------- ----------- ------------ -----------
Gross margin 16,378,499 13,687,462 42,819,499 29,257,879
----------- ----------- ------------ -----------
Operating expenses:
Advertising and promotional 8,958,317 4,835,918 19,679,049 9,898,653
Selling and distribution 2,287,200 1,446,053 5,941,718 3,398,960
General and administrative 2,259,342 1,413,736 5,760,535 4,239,257
Royalties 651,263 598,407 1,668,539 1,091,228
----------- ----------- ------------ -----------
Total operating expenses 14,156,122 8,294,114 33,049,841 18,628,098
----------- ----------- ------------ -----------
Operating income 2,222,377 5,393,348 9,769,658 10,629,781
Interest expense and bank charges 611,473 479,150 1,677,538 1,414,240
Exchange (gains) losses 49,225 22,562 (54,360) 117,802
Loss on debenture redemption 901,648 -- 901,648 --
----------- ----------- ------------ -----------
Income before income taxes 660,031 4,891,636 7,244,832 9,097,739
Income taxes 572,326 1,900,882 3,074,372 3,457,140
----------- ----------- ------------ -----------
Net income $ 87,705 $ 2,990,754 $ 4,170,460 $ 5,640,599
=========== =========== ============ ===========
Earnings per common and common
equivalent share:
Primary $ 0.01 $ 0.28 $ 0.25 $ 0.56
========== =========== ============ ===========
Fully Diluted $ 0.01 $ 0.28 0.25 $ 0.55
========== =========== ============ ===========
</TABLE>
See notes to consolidated financial statements.
9
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PARLUX FRAGRANCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK RETAINED
--------------------- ADDITIONAL EARNINGS
NUMBER PAR PAID-IN (ACCUMULATED
ISSUED VALUE CAPITAL DEFICIT)
---------- -------- ----------- -------------
<S> <C> <C> <C> <C>
BALANCE at April 1, 1994 2,861,189 $ 28,612 $ 8,868,994 ($ 2,959,264)
Net income -- -- -- 4,231,211
Issuance of common stock in connection with:
Excercise of employee stock options 19,025 190 61,020 --
Sale of stock in private placement 110,000 1,100 438,523 --
Acquisition of assets 500,000 5,000 2,195,000 --
Foreign currency translation adjustment -- -- -- --
Purchase of 39,000 shares of treasury stock, at cost -- -- -- --
---------- -------- ----------- ------------
BALANCE at March 31, 1995 3,490,214 34,902 11,563,537 1,271,947
Net income -- -- -- 7,772,691
Issuance of common stock upon exercise of:
Employee stock options 11,175 112 33,910 --
Warrants 1,056,916 10,569 3,006,022 --
Sale of stock in private placements 1,001,514 10,015 7,605,570 --
Stock issued in connection with the acquisition of assets 424,000 4,240 3,739,760 --
Conversion of debentures, net of unamortized debt
issuance costs 1,073,688 10,737 6,932,408 --
Adjustment for stock split 4,398,919 43,989 -- (43,989)
Foreign currency translation adjustment -- -- -- --
---------- -------- ----------- ------------
BALANCE at March 31, 1996 11,456,426 114,564 32,881,207 9,000,649
Net income -- -- -- 4,170,460
Issuance of common stock upon exercise of:
Employee stock options 14,500 145 18,448 --
Options 176,000 1,760 1,406,240 --
Warrants 60,000 600 415,650 --
Stock issued in connection with the acquisition of assets 370,000 3,700 3,002,550 --
Conversion of debentures, net of unamortized debt
issuance costs 5,370,552 53,706 29,029,501 --
Foreign currency translation adjustment -- -- -- --
Purchase of 318,355 shares of treasury stock, at cost -- -- -- --
---------- -------- ----------- ------------
BALANCE at December 31, 1996 (Unaudited) 17,447,478 $174,475 $66,753,596 $ 13,171,109
========== ======== =========== ============
<CAPTION>
CUMULATIVE
TRANSLATION TREASURY
ADJUSTMENT STOCK TOTAL
---------- --------- ------------
<S> <C> <C> <C>
BALANCE at April 1, 1994 $ 129,258 -- $ 6,067,600
Net income -- -- 4,231,211
Issuance of common stock in connection with:
Excercise of employee stock options -- -- 61,210
Sale of stock in private placement -- -- 439,623
Acquisition of assets -- -- 2,200,000
Foreign currency translation adjustment 216,495 -- 216,495
Purchase of 39,000 shares of treasury stock, at cost -- ($ 133,472) (133,472)
--------- ----------- ------------
BALANCE at March 31, 1995 345,753 (133,472) 13,082,667
Net income -- -- 7,772,691
Issuance of common stock upon exercise of:
Employee stock options -- -- 34,022
Warrants -- -- 3,016,591
Sale of stock in private placements -- -- 7,615,585
Stock issued in connection with the acquisition of assets -- -- 3,744,000
Conversion of debentures, net of unamortized debt
issuance costs -- -- 6,943,145
Adjustment for stock split -- -- --
Foreign currency translation adjustment (163,506) -- (163,506)
--------- ----------- ------------
BALANCE at March 31, 1996 182,247 (133,472) 42,045,195
Net income -- -- 4,170,460
Issuance of common stock upon exercise of:
Employee stock options -- -- 18,593
Options -- -- 1,408,000
Warrants -- -- 416,250
Stock issued in connection with the acquisition of assets -- -- 3,006,250
Conversion of debentures, net of unamortized debt
issuance costs -- -- 29,083,207
Foreign currency translation adjustment (80,326) -- (80,326)
Purchase of 318,355 shares of treasury stock, at cost -- (1,494,764) (1,494,764)
--------- ----------- ------------
BALANCE at December 31, 1996 (Unaudited) $ 101,921 ($1,628,236) $ 78,572,865
========= =========== ============
</TABLE>
See notes to consolidated financial statements.
10
<PAGE> 11
PARLUX FRAGRANCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended December 31,
------------------------------
(Unaudited)
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,170,460 $ 5,640,599
------------ ------------
Adjustments to reconcile net income
to net cash used by operating activities:
Depreciation and amortization 1,858,651 1,009,063
Changes in assets and liabilities net of effect of acquisitions:
Increase in trade receivables - unrelated customers (4,031,515) (4,009,474)
Increase in trade receivables - affiliates (9,882,635) (2,472,184)
Increase in inventories (3,527,479) (8,232,664)
Increase in prepaid expenses and other current assets (1,225,236) (643,590)
Decrease (increase) in other non-current assets 287,474 (76,751)
(Decrease) increase in accounts payable (4,070,883) 3,677,381
(Decrease) increase in accrued expenses (301,786) 1,961,007
Increase in income taxes payable 2,968,472 1,788,818
Decrease in advances from customers -- (2,451,059)
------------ ------------
Total adjustments (17,924,937) (9,449,453)
------------ ------------
Net cash used by operating activities (13,754,477) (3,808,854)
------------ ------------
Cash flows from investing activities:
Purchases of equipment and leasehold improvements (1,247,655) (508,778)
Purchases of trademarks (49,060) (71,811)
Net cash paid in acquisition of Alexandra de Markoff -- (8,608,000)
Net cash paid in acquisition of Richard Barrie Fragrances, Inc. (694,707) --
------------ ------------
Net cash used in investing activities (1,991,422) (9,188,589)
------------ ------------
Cash flows from financing activities:
Proceeds - receivable financing and overdraft facilities 250,451 159,704
Payments - note payable (13,483) --
Proceeds - note payable to Finova Capital Corp. 1,617,686 504,988
Payments - note payable to National Bank of Kuwait -- (400,000)
Proceeds - note payable Eagle Bank 17,608 195,378
Payments - note payable to Sanofi Beaute, Inc. -- (5,055,543)
Payments - note payable to Fred Hayman Beverly Hills (355,502) (87,591)
Payments - note payable to Parfums Jean Desprez (2,535,135) --
(Payments) proceeds - note payable to Distr. de Perfumes Senderos (674,722) 674,722
(Payments) proceeds - note payable to related parties (50,000) 300,000
Payments - note payable to stockholder (148,545) --
Proceeds - note payable Lyon Credit Corporation 1,443,035 --
Proceeds - 7% convertible debentures, net -- 3,666,000
Proceeds - 5% convertible debentures, net 16,451,774 6,802,500
Purchase of treasury stock, at cost (1,494,764) --
Proceeds from issuance of common stock 1,489,520 6,113,881
------------ ------------
Net cash provided by financing activities 15,997,923 12,874,039
------------ ------------
Effect of exchange rate changes on cash (80,326) (99,581)
------------ ------------
Net increase (decrease) in cash and cash equivalents 171,698 (222,985)
Cash and cash equivalents, beginning of period 339,423 575,700
------------ ------------
Cash and cash equivalents, end of period $ 511,121 $ 352,715
============ ============
</TABLE>
See notes to consolidated financial statements.
11
<PAGE> 12
PARLUX FRAGRANCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. The Consolidated Balance Sheet as of December 31, 1996, the Consolidated
Statements of Income for the three-month and nine-month periods ended December
31, 1996 and 1995, and the Consolidated Statements of Cash Flows for the
nine-month periods ended December 31, 1996 and 1995, have been prepared without
audit. In the opinion of management, the statements reflect all adjustments
consisting of normal recurring adjustments necessary to present fairly the
financial position of Parlux Fragrances, Inc., and subsidiaries at December 31,
1996 and the results of their operations and their cash flows for the
three-month and nine-month periods ended December 31, 1996 and 1995.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. It is suggested that these consolidated financial statements
be read in conjunction with the financial statements and notes thereto included
in the Company's March 31, 1996 Form 10-K as filed with the Securities and
Exchange Commission on June 28, 1996.
Certain reclassifications were made to the December 31, 1995 financial
statements to conform with the presentation of the December 31, 1996 financial
statements. All comparable share information has been restated to reflect the
two-for-one stock split consummated in November 1995.
B. INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market. The components of inventories are as follows:
<TABLE>
<CAPTION>
December 31, 1996 March 31, 1996
----------------- --------------
<S> <C> <C>
Raw Material, Packaging and Components $24,470,682 $22,285,515
Finished Products 16,103,841 13,477,055
----------- -----------
$40,574,523 $35,762,570
=========== ==========
</TABLE>
The above amounts are net of reserves for potential inventory obsolescence of
approximately $1,936,000 and $1,200,000 at December 31, 1996 and March 31, 1996,
respectively.
C. ACQUISITIONS
On June 28, 1996, the Company consummated the acquisition of substantially all
of the assets and assumption of certain liabilities of Richard Barrie
Fragrances, Inc. (RBF), pursuant to an asset purchase agreement entered into on
January 31, 1996.
Parlux acquired from RBF certain inventories, fixed assets and licenses relating
to the brands Baryshnikov and Melrose Place, as well as fixed assets located in
RBF's office and distribution center in Orange, Connecticut.
12
<PAGE> 13
Parlux provided as consideration $750,000 in cash which was paid on July 1,
1996, and 370,000 shares of common stock valued at $3,006,250, the average price
of the shares on January 30, 1996, the date of the original asset purchase
agreement.
The estimated fair value of the net assets acquired is summarized as follows:
<TABLE>
<CAPTION>
<S> <C>
Molds and other fixed assets $ 893,856
Inventories, net 1,784,474
Other assets 141,518
Goodwill and licenses 2,417,957
Accounts payable and other liabilities (1,481,555)
-----------
Fair value of net assets acquired $ 3,756,250
===========
</TABLE>
On March 19, 1996, the Company consummated the acquisition of the trademarks and
certain inventory for the Bal a Versailles (BAV) fragrance and beauty products
brand name from Parfums Jean Desprez, S.A., pursuant to a letter of intent
entered into on January 11, 1996.
At closing, the Company provided as consideration $1,697,500 in cash and
$2,553,360 in the form of non-interest bearing promissory notes due in varying
installments through December 1996.
The estimated fair value of the assets acquired is summarized as follows:
<TABLE>
<CAPTION>
<S> <C>
Goodwill, licenses and trademarks $ 2,872,500
Inventories, net 878,360
Covenant-not-to-compete 300,000
Molds and other fixed assets 200,000
-----------
Fair value of assets acquired $ 4,250,860
===========
</TABLE>
On December 27, 1995, the Company consummated the acquisition of substantially
all of the assets of Alexandra de Markoff (AdM), a prestige cosmetic line,
pursuant to an asset purchase agreement entered into on September 21, 1995
between the Company and Revlon Holdings, Inc. (Revlon).
Parlux acquired from Revlon certain inventories and fixed assets and the rights
in certain trademarks relating to AdM. Parlux provided as consideration
$8,608,000 in cash, 424,000 shares of common stock valued at $3,392,000 and
agreed to accept returns and allowances in excess of $100,000 related to sales
of AdM products by Revlon prior to December 27, 1995. In addition, the Company
granted Revlon an option to purchase 176,000 shares of the Company's common
stock, until June 30, 1996, at an exercise price of $8.00 per share, which was
exercised in May 1996.
13
<PAGE> 14
The estimated fair value of the net assets acquired is summarized as follows:
<TABLE>
<CAPTION>
<S> <C>
Goodwill, licenses and trademarks $10,765,000
Advances for future inventory purchases 4,000,000
Molds and other fixed assets 85,000
Reserve for sales returns and allowances (2,850,000)
-----------
Fair value of net assets acquired $12,000,000
===========
</TABLE>
D. BORROWINGS - BANKS AND OTHERS
The composition of debt is as follows:
<TABLE>
<CAPTION>
December 31, 1996 March 31, 1996
----------------- --------------
<S> <C> <C>
Note payable to FHBH, secured by the acquired licensed
trademarks, interest at 7.25%, payable in equal monthly
installments of $69,863, including interest, through June 2004 $ 4,817,706 $ 5,173,209
Revolving credit facility payable to Finova Capital Corporation,
interest at Citibank N.A. prime (8.25% at December 31, 1996) plus
1 1/8%, payable on December 27, 1997 5,506,064 3,888,378
Notes payable to Parfums Jean Desprez, non-interest
bearing, payable in installments through February 1997 18,225 2,553,360
Note payable to Lyon Credit Corporation, secured by certain equipment, interest
at 11.10%, payable in equal monthly installments of $32,688, including interest,
through September 2001 1,443,034 --
Unsecured $500,000 line of credit payable to Eagle National Bank,
interest at the bank's prime rate plus 2%, repaid in January 1997 500,000 482,392
Note payable to Distribudora de Perfumes Senderos, Ltda.,
unsecured, interest at 12%, repaid in August 1996 -- 674,722
Receivable financing and overdraft facilities, interest at 8.75%
to 10.75%, payable on demand (1) 2,818,695 2,568,244
Note payable to stockholder, repaid in May 1996 (l) -- 148,544
Unsecured notes payable to related parties, interest at 11%, due
March 31, 1997 350,000 700,000
Other notes payable 56,825 70,307
------------ ------------
15,510,549 16,259,156
Less: long-term borrowings (5,483,364) (4,694,239)
------------ ------------
Short-term borrowings $ 10,027,185 $ 11,564,917
============ ============
</TABLE>
(l) Denominated in French francs
In December 1994, the Company entered into a Loan and Security Agreement (the
Credit Agreement) with Finova Capital Corporation (Finova), (formerly Greyhound
Financial Corporation ) pursuant to which the Company is able to borrow,
depending on the availability of a borrowing base, as defined in the Credit
Agreement, on a revolving basis for a three-year period, up to $5,000,000, at an
interest rate of 2% in excess of Citibank, N.A. "base or prime rate." Finova has
taken a security interest in substantially all of the domestic assets of the
Company. The Credit Agreement contains customary events of default and covenants
which prohibit, among other things, incurring additional indebtedness in excess
of
14
<PAGE> 15
a specified amount, paying dividends, creating liens, and engaging in mergers
and consolidation without the prior consent of Finova. The Credit Agreement also
contains certain financial covenants relating to net worth, interest coverage
and other financial ratios. In May 1996, the Credit Agreement was amended to
provide for a temporary increase in the line up to $6,000,000 until September
28, 1996.
On October 17, 1996, the Credit Agreement was further amended to increase the
availability under the line to $10,000,000. The $5,000,000 permanent increase
was funded by Merrill Lynch Financial Service, Inc., through a participation
agreement with FINOVA. The addition to the line of credit will bear interest at
1/2% over prime.
Simultaneously with the closing of the Credit Agreement, the Company
restructured a prior loan extended by the National Bank of Kuwait SAK (NBK) by
paying NBK approximately $2,120,015, including interest, from borrowings under
the Credit Agreement. In exchange for such payment, NBK released Parlux, and all
of its subsidiaries, from all outstanding liabilities and guarantees owed to
NBK, except for those obligations relating to a new $560,000 term loan, and a
$1,000,000 letter of credit made available to support the Finova loan. The
combined $1,560,000 facility was fully cash collateralized by certain
shareholders' deposits. In addition, the shareholders have signed a
subordination agreement in connection with the Credit Agreement. The term loan
was repaid during February 1996.
The Company has overdraft and trade financing facilities aggregating 15,950,000
French francs (approximately $3,098,000 as of December 31, 1996). These credit
facilities are reviewed annually.
In August, 1995, the Company entered into an agreement to borrow, on an
unsecured basis, $500,000 from Distribudora de Perfumes Senderos, Ltda., with an
additional $500,000 available at the option of the Company, to be drawn upon
prior to October 31, 1995. The note bore interest at 12% per annum and was
originally due on February 23, 1996. The Company borrowed a total of $674,722
under the agreement, which was repaid in installments of $500,000 and $174,722
in May and August 1996, respectively.
In June 1995, the Company borrowed, on an unsecured basis, $300,000 from an
individual related to the Company's Chairman of the Board. The note bore
interest at 11% per annum and was due on June 27, 1997. In connection with the
note, the Company issued warrants to purchase 60,000 shares of Parlux common
stock at a price of $6.94 per share, which were to expire on June 27, 1997. On
July 15, 1996, these warrants were exercised effectively converting the loan to
equity.
The Company is currently pursuing additional facilities to finance future
growth. There can be no assurance that such financing facilities will become
available, or, if available, that they will be on terms satisfactory to the
Company.
E. CONVERTIBLE DEBENTURES
During the period November 2, 1995 through March 31, 1996, the Company issued
$3,700,000 of 7% convertible debentures and $15,000,000 of 5% convertible
debentures (the Debentures), pursuant to Regulation S with maturities between
one and two years. The Debentures were convertible into shares of the Company's
common stock at 85% of the average closing price of the stock over a five-day
period prior to conversion.
15
<PAGE> 16
As of March 31, 1996, $7,000,000 of the Debentures, plus accrued interest of
$48,146, had been converted into 1,073,688 shares of common stock and
$10,000,000 of the 5% Debentures and $1,700,000 of the 7% Debentures were
outstanding. Subsequent to March 31, 1996, the remaining $11,700,000 have been
converted into 1,348,058 shares of common stock.
During April and May 1996, the Company issued an additional $13,000,000
($3,000,000 and $10,000,000 pursuant to Regulation S and Regulation D,
respectively) in 5% Debentures with the same conversion features and terms as
those issued above, of which $3,000,000, plus accrued interest of $20,411, have
been converted into 308,727 shares of common stock during June 1996, and
$4,300,000, plus accrued interest of $56,473, have been converted into 1,005,632
shares of common stock during September 1996. An additional $2,055,324 of the
debentures, plus accrued interest of $54,032, were converted into 553,913 shares
of common stock during October 1996.
On July 2, 1996, the Company issued an additional $10,000,000 of 5% Debentures,
due June 1, 1997, in private placements pursuant to Regulation D, with the same
conversion features and terms as those issued above, except that the conversion
rate is 86%. During October 1996, $8,412,236 of the debentures, plus accrued
interest of $72,466, were converted into 2,154,222 shares of common stock.
During October 1996, the Company entered into agreements to redeem $5,232,440 of
the May and July Debentures which had not been converted, plus $105,638 of
accrued interest thereon, by issuing $6,239,726 of 10% bonds which was repaid in
accordance with their terms in December 1996. The redemption resulted in a
one-time charge to net income of $901,648 during the quarter ended December 31,
1996, which is not deductible for income tax purposes.
F. TRANSACTIONS WITH RELATED PARTIES
Sales to Perfumania, Inc., a public company in which the Company's Chairman of
the Board maintains an ownership interest, amounted to $22,790,796 or 32% of net
sales for the nine-month period ended December 31, 1996, as compared to
$17,785,404 or 37% of net sales in the same period for the prior fiscal year.
Amounts due from Perfumania amounted to $23,365,058 and $13,482,423 at December
31, 1996 and March 31, 1996, respectively.
G. EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
On October 26, 1995, the Company announced a two-for-one stock split in the form
of a dividend to shareholders of record as of November 3, 1995. The following
share and per share data have been retroactively adjusted to reflect the
transaction.
Earnings per common and common equivalent share and the weighted average number
of shares outstanding used in the computations, retroactively adjusted for the
stock split, are summarized as follows:
16
<PAGE> 17
<TABLE>
<CAPTION>
Three-Months Ended December 31,
-------------------------------
1996 1995
---- ----
Primary Fully Diluted Primary Fully Diluted
------- ------------- ------- -------------
<S> <C> <C> <C> <C>
Net Income $ 87,705 (1) $ 2,990,754 $2,990,754
Add - reduction of interest expense (2) 10,853 24,709 24,709
----------- ----------- ----------
Adjusted for per share computation $ 98,558 $ 3,015,463 $3,015,463
=========== ============ ==========
Number of shares:
Weighted average shares outstanding 16,830,667 8,837,074 8,837,074
Add - net additional shares issuable (3) 1,206,359 1,914,682 1,973,101
----------- ------------ ----------
Weighted average shares used in the per share
computation 18,037,026 10,751,756 10,810,175
=========== ============ ==========
Earnings per common and common equivalent
share $ 0.01 $ 0.28 $ 0.28
=========== ============ ==========
</TABLE>
<TABLE>
<CAPTION>
Nine-Months Ended December 31,
-------------------------------
1996 1995
---- ----
Primary Fully Diluted Primary Fully Diluted
------- ------------- ------- -------------
<S> <C> <C> <C> <C>
Net Income $ 4,170,460 (1) $ 5,640,599 $5,640,599
Add - reduction of interest expense (2) 199,491 24,709 24,709
----------- ----------- ----------
Adjusted for per share computation $ 4,369,951 $ 5,665,308 $5,665,308
=========== =========== ==========
Number of shares:
Weighted average shares outstanding 14,339,066 8,303,874 8,303,874
Add - net additional shares issuable (3) 3,181,786 1,821,190 1,950,924
----------- ----------- ----------
Weighted average shares used in the per share
computation 17,520,852 10,125,064 10,254,798
=========== =========== ==========
Earnings per common and common equivalent
share $ 0.25 $ 0.56 $ 0.55
=========== =========== ==========
</TABLE>
(1) The calculation of fully diluted earnings per share was not required for
1996 since it would be antidilutive.
(2) Reduction of interest expense assumes that the convertible debentures were
converted into shares of common stock on the date of their issuance.
Accordingly, no interest expense on the convertible debentures would have been
incurred.
(3) Assumes exercise or conversion of outstanding common stock equivalents
(options, warrants and convertible debentures) at the beginning of the period,
or at the date of issuance if issued during the period, net of the assumed
repurchase of common stock from exercise proceeds. The assumed repurchase of
common stock is based on the average price of the Company's common stock during
the period for primary and, when dilutive, the end of period price for fully
diluted.
17
<PAGE> 18
H. CASH FLOW INFORMATION
The Company considers temporary investments with an original maturity of three
months or less to be cash equivalents. Supplemental disclosures of cash flow
information are as follows:
<TABLE>
<CAPTION>
Nine Months Ended December 31,
------------------------------
1996 1995
---- ----
<S> <C> <C>
Cash paid for:
Interest $1,724,466 $1,276,545
Income taxes $ 264,129 $ 185,800
</TABLE>
In addition to the RBF, BAV and AdM acquisitions discussed in Note C, which were
partially funded through the issuance of common stock and notes, the Company
used barter credits totaling $286,000 ($684,000 in 1995) in payment of
advertising expenses.
Additionally, during 1996, notes payable and accrued interest in the amount of
$300,000 and $53,323, respectively, ($350,000 and $178,750, respectively, in
1995) were repaid through the issuance of common stock in connection with the
exercise of certain warrants and options.
I. INCOME TAXES
As of March 31, 1995, the Company had utilized its remaining U.S. net operating
loss carryovers. The provision for income taxes for the period ended December
31, 1996 reflects the non-deductible nature of the loss on the convertible
debenture redemption.
J. LICENSE AND DISTRIBUTION AGREEMENTS
PERRY ELLIS: The Company acquired the Perry Ellis license from Sanofi Beaute.
The Perry Ellis license is entering its eleventh year, and is renewable every
two years if the average annual sales in the completed period exceed 75% of the
average sales of the previous four years. All minimum sales levels have been met
by the previous licensee, and the Company believes that this will continue. The
license requires the payment of royalties, which decline as a percentage of net
sales as net sales volume increases, and the spending of certain minimum amounts
for advertising based upon net sales levels achieved in the prior year.
VICKY TIEL: In September 1992, the Company entered into an exclusive worldwide
license agreement with VICKY TIEL S.A. in which the Company secured the rights
to manufacture and distribute fragrances and beauty care products using the
VICKY TIEL trademark for an initial five-year period, renewable for a subsequent
five-year period upon achieving specified sales or minimum royalty levels. Under
this agreement, the Company is obligated to pay royalties calculated as a
percentage of net sales, which decline as net sales volume increases. The
Company is also obligated to spend certain minimum amounts for advertising based
upon the annual net sales of the products.
TODD OLDHAM: In December 1992, the Company entered into an exclusive worldwide
licensing agreement with L-7 Designs, Inc. in which the Company secured the
rights to manufacture and distribute fragrances and beauty care products using
the TODD OLDHAM trademark for an initial period of three-years, renewable for
subsequent three-year and four-
18
<PAGE> 19
year periods upon achieving specified sales or minimum royalty levels. The
initial three-year period expires March 31, 1997, and the Company has informed
the licensor that it does not intend to renew the agreement. The Company will
have a 12-month period following expiration to sell off inventories, with no
sales or advertising minimums. Sales of Todd Oldham products represented 2% of
total sales in the three-month and nine-month periods ended December 31, 1996.
PHANTOM OF THE OPERA: In April 1993, the Company entered into an exclusive
worldwide agreement with Creative Fragrances, Inc., for the worldwide
distribution rights to PHANTOM OF THE OPERA covering men's and women's
fragrances and beauty related products. The agreement expires in April 1998.
Royalties are payable at 7% of net sales, and there are no minimum royalty
requirements, nor are there minimum requirements for sales or advertising.
FRANCESCO SMALTO: In May 1995, the Company terminated its license agreement with
FRANCESCO SMALTO INTERNATIONAL (SMALTO) for breach of contract. On October 5,
1995, the Company entered into a transition and termination agreement with
SMALTO which provided for the continued use of the Francesco Smalto trademark
through September 30, 1996. The agreement contained certain production
restrictions and required a fixed amount of royalties during the period, which
approximated 6% of net sales of SMALTO fragrances. Sales of Francesco Smalto
products represented approximately 7% of total Company net sales for the year
ended March 31, 1996, and approximately 1% in the nine-month period ended
December 31, 1996. The contract has been terminated in accordance with the
Agreement.
K. SUBSEQUENT EVENTS
On February 10, 1997, the Company consummated an agreement with Cosmetic
Essence, Inc. ("CEI"), to sublease the manufacturing and distribution areas, at
the Orange, Connecticut facility (the "facility"), which was assumed as part of
the RBF acquisition (approximately 78,000 square feet out of a total square
footage of 90,000), through December 31, 1999, the remaining term of the lease.
The Company is actively pursuing the sublease of the remaining 12,000 square
feet of office space. The total annual rental commitment on the lease
approximates $500,000, of which CEI will pay $350,000.
In connection with the sublease agreement, the Company sold certain fixed assets
located at the facility to CEI for $544,760, which closely approximates their
net book value.
All remaining distribution and warehousing activity previously performed at the
facility will be consolidated in the Company's South Florida location prior to
March 31, 1997.
* * * * * * * * * *
19
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PARLUX FRAGRANCES, INC.
/s/ Ilia Lekach
- ------------------------
Ilia Lekach, Chairman and Chief Executive Officer
/s/ Frank A. Buttacavoli
- ------------------------
Frank A. Buttacavoli, Executive Vice President, Chief Financial Officer and
Director
Date: February 12, 1997
20
<PAGE> 1
EXHIBIT 10.39
SUBLEASE
SUBLEASE, dated as of December , 1996 between Cosmetic Essence, Inc.
having an office at 200 Clearview Avenue, Edison, New Jersey 08818
("Subtenant") and Parlux Fragrances, Inc. with offices located at 3725 S.W.
30th Avenue, Ft. Lauderdale, FL 33312 ("Sublandlord ").
1. Demise and Term. A Sublandlord hereby leases to Subtenant, and
Subtenant hereby hires from Sublandlord, (the "Subleased Premises") shown on
Exhibit A attached hereto (the "Subleased Premises"), consisting of
approximately 77,300 square feet located on the first floor in the building
known as 15 Executive Boulevard, Orange, Connecticut, (the "Building"). There
term of this Sublease shall commence on December 1, 1996 (the "Commencement
Date") and shall terminate at 11:00 p.m. on December 31, 1998 (the "Expiration
Date").
2. Subordinate to Main Lease. This Sublease is and shall be subject to all
of the terms of, and subordinate to that certain Lease (the "Main Lease") dated
December 10, 1993 between Baker Properties Limited Partnership ("Landlord"), as
landlord, and Richard Barrie Fragrances, Inc. as tenant, and assumed by
Sublandlord effective June 30, 1996, and to the matters to which the Main Lease
is or shall be subject and subordinate. Subtenant acknowledges that it has
received and reviewed a copy of the Main Lease.
3. Performance by Sublandlord. Any obligation of Sublandlord which is
contained in this Sublease by the incorporation by reference of the provisions
of the Main Lease may be observed or performed by Sublandlord using reasonable
efforts to cause the landlord under the Main Lease (the "Landlord") to observe
and/or perform only those obligations under the Main Lease and Sublandlord
shall have a reasonable time to enforce its rights under the Main Lease to
cause such observance or performance. Subtenant shall not in any event have
any rights with respect to the Subleased Premises greater than Sublandlord's
rights under the Main Lease. Sublandlord shall have no responsibility or
liability of any nature whatsoever to Subtenant as a consequence of any default
of or by Landlord under the Main Lease or for Landlord's failure or delay in
furnishing to Subtenant or the Subleased Premises any services of any kind
whatsoever which Landlord is required to furnish to Sublandlord or to the
Subleased Premises. Further, Subtenant acknowledges that Landlord has no
obligation or relationship with Subtenant as it relates to this Sublease
Agreement.
4. Rent. Upon the earlier of the Sublandlord vacating the subleased
premises or April 1, 1997, Subtenant shall pay to Sublandlord rent (the "Fixed
Rent") hereunder at the rate of $350,000 per annum, payable monthly in advance
in installments of $29,166.67 due on the first day of each month. Prior to
that date the Fixed Rent shall be $12,500 per month. Fixed Rent and all other
amounts payable by Subtenant to Sublandlord under this Sublease (the
"Additional Charges") shall be paid promptly when due, without notice or demand
therefore, and without deduction, abatement, counterclaim, or setoff of any
amount or for any reason whatsoever. Fixed Rent shall be paid to Sublandlord
in lawful money of the United States at the address of Sublandlord set forth at
the head of this Sublease or to successor or other person and/or at such other
address as Sublandlord may from time to time designate by notice to Subtenant.
Fixed Rent for any partial calendar month during the term shall be prorated on
a per diem basis based
<PAGE> 2
on a 360 day calendar year. If any installment of Fixed Rent or any Additional
Charge is not paid the date on which it is due, Subtenant shall also pay to
Sublandlord on demand, as an Additional Charge, interest thereon, from the
original due date until paid, at an annual rate of the lesser of (1) 2 % plus
the "prime" or "base" interest rate announced by Citibank, N.A., New York, New
York (or any successor thereto) from time to time, or (ii) the maximum rate
permitted by law.
The parties acknowledge that Subtenant will perform services for and on
behalf of Sublandlord. The parties agree that Subtenant shall have the right
to apply any monies owed to Subtenant by Sublandlord for the services
performed, against rental or rentals due or to be due from Subtenant to
Sublandlord under this agreement. Sublandlord agrees that in the event
Sublandlord does not in any given three month period utilize Subtenant's
services sufficient to give rise to an average of $75,000.00 in average monthly
charges to Sublandlord by Subtenant for filling services, Subtenant shall have
the right to terminate this Sublease Agreement upon 15 days written notice to
Sublandlord.
5. Use. Subtenant shall use and occupy the Subleased premises for
production distribution and warehousing of fragrances, cosmetics and related
products for no other purpose without the written consent of the Sublandlord.
Subtenant and its invitees shall have use of and access to all common areas as
defined in the Main Lease.
The Subtenant agrees not to generate, store, manufacture, refine,
transport, treat, dispose of, or otherwise permit to be present on or about the
Subleased Premised, any Hazardous Substances.
The Subtenant shall not do or permit anything to be done in the Subleased
Premises which shall constitute a public nuisance or which will conflict with
the regulations of the Fire Department or with any insurance policy upon said
improvements or any part thereof or conflict with any provisions of the Main
Lease.
The Subtenant agrees, to the extent set forth in the Main Lease, indemnify
and hold harmless the Sublandlord and the Landlord on the Main Lease and each
mortgagee of the Subleased Premises from and against any and all liabilities,
damages, claims, losses, judgments, causes of actions, costs and expenses
(including the reasonable fees and expenses of counsel) which may be incurred
by the Subtenant, the Landlord or any such mortgagee or threatened against the
subtenant of the undertakings set forth in this Article, said indemnity to
survive the expiration or sooner termination of this Sublease.
6. Care and Maintenance. Subtenant acknowledges the Subleased premises is
in good order and repair. Subtenant, shall from the time of actual occupancy,
have 30 days to perform an inspection of the premises. Promptly upon receiving
a written report of such inspection, Subtenant shall provide a copy of same to
Sublandlord. Sublandlord shall promptly thereafter repair and/or replace as
appropriate any defects in the premises or mechanical systems. Subtenant
shall, at its own expense and at all times maintain the Subleased premises in
good
2
<PAGE> 3
condition, order and repair. Subtenant shall be responsible for the care,
upkeep and maintenance of any mechanical systems dedicated solely to the
demised premises. Except as set forth above Sublandlord shall at all times and
at its own expense maintain, repair and as necessary replace the electrical
wiring, plumbing, heating, air conditioning installations in or servicing the
Subleased premises, except that Subtenant shall be solely responsible for any
damage to such systems caused by Subtenant, or its agents, employees,
representatives or invitees. Subtenant shall be responsible for immediately
replacing any plate glass in the subleased premises broken by its agents,
employees or invitees. Subtenant agrees to maintain the Subleased premises in
good order and shall surrender same at the expiration of this sublease or
earlier termination hereof, in the condition as received, reasonable wear and
tear excepted.
7. Utilities. Tenant shall pay its pro-rata share of all common utility
charges for the building unless there is no other occupant in the building in
which event Tenant shall pay all utility charges for so long as it is the sole
Tenant. Tenant shall be responsible for payment of all telephone charges and
other utilities obtained in the name of tenant for its sole use.
8. Entry and Inspection. Subtenant shall permit Landlord, Sublandlord or
Sublandlord's agents to enter upon the Subleased Premises at reasonable times
and upon reasonable notice, for the purpose of inspecting same and will permit,
at any time within ninety (90) days prior to the expiration of this Sublease,
persons desiring to lease the same to inspect the Subleased Premises.
9. Liability Insurance. Subtenant at its expense, shall maintain
liability insurance with minimum limits of at least Five Million Dollars per
person, including bodily injury, insuring Subtenant and Sublandlord, and
Subtenant shall provide Sublandlord with a Certificate of Insurance showing
Landlord and Sublandlord as an additional insured. Subtenant shall carry
insurance on its personal property naming Sublandlord as an additional insured
for same.
10. Destruction of Subleased Premises. In the event of a partial
destruction of the Subleased Premises during the term hereof, from any cause,
Sublandlord shall forthwith repair the same provided that such repairs can be
made within sixty (60) days under existing governmental laws and regulations,
but such partial destruction shall not terminate this Sublease, except that
Subtenant shall be entitled to a proportionate reduction of rent while such
repairs are being made, based upon the extent to which the making of such
repairs shall interfere with the business of Subtenant of the Subleased
Premises. If such repairs cannot be made within said sixty (60) days,
Sublandlord, at its option, may make the same within a reasonable time, not to
exceed 120 days, this Sublease continuing in effect with the rent
proportionately abated as aforesaid, and in the event the Sublandlord shall not
elect to make such repairs which cannot be made within sixty (60) days, this
Sublease may be terminated at the option of either party. In the event that
the building in which the Subleased Premises is situated is destroyed to an
extent of not less than one-third of the replacement costs thereof, Sublandlord
may elect to terminate this sublease whether the Subleased Premises be injured
or not. A total destruction of the building in which the Subleased Premises is
situated shall terminate this sublease.
3
<PAGE> 4
11. Defaults, Remedies. The following shall be an Event of Default by
Subtenant:
(a) The Subtenant shall default in making any payment of Fixed Rent or any
Additional Charge as and when the same shall become due and payable, and such
default shall continue for a period of ten (10) days after notice from the
Sublandlord that such payment is due and unpaid; or
(b) The Subtenant shall default in the performance of or compliance with
any of the other covenants, agreements, terms or conditions of this sublease to
be performed by the Subtenant (other than any default curable by payment of
money), and such default shall continue for a period of thirty (30) days after
written notice thereof from the Sublandlord to the Subtenant, or, in the case
of a default which cannot with due diligence be cured within thirty (30) days,
the Subtenant shall fail to proceed promptly (except for unavoidable delays)
after the giving of such notice and with all due diligence to cure such default
and thereafter to prosecute the curing thereof with all due diligence (it being
intended that as to a default not susceptible of being cured with due diligence
within thirty (30) days, the time which such default may be cured shall be
extended for such period as may be reasonably necessary to permit the same to
be cured with all due diligence).
In any such event of default, and during the continuance thereof, the
Sublandlord may, at its option, then or thereafter while any such Event of
Default shall continue and notwithstanding the fact that the Sublandlord may
have any other remedy hereunder or at law or in equity, upon notice to the
Subtenant, designate a date, not less than thirty (30) days after the giving of
such notice, on which this sublease shall terminate. On such date the Term of
this sublease and the estate hereby granted shall expire and terminate upon the
date specified in such notice with the same force and effect as if the date
specified in such notice was the date hereinbefore fixed for the expiration of
the Term of this sublease, and except as set forth herein ail rights of the
Subtenant and Sublandlord hereunder shall expire and terminate. Additionally,
Subtenant agrees to pay, as an Additional Charge, all reasonable attorney's
fees and other expenses incurred by the Sublandlord in enforcing any of the
obligations under this sublease, this covenant to survive the expiration or
sooner termination of this sublease.
If this sublease is terminated as provided above, or as permitted by law,
the Subtenant shall peaceably quit and surrender the Subleased Premises to the
Sublandlord and the Sublandlord may, without further, notice, enter upon,
re-enter, possess and repossess the same by summary proceedings, ejectment or
other legal proceedings, and again have, repossess and enjoy the same as if
this sublease had not been made, and in any such event neither the Subtenant
nor any person claiming through or under the Subtenant by virtue of any law or
an order of any court shall be entitled to possession or to remain in
possession of the Subleased Premises.
In such event, the Sublandlord shall have the right to collect from the
Subtenant.
(1) any unpaid fixed rent; rentals
(2) any unpaid additional charges; additional
4
<PAGE> 5
(3) The reasonable costs of repairing the premises so that they are in the
condition required under Section 6 hereof and/or performing any obligation of
Subtenant under the Sublease;
(4) reasonable attorneys fees and costs incurred in evicting the Subtenant
and for enforcing the Sublandlord's rights under the lease including the
collection of rents and other damages;
(5) other damages as provided by law.
12. Releases. Subtenant hereby releases Sublandlord, Landlord and anyone
claiming through or under Sublandlord or Landlord by way of subrogation or
otherwise to the extent that Subtenant released Sublandlord or Landlord and/or
Landlord was relieved of liability or responsibility pursuant to the provisions
of the Main Lease, and Subtenant will cause its insurance carriers to include
any clauses or endorsements in favor of Landlord which Sublandlord is required
to provide pursuant to the provisions of the Main Lease.
13. Termination of Main Lease. If for any reason the term of the Main
Lease shall terminate prior to the expiration date of this Sublease, this
Sublease shall thereupon be terminated.
14. Alterations. Subtenant shall not make or cause, suffer or permit
the making of any alteration, addition, change, replacement, installation or
addition in or to the Subleased Premises without obtaining the prior consent of
Landlord or Sublandlord in each instance, provided that Sublandlord shall not
unreasonably withhold its consent to any non-structural change to the interior
portion of the Subleased Premises required or desired by Subtenant in
connection with its permitted use of the Subleased Premises. Nothing contained
in this Paragraph shall relieve Subtenant of any obligation to remove such
installations and restore the Subleased Premises at the end of the term of this
Sublease.
15. Hazard Insurance. A. Sublandlord, pursuant to the Main Lease shall
provide and keep in force, during the term of this Sublease, for the benefit
of, among others, Subtenant, a policy or policies, issued by insurance
companies with licenses to do business in the State of Connecticut, insuring
the Premises against damage or loss by fire and the hazards covered by
"extended coverage" and with a vandalism and malicious mischief endorsement in
an amount not less than the full replacement value thereof. If any premium
with respect to the premises demised under the Main Lease is increased due to
or arising out of the activities of Subtenant or the use of the Subleased
Premises, Subtenant shall pay to Sublandlord on demand as an Additional Charge
the full amount of such increase.
B. In addition to other insurance coverage required herein. Subtenant
shall be fully responsible for insurance covering its inventory and shall carry
workman's compensation insurance in amounts required by law. Subtenant hereby
agrees to hold Sublandlord harmless from and against any loss or damage to the
trade fixtures, inventory, equipment and other property of Subtenant located in
or on the Subleased Premises.
5
<PAGE> 6
16. Brokerage. a. Subtenant represents to Sublandlord that no broker or
other person had any part, or was instrumental in any way, in brining about
this Sublease. Subtenant shall pay, and shall indemnify, defend and hold
harmless Sublandlord from and against, any claims made by any broker or other
person for a brokerage commission, finder's fee, or similar compensation, by
reason of or in connection with this Sublease, and any loss, liability, damage,
cost and expense (including, without reasonable attorneys' fees) in connection
with such claims if such broker or other person claims to have had dealings
with Subtenant or its representatives.
b. Sublandlord represents to Subtenant that no broker or other person had
any part, or was instrumental in any way, in bringing about this Sublease.
Sublandlord shall pay, and shall indemnify, defend and hold harmless Subtenant
from and against, any claims made by any broker or other person for a brokerage
commission, finder's fee, or similar compensation, by reason of or in
connection with this Sublease, and any loss, liability, damage, cost or expense
(including, reasonable attorneys' fees and expenses) in connection with such
claims if such broker or other person claims to have had dealings with
Sublandlord or its representatives.
17. Indemnification. A. Subtenant shall save Sublandlord, its agents,
representatives and employees and Landlord harmless from and against all loss,
cost, liability, claim, damage and expense, including, without limitation,
reasonable attorneys' fees, penalties and fines incurred in connection with or
arising from any injury to Subtenant or to any other person or for any damage
to the Subleased Premises or for any damage to, or loss (by theft or otherwise)
of, any of Subtenant's property and/or of the property of any other person,
irrespective of the cause of such injury, damage or loss other than
Sublandlord's gross negligence or willful misconduct. Subtenant agrees to
indemnify and save Sublandlord, its agents, representatives or employees and
Landlord harmless from and against all loss, cost, liability, claims, damage
and expenses (including, without limitation, reasonable attorneys' fees),
penalties and fines, incurred in connection with or arising from (a) any
default by Subtenant in the observance or performance of any of the terms,
covenants or conditions of this Sublease on Subtenant's part to be observed or
performed, (b) Subtenant's failure to perform Sublandlord's obligations, as
tenant, as under the Main Lease, to the extent such obligations are required to
be performed by Subtenant pursuant to this Sublease, (c) the use or occupancy
or manner of use or occupancy of the Subleased Premises by Subtenant or any
person claiming through or under Subtenant, (d) to the extent Subtenant is
responsible therefore, the condition of the Subleased Premises, or (e) any
acts, omissions or negligence of Subtenant or any such person, or the
contractors, agents, representatives, employees, servants, visitors or
licensees of Subtenant or any such person, in or about the Subleased Premises
and common areas per the Main Lease or the Building either prior to, during, or
after the expiration of the Term. If any action or proceeding shall be brought
against Sublandlord or Landlord by reason of any such claim, Subtenant, upon
notice from Sublandlord, agrees to resist or defend such action or proceeding
and to employ counsel which is reasonably satisfactory to Sublandlord.
Subtenant shall pay to Sublandlord on demand all sums which may be owing, to
Sublandlord by reason of the provisions of this Paragraph 17 as an Additional
Charge. Subtenant's obligations under this Paragraph 17 shall survive the
termination of this Sublease.
6
<PAGE> 7
B. Sublandlord shall indemnify, defend and save Subtenant, its agents,
representatives and employees harmless from an against all loss, cost,
liability, claim, damage and expense, including, without limitation, reasonable
attorneys' fees, penalties and fines incurred in connection with or arising
from Sublandlord's and/or Landlord's willful wrongful acts or gross
negligence.
18. Environmental Matters. A. For purposes of this Sublease, the term
"Hazardous Substances" shall mean (a) any toxic substance or hazardous wastes,
substance or related material, or pollutant or contaminant; (b) any substance,
gas, material or chemical which is or may hereafter be defined as or included
in the definition of "hazardous substances", "toxic substances", "hazardous
materials", "hazardous waste" or words of similar import under any federal,
state or local statute, law, ordinance, code, regulation, order, permit,
approval, license, restriction or rule of any governmental or
quasi-governmental entity having jurisdiction over the Subleased Premises or
the operations or activities at the Subleased Premises (hereinafter
"Governmental Authorities"), including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 41 U.S.C.
Section 9601 et. seq., ("CERCLA"), the Resource Conservation and Recovery Act,
as amended, 42 U.S.C. Section 6901 et. seq., ("RCRA"), (c) any other substance,
material, chemical or gas, which is toxic, explosive, corrosive, flammable, or
otherwise hazardous and is or becomes regulated by any Governmental Authority;
and (d) any substance without limitation, which contains gasoline, diesel fuel
or other petroleum hydrocarbons.
B. Subtenant, its agents, employees, contractors, and invitees shall
comply with all applicable federal, state, and local environmental and safety
laws and regulations, shall obtain and maintain all permits, licenses, and
authorizations required for Subtenant's business, equipment, and operations on
and in connection with the Subleased Premises, and shall comply with all
applicable laws, statutes, rules, regulations, requirements, orders, and
directives of any Governmental Authorities, including, without limitation,
CERCLA and RCRA.
C. If at any time Subtenant shall become aware, or have reasonable cause
to believe, that any Hazardous Substance has been released or has otherwise
come to be located on or beneath the Property, Subtenant shall, immediately
upon discovering the release or the presence or suspected presence of the
Hazardous Substance, give written notice of that condition to Sublandlord and
Landlord. In addition, Subtenant shall, immediately notify the other party in
writing of (i) any enforcement, cleanup, removal, or other governmental or
regulatory action instituted, completed, or threatened pursuant to any
Hazardous Substance laws, (ii) any claim made or threatened by any person
against Landlord, Sublandlord, Subtenant, the Subleased Premises, the Building,
or the Property arising out of or resulting from any Hazardous Substances, and
(iii) any reports made to any local, state or federal environmental agency
arising out of or in connection with any Hazardous Substance.
D. Subtenant shall Indemnify, defend (by counsel acceptable to
Sublandlord, protect, and hold harmless Sublandlord, and each of Landlord's and
Sublandlord's partners, directors, officers, employees, agents, attorneys,
successors, and assigns from and against any and all claims,
7
<PAGE> 8
liabilities, penalties, fines, judgments, forfeitures, losses, costs, or
expenses (including attorney's fees, consultants' fees, and expert fees) for
the death of or injury to any person or damage to any Property whatsoever,
arising from or caused in whole or in part, directly or indirectly, by (i) the
presence in, on, under, or about the Subleased Premises, the Building or the
Property, or any discharge or release in, to, on, or from the Subleased
Premises, the Building, or the Property, of any Hazardous Substance but only to
the extent that any such presence, discharge, or release is caused by
Subtenant's activities on the Subleased Premises, or (ii) Subtenant's failure
to comply with any Hazardous Substance law, to the extent that compliance is
required on account of Subtenant's activities on the Premises and not to the
extent that compliance is required solely because Subtenant, as the occupant of
the Premises is held accountable for Hazardous Substances on, in, under, or
about the Property, or released therefrom.
E. Notwithstanding anything to the contrary contained herein, Subtenant
shall not have any responsibility or liability with regard to any spill,
release, event, or condition involving a Hazardous Substance, which spill,
release, event or condition:
a) preexisted Subtenant's occupancy of the Subleased Premises;
b) is caused by an action of Sublandlord, its agents, employees, or
representatives.
Sublandlord shall indemnify, defend (by counsel acceptable to Subtenant),
protect, and hold harmless Subtenant and each of Subtenant's partners,
directors, officers, employees, agents, attorneys, successors, and assigns from
and against any and all claims, liabilities, penalties, fines, judgments,
forfeitures, losses, costs, or expenses (including attorney's fees,
consultants' fees, and expert fees) for the death of or injury to any person or
damage to any Property whatsoever, arising from or caused in whole or in part,
directly or indirectly, from such a spill, release, event, or condition.
F. Notwithstanding anything contained herein to the contrary, the
provisions of this paragraph 18 shall survive the termination of the sublease.
19. Landlord's Consent. This lease is subject to Sublandlord obtaining
the Landlord's consent hereto.
20. Waiver. No failure of Sublandlord to enforce any term hereof shall be
deemed to be a waiver of such term.
21. Notices. Any notice which either party may or is required to give
shall be given by mailing the same, postage prepaid, to Sublandlord or
Subtenant at their respective addresses set forth above, or at such other
places as may be designated by the parties from time to time.
22. Subordination. This Sublease is and shall be subordinated to all
existing liens and encumbrances against the property.
8
<PAGE> 9
23. Applicable Law. This Sublease shall be governed as to all matters
including validity, construction and performance by the laws of the State of
New Jersey.
24. Surrender of Premises. On or before the Expiration Date of the Main
Lease, Sublandlord shall be permitted to have access to the Subleased Premises
for the purpose of performing any repairs, maintenance or restoration to the
Subleased Premises as made reference to in the Main Lease.
25. Complete Agreement. There are no representations, agreements,
arrangements or understandings, oral or written, between the parties relating
to the subject matter of this Sublease which are not fully expressed in this
Sublease. This Sublease cannot be changed or terminated orally or in any
manner other than by a written agreement executed by both parties.
26. Successors and Assigns; Status of Sublandlord. The provisions of
this Sublease, except as herein otherwise specifically provided, shall extend
to, bind and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
IN WITNESS WHEREOF, Sublandlord and Subtenant have executed this Sublease as of
the day and year first above written.
Sublandlord:
PARLUX FRAGRANCES, INC.
By: s/s Zalman Lekach
--------------------------------
Zalman Lekach, President, C.O.O.
Subtenant:
COSMETIC ESSENCE, INC.
By: s/s/ John Croddick
--------------------------------
John Croddick, President
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF PARLUX FRAGRANCES, INC. FOR THE QUARTER ENDED DECEMBER
31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 511,121
<SECURITIES> 0
<RECEIVABLES> 18,850,756
<ALLOWANCES> (4,436,935)
<INVENTORY> 40,574,523
<CURRENT-ASSETS> 87,907,740
<PP&E> 7,705,801
<DEPRECIATION> (4,091,808)
<TOTAL-ASSETS> 118,858,063
<CURRENT-LIABILITIES> 34,617,970
<BONDS> 0
174,475
0
<COMMON> 0
<OTHER-SE> 78,398,390
<TOTAL-LIABILITY-AND-EQUITY> 118,858,063
<SALES> 71,262,620
<TOTAL-REVENUES> 71,262,620
<CGS> 28,443,121
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 38,002,589
<LOSS-PROVISION> 65,000
<INTEREST-EXPENSE> 1,677,538
<INCOME-PRETAX> 7,244,832
<INCOME-TAX> 3,074,372
<INCOME-CONTINUING> 4,170,460
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,170,460
<EPS-PRIMARY> .25
<EPS-DILUTED> .25
</TABLE>
