THE CORPORATE LIBRARY

Related Party Transactions and Outside Related Director Information

Parlux Fragrances, Inc. (PARL)

7/29/2005 Proxy Information

Prior to the effectiveness of the Sarbanes-Oxley Act (“Sarbanes-Oxley”), which prohibits renewing or amending loans, as well as issuing new loans to Company officers and directors, the Company had made several personal loans to its Chairman and CEO, Mr. Ilia Lekach. These loans, which were consolidated into one note agreement on April 1, 2002, bore interest at 8% per annum (which the Company considered to be a market rate of interest at the time) and became due on March 31, 2003 in accordance with the note’s terms. On March 31, 2003, Mr. Lekach repaid $46,854 in principal and $71,364 of accrued interest, through that date. The repayment was affected via an offset of amounts due Mr. Lekach under his regular compensation arrangement. On July 15, 2003, Mr. Lekach repaid the entire loan balance of $742,884, plus accrued interest at the default rate of prime plus 5% (9.25%), through that date.

The Company had net sales to Perfumania of $35,330,772, $31,964,407, and $12,823,696 during the fiscal years ended March 31, 2005, 2004 and 2003, respectively. Perfumania, a related party, is our largest customer, and transactions with them are closely monitored by our Audit Committee and Board of Directors. Perfumania offers us the opportunity to sell our products in over 230 retail outlets and our terms with Perfumania take into consideration our over 15 year relationship. 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) free exposure of our products provided in Perfumania’s store windows and (e) minimal distribution costs to fulfill Perfumania orders shipped directly to their distribution center. While our invoice terms to Perfumania appear as net ninety (90) days, for over ten years the Board of Directors has granted longer payment terms, taking into consideration the factors discussed above. Our Board of Directors evaluates the credit risk involved and imposes a specific dollar limit, which is determined based on Perfumania’s reported results and comparable store sales performance. Management monitors the account activity to ensure compliance with the Board of Directors’ limit.

Net trade accounts receivable owed by Perfumania to the Company totaled $8,566,939 and $10,890,338 at March 31, 2005 and 2004, respectively. Trade receivables from Perfumania are non-interest bearing and are paid in accordance with the terms established by the Board of Directors.

In addition to Perfumania, the Company had net sales of $17,580,408, $10,477,671, and $8,924,530 during the years ended March 31, 2005, 2004, and 2003, respectively, to fragrance distributors owned/operated by individuals related to the Company’s Chairman/CEO. These sales are included as related party sales in the Company’s statements of operations. As of March 31, 2005 and 2004, trade receivables from related parties include $13,154 and $614,134, respectively, from these customers, which were current in accordance with their sixty (60) or ninety (90) day terms.

During the year ended March 31, 2005, the Company purchased $250,000 in television advertising on the “Adrenalina Show”, which is broadcast in various U.S. markets and in Latin American countries. The Company’s Chairman/CEO has a controlling ownership interest in the company, which has the production rights to the show.