Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004
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: 1-14208
MOSSIMO, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 33-0684524
(State or other jurisdiction of (I.R.S. Employer ID No.)
incorporation or organization)
2016 BROADWAY
SANTA MONICA, CALIFORNIA 90404
(Address of principal (Zip Code)
executive offices)
(310) 460-0040
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for any shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of March 31, 2004, the Registrant had 15,738,442 shares of Common Stock,
$0.001 par value, outstanding.
MOSSIMO, INC.
FORM 10-Q
For the Three Months Ended March 31, 2004
PART I - FINANCIAL INFORMATION Page
- ------------------------------ ----
ITEM 1 - Financial Statements (Unaudited):
Condensed consolidated balance sheets as of March 31, 2004 and December 31, 2003................... 2
Condensed consolidated statements of earnings for the three months
ended March 31, 2004 and 2003.................................................................. 3
Condensed consolidated statements of cash flows for the three months
ended March 31, 2004 and 2003.................................................................. 4
Notes to condensed consolidated financial statements .............................................. 5
ITEM 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations .... 12
ITEM 3 - Quantitative and Qualitative Disclosure about Market Risk ................................ 19
ITEM 4 - Controls and Procedures .................................................................. 19
PART II - OTHER INFORMATION
- ---------------------------
ITEM 1 - Legal Proceedings ........................................................................ 21
ITEM 6 - Exhibits and Reports on Form 8-K ......................................................... 22
SIGNATURES ........................................................................................ 22
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MOSSIMO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
UNAUDITED
MARCH 31, DECEMBER 31,
2004 2003
--------- ---------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................................ $ 6,628 $ 9,707
Restricted cash .................................................. -- 4,585
Accounts receivable .............................................. 5,464 2,007
Deferred income taxes ............................................ 2,307 3,071
Prepaid expenses and other current assets ........................ 602 282
--------- ---------
Total current assets ........................................... 15,001 19,652
PROPERTY AND EQUIPMENT, net ........................................ 998 480
DEFERRED INCOME TAXES .............................................. 5,973 6,037
GOODWILL ........................................................... 324 --
OTHER ASSETS ....................................................... 46 244
--------- ---------
$ 22,342 $ 26,413
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ................................................. $ 211 $ 525
Accrued liabilities .............................................. 532 1,513
Accrued commissions .............................................. 745 5,251
Accrued bonuses .................................................. 652 112
--------- ---------
Total current liabilities ...................................... 2,140 7,401
--------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.001; authorized shares 3,000,000;
no shares issued or outstanding ................................ -- --
Common stock, par value $.001; authorized shares 30,000,000;
issued and outstanding 15,738,442 at March 31, 2004
and at December 31, 2003 ....................................... 15 15
Additional paid-in capital ....................................... 39,763 39,763
Accumulated deficit .............................................. (19,576) (20,766)
--------- ---------
Stockholders' equity ........................................... 20,202 19,012
--------- ---------
$ 22,342 $ 26,413
========= =========
See accompanying notes to condensed consolidated financial statements.
2
MOSSIMO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
UNAUDITED
FOR THE THREE MONTHS
ENDED MARCH 31,
----------------------
2004 2003
--------- ---------
REVENUE FROM LICENSE ROYALTIES AND
DESIGN SERVICE FEES ............................ $ 6,223 $ 5,868
OPERATING EXPENSES:
Selling, general and administrative ............. 4,213 3,526
--------- ---------
Operating earnings .................................. 2,010 2,342
INTEREST INCOME (EXPENSE), net ...................... 27 (14)
--------- ---------
Earnings before income taxes ........................ 2,037 2,328
Provision for income taxes .......................... 847 930
--------- ---------
Net earnings ........................................ $ 1,190 $ 1,398
========= =========
Earnings per common share:
Basic ........................................... $ 0.08 $ 0.09
========= =========
Diluted ......................................... $ 0.08 $ 0.09
========= =========
Weighted average common shares outstanding:
Basic ........................................... 15,738 15,491
========= =========
Diluted ......................................... 15,771 15,657
========= =========
See accompanying notes to condensed consolidated financial statements.
3
MOSSIMO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
UNAUDITED
FOR THE THREE MONTHS
ENDED MARCH 31,
-------------------
2004 2003
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings ................................................................. $ 1,190 $ 1,398
Adjustment to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization ............................................ 58 74
Inventory reserve ........................................................ 13 --
Allowance for accounts receivable ........................................ 12 --
Deferred income taxes .................................................... 828 930
Changes in:
Restricted cash ...................................................... 4,585 --
Accounts receivable .................................................. (3,457) (3,283)
Prepaid expenses and other current assets ............................ (320) (355)
Other assets ......................................................... 204 24
Accounts payable and long-term accounts payable ...................... (314) (54)
Accrued liabilities .................................................. (981) (299)
Accrued commissions .................................................. (4,506) 783
Accrued bonuses ...................................................... 540 (329)
-------- --------
Net cash used in operating activities ................................ (2,148) (1,111)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for acquisition of assets of a business ............................. (375) --
Payments for acquisition of property and equipment ........................... (556) (55)
-------- --------
Net cash used in investing activities ................................ (931) (55)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of loan payable ..................................................... -- (973)
Proceeds from issuance of common stock ....................................... -- 27
-------- --------
Net cash used in financing activities ................................ -- (946)
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS .................................... (3,079) (2,112)
CASH and CASH EQUIVALENTS, beginning of period ............................... 9,707 7,786
-------- --------
CASH and CASH EQUIVALENTS, end of period ..................................... $ 6,628 $ 5,674
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest ................................. $ -- $ 27
======== ========
Cash paid during the period for taxes .................................... $ 35 $ --
======== ========
See accompanying notes to condensed consolidated financial statements.
4
MOSSIMO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
1. BASIS OF PRESENTATION
The condensed consolidated financial statements presented herein have
not been audited by independent auditors, but include all material adjustments
(consisting of normal recurring adjustments), which are, in the opinion of
management, necessary for a fair statement of the financial condition, results
of operations and cash flows for the periods presented. However, these results
are not necessarily indicative of results for any other interim period or for
the full year. The condensed consolidated balance sheet data presented herein
for December 31, 2003 was derived from the Company's audited financial
statements for the year then ended, but does not include all disclosures
required by accounting principles generally accepted in the United States of
America.
On January 16, 2004, Mossimo, Inc. acquired substantially all the
assets of Modern Amusement LLC through a wholly owned subsidiary, Modern
Amusement, Inc. ("Modern Amusement"). The accompanying condensed consolidated
financial statements as of and for the three months ended March 31, 2004 include
the account balances and results of operations of Modern Amusement as of March
31, 2004 and for the period from January 16, 2004 to March 31, 2004,
respectively. All intercompany accounts and transactions have been eliminated in
consolidation.
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires the
Company to make certain estimates and assumptions for the reporting periods
covered by the financial statements. These estimates and assumptions affect the
reported amounts of assets, liabilities, revenues and expenses. Actual amounts
could differ from these estimates.
Certain information and footnote disclosures normally included in
annual financial statements in accordance with accounting principles generally
accepted in the United States of America have been omitted pursuant to the
Regulations of the Securities and Exchange Commission. The Company believes the
disclosures included in the accompanying interim condensed consolidated
financial statements and notes thereto are adequate to make the information not
misleading, but should be read in conjunction with the financial statements and
notes thereto included in our Form 10-K for the year ended December 31, 2003.
Certain prior year balances have been reclassified to conform to the
current year presentation.
5
2. DESCRIPTION OF BUSINESS
In 2000 the Company changed its business operating strategy from a
traditional apparel and related products wholesale company, to a designer and
licensor of apparel and related products. In connection therewith, the Company
entered into a multi-year licensing and design services agreement with Target
Corporation ("Target") in March 2000, subsequently amended in April 2002 and in
February 2003, (herein after referred to as the "Target Agreement".) Under the
terms of the Target Agreement, Target has the exclusive license, for production
and distribution through Target stores, of substantially all Mossimo products
sold in the United States, other than those covered under other existing Mossimo
licensing arrangements at the time the Company entered into the Target
Agreement.
Under the Target Agreement the Company provides design services and has
approval rights for product design, marketing and advertising materials. Target
collaborates on design and is responsible for product development, sourcing,
quality control and inventory management with respect to the Target licensed
product line. Target is obligated to pay the Company design service fees and
license royalty fees. Total fees payable by Target are based upon a percentage
of Target's net sales of Mossimo brand products, with minimum total guaranteed
fees of approximately $9.6 million payable in each of the contract years after
January 31, 2002. Target fees are based on net sales achieved multiplied by a
rate, as defined in the Target Agreement. The Company pays a 15 percent
commission, based on fees received from Target, to a third party who assisted
the Company in connection with entering into the initial agreement with Target.
The Target Agreement is subject to early termination under certain
circumstances. If Target is current with payments of its obligations under the
Target Agreement, Target has the right to renew the Target Agreement, on the
same terms and conditions, for additional terms of two years each. In January
2003, Target exercised its first renewal option extending the Target Agreement
through January 31, 2006. The next renewal option could be exercised by Target
in or before January 2005. This renewal option could extend the Target Agreement
through January 2008, if it is exercised by Target.
In addition to the Target Agreement, the Company also licenses its
trademarks and provides design services outside of the United States, and also
licenses its trademarks for use in collections of eyewear and women's swimwear
and body-wear sold in Target stores in the United States.
In May 2002, the Company entered into an agreement with Hudson's Bay
Company whereby the Company provides product design services, and has licensed
the Mossimo trademark to Hudson's Bay Company exclusively in Canada, in return
for license royalties and design service fees. Hudson's Bay Company collaborates
on product design, and is responsible for manufacturing, importing, marketing,
advertising, selling and distributing merchandise bearing the Mossimo trademark.
The initial term of the agreement is three years beginning in May 2002, with a
five-year extension at the option of Hudson's Bay Company. Hudson's Bay Company
fully launched the Mossimo product in mid-March 2003 for distribution through
its Zellers stores in Canada.
In January 2004 the Company acquired substantially all the assets of
Modern Amusement LLC through a wholly owned subsidiary, Modern Amusement for
aggregate consideration of $375,000. Modern Amusement designs, merchandises,
sources, markets, sells and distributes wholesale apparel and related
accessories for young men and young women. The "Modern Amusement" registered
brand is principally focused on premium west coast-lifestyle apparel and related
accessories. The products are offered at moderate to upper price points through
traditional specialty store and higher-end department store distribution
channels. This line of business is expected to diversify the Company's current
design and licensing business of its Mossimo brand product through mass retail
distribution channels. The results of operations for the first quarter were not
material to the consolidated results of operations of the Company. Pro forma
information is not presented for the first quarter 2003 as it was not material
to the results of operations for that period.
6
3. REVENUE RECOGNITION
Revenue from license royalties and design service fees are recognized
in accordance with the terms of the underlying agreements, which is generally
after the design services are performed, and as the licensee achieves sales of
the Company's products. During the periods presented herein, a substantial
amount of the Company's revenue from license royalties and design fees were
generated under the Target Agreement under a rate of 1% to 4% that declines as
the contract year progresses and Target achieves certain levels of retail sales.
Accordingly, the Company's revenues from Target decrease as the year progresses.
The declining rate is reset each contract year beginning on February 1. Revenue
recognized in the first and second quarters of the Company's calendar year in
connection with the Target Agreement is significantly higher than in the third
and fourth quarters of the Company's calendar year due to the declining rates in
the Target Agreement. Revenues from license royalties and design service fees
under license agreements other than the Target Agreement are generally collected
on a quarterly basis, and they range from 1% to 3% of sales, as defined in the
respective agreements.
4. BONUS PLANS
The Company has bonus plans covering two executive officers which are
administered by the Compensation Committee of the Board of Directors, and that
provide for discretionary bonuses based on the Company's overall performance,
with the total amount of the bonuses not to exceed a percent (as defined) of the
excess over the minimum total guaranteed fees, if any, of license royalties paid
to the Company under the Target Agreement, and as defined in each of the
respective bonus plans. The Company has expensed $607,000 and $572,000 under
these agreements for the three month periods ended March 31, 2004 and 2003,
respectively.
5. INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standard ("SFAS") No. 109, "Accounting for Income Taxes".
Deferred taxes result from the recognition of the income tax benefit to be
derived from the Company's net operating loss carry forward for income taxes
purposes.
The Company recorded a provision for income taxes of $847,000 in the
first quarter of 2004 compared to a provision for income taxes of $930,000 in
the first quarter of 2003. Both provisions approximate the Company's combined
statutory tax rate for Federal and California state income taxes.
At March 31, 2004, the Company has recorded a total net deferred tax
asset of $8.3 million, with $2.3 million classified as current in the
accompanying condensed consolidated balance sheet, as a result of the extension
of the Target Agreement through January 31, 2006, management's discussions with
Target prior to March 31, 2004 which resulted in management considering that it
is more likely than not that Target would extend the agreement through 2008, the
reevaluation of its forecasted operating results and resultant taxable income
during the extended term of the Target Agreement, and the consequent expected
utilization of available net operating losses during the extended term of the
Target Agreement. The Company has considered the projected taxable income from
the Target Agreement and other agreements in its estimate of deferred tax asset
recoverability and has recorded a valuation allowance for its net deferred tax
assets of $1.1 million.
7
The Company has approximately $22 million and $18 million of federal
and state income tax net operating loss carry forwards, respectively, available
to offset future taxable income which expire in various years through 2022. The
Company expects that future taxable income will be offset in the near-term, for
the most part, by its net operating tax loss carry forwards.
In addition to the Company's taxable income being subject to federal,
state and local income taxes, the Company may be classified as a "personal
holding company" from time to time. Personal holding company status results from
more than 50 percent of the value of outstanding stock being owned directly or
indirectly by five or fewer individuals, and more than 60 percent of the
Company's income, as defined, being derived from royalties. Personal holding
companies are subject to an additional federal tax at the highest personal
income tax rate on undistributed after tax earnings.
Over 50 percent of the value of the Company's outstanding stock is
owned by one stockholder, however it is presently anticipated that in 2004, no
more than 60 percent of the Company's income, as defined, would be derived from
license royalties. Accordingly, at this time the Company is not anticipated to
be classified as a personal holding company at the end of 2004 and the Company
intends to continue to take appropriate measures to avoid being classified as a
personal holding company at the end of 2004 and beyond. However, there can be no
assurance that the Company will be successful in its efforts to avoid
classification as a personal holding company at the end of 2004 or in future
years.
6. BUSINESS ACQUISITION
On January 16, 2004, Mossimo, Inc. acquired substantially all the
assets of Modern Amusement LLC through a wholly owned subsidiary, Modern
Amusement. The acquisition was accounted for as a purchase whereby the purchase
price was allocated to the assets acquired based on fair values. The excess
purchase price over the amount allocated to the assets acquired has been
recorded as goodwill in the accompanying condensed consolidated balance sheet at
March 31, 2004. The following table summarizes the fair values of the assets
acquired at the date of acquisition.
Current assets............................................. $ 25
Property and equipment..................................... 20
Goodwill................................................... 324
Other assets............................................... 6
------
Assets acquired....................................... $ 375
======
7. EARNINGS PER SHARE AND STOCK OPTION PLANS
Basic earnings per share is computed by dividing net earnings available
to common stockholders by the weighted average number of common shares
outstanding. Diluted net earnings per share includes the effect of potential
shares outstanding, including dilutive stock options, using the treasury stock
method. Stock options excluded from diluted weighted average shares outstanding
for the three months ended March 31, 2004 and 2003 were 441,000 and 601,000,
respectively, as they were antidilutive.
8
The reconciliation between net earnings and weighted average shares
outstanding for basic and diluted earnings per share is as follows (amounts in
thousands, except per share data):
For the Three Months
Ended March 31,
---------------------
2004 2003
-------- --------
Net earnings ......................................... $ 1,190 $ 1,398
-------- --------
Weighted average shares outstanding - Basic .......... 15,738 15,491
-------- --------
Basic earnings per share ............................. $ 0.08 $ 0.09
-------- --------
Add: Dilutive effect of stock options ................ 33 166
-------- --------
Weighted average shares outstanding - Diluted ........ 15,771 15,657
-------- --------
Diluted earnings per share ........................... $ 0.08 $ 0.09
-------- --------
The Company adopted the Mossimo, Inc. 1995 Stock Option Plan (the "1995
Plan"), which provides for the grant of stock options, stock appreciation rights
and other stock awards to certain officers and key employees of the Company and
to certain advisors or consultants to the Company. In addition, the Company
adopted a Non-Employee Directors Stock Option Plan (the "Directors Plan") that
provides for the grant of stock options to non-employee directors.
The Company accounts for stock-based compensation in accordance with
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees", and related interpretations. The Company follows the pro forma
disclosure requirements of SFAS No. 123, "Accounting for Stock-Based
Compensation", which require presentation of the pro forma effect of the fair
value based method on net earnings and earnings per share in the financial
statement footnotes.
The fair value of each option grant was estimated as of the grant date
using the Black-Scholes option-pricing model for the periods ended March 31,
2004 and 2003, assuming risk-free interest rates in the range of approximately
1.9 to 6.5 percent; volatility in the range of approximately 38 to 202 percent;
zero dividend yield; and expected lives of five years. In accordance with APB
Opinion No. 25, no compensation expense has been recognized related to stock
options granted with an option price at or above the fair market value of the
Company's stock on the date of issuance.
9
If compensation expense was determined based on the fair value method
beginning with grants in the year ended December 31, 1996, the Company's net
earnings and earnings per share would have resulted in the approximate pro forma
amounts indicated below for the three month periods ended March 31, 2004, and
2003 (in thousands, except per share data):
2004 2003
---------- ----------
Actual net earnings ................................ $ 1,190 $ 1,398
Less: Total compensation as if the fair value
method was used, net of tax effect ............ (74) (130)
---------- ----------
Pro forma net earnings ............................. $ 1,116 $ 1,268
========== ==========
Earnings per share:
Basic - as reported ........................... $ 0.08 $ 0.09
Basic - pro forma ............................. $ 0.07 $ 0.08
Diluted - as reported ......................... $ 0.08 $ 0.09
Diluted - pro forma ........................... $ 0.07 $ 0.08
8. IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
In May 2003, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 150, "Accounting for Certain Financial Instruments With Characteristics
of Both Liabilities and Equity." SFAS No. 150 changes the classification in the
statement of financial position of certain common financial instruments from
either equity or mezzanine presentation to liabilities and requires an issuer of
those financial statements to recognize changes in fair value or redemption
amount, as applicable, in earnings. SFAS No. 150 is effective for financial
instruments entered into or modified after May 31, 2003, and with one exception
relating to certain mandatorily redeemable financial instruments, is effective
at the beginning of the first interim period beginning after June 15, 2003. The
implementation of SFAS No. 150 did not have an impact on the Company's financial
position or results of operations.
In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities". This interpretation clarifies the
application of Accounting Research Bulletin No. 51 ("ARB 51"), "Consolidated
Financial Statements", and requires companies to evaluate variable interest
entities for specific characteristics to determine whether additional
consolidation and disclosure requirements apply. The provisions of FIN 46 for
certain variable interest entities were delayed until the fourth quarter of
2003. This interpretation is immediately applicable for variable interest
entities created after January 31, 2003, and applies to fiscal periods beginning
after June 15, 2003 for variable interest entities acquired prior to February 1,
2003. This interpretation also requires extensive disclosures, including
disclosures that are applicable to December 31, 2002 financial statements. The
adoption of this interpretation did not have a material impact on the Company's
financial position or results of operations.
10
In December 2003, the SEC issued Staff Accounting Bulletin ("SAB") No.
104, "Revenue Recognition", which codifies, revises and rescinds certain
sections of SAB No. 101, "Revenue Recognition", in order to make this
interpretive guidance consistent with current authoritative accounting and
auditing guidance and SEC rules and regulations. The changes noted in SAB No.
104 did not have a material effect on the Company's results of operations,
financial position or cash flows.
9. LITIGATION
In May 2002, the Company made a demand for arbitration in connection
with a claim for overpayment of commissions paid to a third party who assisted
the Company in connection with entering into the initial agreement with Target.
The arbitration hearing was completed in October 2002. In November 2002, the
arbitration hearing panel issued a preliminary award in favor of the third
party, which became final in January 2003 and awarded the third party the
commissions owed, interest on the amounts due which had been withheld by the
Company, and the recovery of the third party's legal fees.
In January 2003, the Company filed a petition to vacate the award,
including commissions, third party legal fees, and interest, on the basis that
the evidence received during the arbitration hearing demonstrated that the
finder's agreement between the Company and the third party was illegal under
certain applicable California law. In January 2003 the third party filed a
petition to confirm the award, including commissions, the third party's legal
fees, and interest.
In June 2003, the award was confirmed and a judgment entered in favor
of the third party, and the third party was awarded additional interest. In June
2003 the Company filed an appeal to the judgment and in connection therewith
deposited with the court approximately $4,585,000. The $4,585,000 deposited with
the courts was classified as restricted cash on the Company's balance sheet as
of December 31, 2003. The deposit secured 150% of the judgment amount. In
January 2004 the appeal decision was rendered in favor of the third party, and
the Company proceeded with an appeal to the Supreme Court of the State of
California.
In March 2004, the California Supreme Court denied the Company's
appeal. The California Supreme Court's decision not to review the trial court
judgment reaffirms the validity of the original finder's agreement between the
third party and Mossimo and the third party 's right to be paid all amounts
currently due, including interest at the legal rate and all post-judgment
amounts as well as attorney's fees.
During the three months ended March 31, 2004 the Company paid all
unpaid commissions and interest payable to the third party in connection with
this matter. At March 31, 2004 the Company still owed to the third party
$413,000 for legal fees. No further expenses, other than new commissions
incurred under the original agreement, are anticipated.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion includes the operations of Mossimo, Inc and
its wholly owned subsidiary Modern Amusement. On January 16, 2004, the Company,
through its subsidiary Modern Amusement, acquired substantially all the assets
of Modern Amusement LLC. The accompanying financial statements as of and for the
three months ended March 31, 2004 include the account balances and results of
operations of Modern Amusement as of March 31, 2004 and for the period from
January 16, 2004 to March 31, 2004, respectively. This discussion and analysis
should be read in conjunction with the Company's financial statements for the
year ended December 31, 2003 on our annual report on Form 10-K.
RESULTS OF OPERATIONS
DESCRIPTION OF BUSINESS
In 2000 the Company changed its business operating strategy from a
traditional apparel and related products wholesale company, to a designer and
licensor of apparel and related products. In connection therewith, the Company
entered into a multi-year licensing and design services agreement with Target
Corporation ("Target") which was subsequently amended in April 2002 and in
February 2003, (herein after referred to as the "Target Agreement"). Under the
terms of the Target Agreement, Target has the exclusive license, for production
and distribution through Target stores, of substantially all Mossimo products
sold in the United States, other than those products covered under other
existing Mossimo licensing arrangements at the time the Company entered into the
Target Agreement.
Under the Target Agreement the Company provides design services and has
approval rights for product design, marketing and advertising materials. Target
collaborates on design and is responsible for product development, sourcing,
quality control and inventory management with respect to the Target licensed
product line. Target is obligated to pay the Company design service fees and
license royalty fees. Total fees payable by Target are based upon a percentage
of Target's net sales of Mossimo brand products, with minimum total guaranteed
fees of approximately $9.6 million payable in each of the contract years after
January 31, 2002. Target fees are based on net sales achieved multiplied by a
rate, as defined in the Target Agreement. The Company pays a 15 percent
commission, based on fees received from Target, to a third party who assisted
the Company in connection with entering into the initial agreement with Target.
The Target Agreement is subject to early termination under certain
circumstances. If Target is current with payments of its obligations under the
Target Agreement, Target has the right to renew the Target Agreement, on the
same terms and conditions, for additional terms of two years each. In January
2003, Target exercised its first renewal option extending the Target Agreement
through January 31, 2006. The next renewal option could be exercised by Target
in or before January 2005. This renewal option could extend the Target Agreement
through January 2008 if it is exercised by Target.
In addition to the Target Agreement, the Company also licenses its
trademarks and provides design services outside of the United States, and also
licenses its trademarks for use in collections of eyewear and women's swimwear
and body-wear sold in Target stores in the United States.
12
In May 2002, the Company entered into an agreement with Hudson's Bay
Company. Under the agreement, the Company provides product design services, and
has granted a license for the Mossimo trademark to Hudson's Bay Company
exclusively in Canada, in return for license royalties and design service fees.
Hudson's Bay Company collaborates on product design, and is responsible for
manufacturing, importing, marketing, advertising, selling and distributing
merchandise bearing the Mossimo trademark. The initial term of the agreement is
three years beginning in May 2002, with a five-year extension at the option of
Hudson's Bay Company. Hudson's Bay Company fully launched the Mossimo product in
mid-March 2003 for distribution through its Zellers stores in Canada.
In January 2004 the Company acquired substantially all the assets of
Modern Amusement LLC through a wholly owned subsidiary, Modern Amusement. Modern
Amusement designs, merchandises, sources, markets, sells and distributes
wholesale apparel and related accessories for young men and young women. The
"Modern Amusement" registered brand is principally focused on premium west
coast-lifestyle apparel and related accessories. The products are offered at
moderate to upper price points through traditional specialty store and
higher-end department store distribution channels. This line of business is
expected to diversify the Company's current design and licensing business of its
Mossimo brand product through mass retail distribution channels.
THREE MONTHS ENDED MARCH 31, 2004 AND 2003
REVENUES
Revenue from license royalties and design service fees are recognized
in accordance with the terms of the underlying agreements, which is generally
after the design services are performed, and as the licensee achieves sales of
the Company's products. For the three months ended March 31, 2004, a substantial
amount of the Company's revenue from license royalties and design fees were
generated under the Target Agreement. The royalty rate under the Target
Agreement declines, as the contract year progresses and Target achieves certain
levels of retail sales, from 4% to 1%. The declining royalty rate is reset each
contract year beginning on February 1. Accordingly, revenue recognized in the
first and second quarters of the Company's calendar year is significantly higher
than in the third and fourth quarters due to the declining rates in the Target
Agreement. Revenues from license royalties and design service fees under license
agreements other than the Target Agreement are generally collected on a
quarterly basis, and they range from 1% to 3% of sales, as defined in the
respective agreements.
Total revenue from license royalties and design service fees in the
first quarter of 2004 were $6.2 million compared to $5.9 million in the first
quarter of 2003.
Design service fees and royalties recognized under the Target Agreement
were $5.5 million in the first quarter of 2004 compared to $5.2 million in the
first quarter of 2003. The five percent increase reflects modest growth of
Target sales of Mossimo branded product. Royalties and design service fees from
customers other than Target increased to $715,000 in the first quarter of 2004
from $651,000 in the first quarter of 2003. The increase was primarily due to an
increase in royalty fees to $332,000 in the first quarter of 2004 from $247,000
in the first quarter of 2003 attributable to women's swimwear and body-wear sold
in Target stores in the United States. The Company's revenues generated under
the Target Agreement are expected to increase modestly as Target adds new stores
and the Company continues to maximize its opportunities with Target. the Zellers
business in Canada is also expected to increase revenues as the Company begins
to maximize its opportunities with Zellers, having completed the full launch of
its product line in Canada in March 2003.
Modern Amusement achieved gross retail sales of $26,000 in the period
from its acquisition to March 31, 2004. These sales generated a gross profit of
$13,000 for the period. These amounts are included in the license royalties and
design service fees as they are immaterial to the condensed consolidated
financial statements. In future periods, these amounts will be separately
presented in the statements of earnings, if material.
13
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Total operating expenses is comprised of selling, general and
administrative expenses. Total operating expenses increased to $4.2 million for
the three months ended March 31, 2004 from $3.5 million for the comparable
period in 2003. Selling, general and administrative expenses were approximately
68% of revenues from royalties and design service fees in the first quarter of
2004, as compared to approximately 60% for the comparable period of 2003. This
increase was primarily due to $478,000 of selling, general and administrative
expenses incurred in the first quarter of 2004 by the operations of Modern
Amusement. Operating expenses for Mossimo, Inc., as a stand-alone operation, as
a percent of revenues from royalties and design service fees, remained constant
at 60% in both the first quarter of 2004 and the first quarter of 2003.
Selling expenses, comprised of commissions due to a third party who
assisted the Company in connection with entering into the initial agreement with
Target, increased to $1 million in the first quarter of 2004 from $783,000 in
the first quarter of 2003, due to the true up of interest expense owing on the
unpaid commissions to the third party.
General and administrative expenses include payroll for the Company's
officers and its design staff, travel, facilities, insurance, legal and
professional fees, and other design related expenses for purchased services and
artwork used in the design process. Salaries and related costs for Mossimo, as a
stand alone operation, remained relatively consistent at $969,000 for the first
quarter 2004, compared to $1 million for the first quarter 2003. Also included
in general and administrative expenses are bonuses of $607,000 in the first
quarter of 2004, and $572,000 in the first quarter of 2003, which are due under
bonus plans covering two executive officers of the Company. Design, artwork and
sample costs decreased to $150,000 in the first quarter of 2004 from $276,000 in
the first quarter of 2003 primarily due to the costs incurred in 2003 relating
to the launch of its product line with Zellers.
Operating expenses in the first quarter of 2004 also include $110,000
of costs in connection with a legal dispute with the third party who assisted
the Company in connection with entering into the initial agreement with Target.
The Company incurred $66,000 of similar costs in the first quarter of 2003. The
dispute was resolved in the first quarter of 2004 and is further discussed in
Part II, Item I - Legal Proceedings in this quarterly report.
Expenses incurred by Modern Amusement were $478,000 in the period from
its acquisition to March 31, 2004. These costs consisted primarily of salary and
related costs of $190,000, consulting fees of $83,000, and tradeshow and samples
costs of $146,000.
INTEREST INCOME (EXPENSE), NET
The Company earned $27,000 in interest income in the first quarter of
2004, compared to $25,000 in the first quarter of 2003. As a result of the
repayment of the Company's outstanding balance of a loan payable to a bank in
2003 the Company incurred interest expense in the first quarter of 2003 of
$39,000. No interest expense was incurred in the first quarter of 2004.
14
INCOME TAXES
The Company recorded a provision for income taxes of $847,000 in the
first quarter of 2004 compared to a provision for income taxes of $930,000 in
the first quarter of 2003. Both provisions approximate the Company's combined
statutory tax rate for Federal and California state income taxes.
The Company has approximately $22 million and $18 million of federal
and state income tax net operating loss carry forwards, respectively, available
to offset future taxable income which expire in various years through 2022. The
Company expects that future taxable income will be offset in the near-term, for
the most part, by its net operating tax loss carry forwards.
NET EARNINGS
The Company's net earnings for the first quarter of 2004 were $1.2
million, or $0.08 per diluted share, compared to net earnings of $1.4 million,
or $0.09 per diluted share for the first quarter of 2003 due to the factors
discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was approximately $2.1 million in
the first quarter of 2004. Cash used in operating activities includes,
primarily, $1.2 million of net earnings and the change in deferred income taxes
and accrued bonuses of $828,000 and $540,000, respectively offset by changes in
accounts receivable and accrued liabilities of $3.5 million and $1 million,
respectively. Additionally in the first quarter of 2004 a legal dispute with a
third party was resolved. Prior to March 31, 2004 the Company paid all
previously accrued and unpaid commissions and interest payable to the third
party in connection with this matter. This resulted in a decrease in restricted
cash of $4.6 million which was partially offset by a decrease in accrued
commissions of $4.5 million. The dispute is further discussed in Part II, Item I
- - Legal Proceedings in this quarterly report.
Net cash used in investing activities was $931,000 in the first quarter
of 2004 and was comprised of the purchase price for the business of Modern
Amusement of $375,000 and purchase of property and equipment of $556,000
primarily relating to additional property and equipment for Modern Amusement.
As a result of the acquisition in January 2004 of the Modern Amusement
assets, we amended our facility lease to increase our space from approximately
6,000 square feet to approximately 9,000 square feet, and extend the lease term
through July 2009. The future annual obligation under the amended lease varies
each year. It commences at approximately $290,000 in 2004 and increases to
$334,000 in 2008. The required cash and liquidity resources for Modern Amusement
are not expected to have a significant impact on our liquidity and capital
resources in 2004, due to the size of the acquired business being relatively
small. Future cash and liquidity resources required beyond 2004 will depend on
our planned expansion of the Modern Amusement business.
The Company is approached from time to time by parties seeking to sell
their brands and related trademarks. Should an established marketable brand
become available on favorable terms, the Company may be interested in pursuing
such an acquisition and may elect to fund such acquisition, in whole or in part,
with available cash.
15
The Company believes that its available cash balances at March 31, 2004
and its expected net operating cash inflows from operations during 2004 will be
adequate to meet the Company's anticipated liquidity needs in 2004.
From time to time, the Company also considers a number of different
financing alternatives, including the issuance of equity securities, and debt
instruments as sources of liquidity or as consideration for potential
acquisitions.
CRITICAL ACCOUNTING POLICIES
REVENUE RECOGNITION
Revenue from license royalties and design service fees are recognized
in accordance with the terms of the underlying agreements, which is generally
after the design services are performed, and as the licensee achieves sales of
the Company's products. During the periods presented herein, a substantial
amount of the Company's revenue from license royalties and design fees were
generated under the Target Agreement under a rate of 1% to 4% that declines as
the contract year progresses and Target achieves certain levels of retail sales.
Accordingly, the Company's revenues from Target decrease as the year progresses.
The declining rate is reset each contract year beginning on February 1. Revenue
recognized in the first and second quarters of the Company's calendar year in
connection with the Target Agreement is significantly higher than in the third
and fourth quarters of the Company's calendar year due to the declining rates in
the Target Agreement. Revenues from license royalties and design service fees
under license agreements other than the Target Agreement are generally collected
on a quarterly basis, and they range from 1% to 3% of sales, as defined in the
respective agreements.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standard ("SFAS") No. 109, "Accounting for Income Taxes".
Deferred taxes result from the recognition of the income tax benefit to be
derived from the Company's net operating loss carry forward for income taxes
purposes.
The Company recorded a provision for income taxes of $847,000 in the
first quarter of 2004 compared to a provision for income taxes of $930,000 in
the first quarter of 2003. Both provisions approximate the Company's combined
statutory tax rate for Federal and California state income taxes.
At March 31, 2004, the Company has recorded a total net deferred tax
asset of $8.3 million, with $2.3 million classified as current in the
accompanying condensed consolidated balance sheet, as a result of the extension
of the Target Agreement through January 31, 2006, management's discussions with
Target prior to March 31, 2004 which resulted in management considering that it
is more likely than not that Target would extend the agreement through 2008, the
reevaluation of its forecasted operating results and resultant taxable income
during the extended term of the Target Agreement, and the consequent expected
utilization of available net operating losses during the extended term of the
Target Agreement. The Company has considered the projected taxable income from
the Target Agreement and other agreements in its estimate of deferred tax asset
recoverability and has recorded a valuation allowance for its net deferred tax
assets of $1.1 million.
16
The Company has approximately $22 million and $18 million of federal
and state income tax net operating loss carry forwards, respectively, available
to offset future taxable income which expire in various years through 2022. The
Company expects that future taxable income will be offset in the near-term, for
the most part, by its net operating tax loss carry forwards.
In addition to the Company's taxable income being subject to federal,
state and local income taxes, the Company may be classified as a "personal
holding company" from time to time. Personal holding company status results from
more than 50 percent of the value of outstanding stock being owned directly or
indirectly by five or fewer individuals, and more than 60 percent of the
Company's income, as defined, being derived from royalties. Personal holding
companies are subject to an additional federal tax at the highest personal
income tax rate on undistributed after tax earnings.
Over 50 percent of the value of the Company's outstanding stock is
owned by one stockholder, however it is presently anticipated that in 2004, no
more than 60 percent of the Company's income, as defined, would be derived from
license royalties. Accordingly, at this time the Company is not anticipated to
be classified as a personal holding company at the end of 2004 and the Company
intends to continue to take appropriate measures to avoid being classified as a
personal holding company at the end of 2004 and beyond. However, there can be no
assurance that the Company will be successful in its efforts to avoid
classification as a personal holding company at the end of 2004 or in future
years.
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
In May 2003, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 150, "Accounting for Certain Financial Instruments With Characteristics
of Both Liabilities and Equity." SFAS No. 150 changes the classification in the
statement of financial position of certain common financial instruments from
either equity or mezzanine presentation to liabilities and requires an issuer of
those financial statements to recognize changes in fair value or redemption
amount, as applicable, in earnings. SFAS No. 150 is effective for financial
instruments entered into or modified after May 31, 2003, and with one exception
relating to certain mandatorily redeemable financial instruments, is effective
at the beginning of the first interim period beginning after June 15, 2003. The
implementation of SFAS No. 150 did not have an impact on the Company's financial
position or results of operations.
In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities". This interpretation clarifies the
application of Accounting Research Bulletin No. 51 ("ARB 51"), "Consolidated
Financial Statements", and requires companies to evaluate variable interest
entities for specific characteristics to determine whether additional
consolidation and disclosure requirements apply. The provisions of FIN 46 for
certain variable interest entities were delayed until the fourth quarter of
2003. This interpretation is immediately applicable for variable interest
entities created after January 31, 2003, and applies to fiscal periods beginning
after June 15, 2003 for variable interest entities acquired prior to February 1,
2003. This interpretation also requires extensive disclosures, including
disclosures that are applicable to December 31, 2002 financial statements. The
adoption of this interpretation did not have a material impact on the Company's
financial position or results of operations.
In December 2003, the SEC issued Staff Accounting Bulletin ("SAB") No.
104, "Revenue Recognition", which codifies, revises and rescinds certain
sections of SAB No. 101, "Revenue Recognition", in order to make this
interpretive guidance consistent with current authoritative accounting and
auditing guidance and SEC rules and regulations. The changes noted in SAB No.
104 did not have a material effect on the Company's results of operations,
financial position or cash flows.
17
CONTINGENCIES AND LITIGATION
Management evaluates contingent liabilities including pending or
threatened litigation in accordance with SFAS No. 5 "Accounting for
Contingencies", and records accruals when the outcome of these matters is deemed
probable and the amount of the liability is subject to reasonable estimate.
Management makes these assessments based on the facts and circumstances
available at the time, and in some instances based in part on the advice of
outside counsel.
INFLATION
The Company does not believe that the relatively moderate rates of
inflation experienced in the United States over the last three years have had a
significant effect on its operations. Since the Company's future revenues are
based on a percentage of sales of licensed products by licensees, the Company
does not anticipate that inflation will have a material impact on future
operations.
EXCHANGE RATES
The Company receives United States dollars for all its revenue from
license royalties and design service fees, other than from its business in
Canada, which began in 2003 and does not represent a substantial amount of
revenue at this time. During the last three fiscal years, exchange rate
fluctuations have not had a material impact on the Company's operating results.
The Company does not engage in hedging activities with respect to exchange rate
risk.
18
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company does not use interest rate swaps, futures contracts or
options on futures, or other types of derivative financial instruments. The
Company does not believe that future market risks arising from holdings of its
financial instruments will have a material impact on its financial position or
results of operations. Further, the Company does not face the risk of exposure
to adverse movements in foreign currency. The Company does not currently rely
upon credit agreements for financing, which could have an adverse impact upon
the Company should interest rates rise.
ITEM 4. CONTROLS AND PROCEDURES
Based on their evaluation as of March 31, 2004, our Chief Executive
Officer and Chief Financial Officer have concluded that our internal controls
and disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended) were
sufficiently effective to ensure that the information required to be disclosed
by us in this report on Form 10-Q was recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and instructions
for Form 10-Q.
There have not been any changes in our internal control over financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities
Exchange Act of 1934) during the quarter ended March 31, 2004 that have
materially affected, or are reasonably likely to materially affect our internal
controls over financial reporting.
Our management, including our Chief Executive Officer and Chief
Financial Officer, does not expect that our internal controls and disclosure
controls and procedures will prevent all error and all fraud. A control system,
no matter how well conceived and operated, can provide only reasonable, not
absolute assurance that the objectives of the control system are met. Further,
the design of the control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within the Company have been detected.
FORWARD-LOOKING STATEMENTS AND RISK FACTORS
Certain information included in this Form 10-Q and other materials
filed or to be filed by us with the Securities and Exchange Commission (as well
as information included in oral or written statements made by us or on our
behalf), may contain forward-looking statements about our current and expected
performance trends, growth plans, business goals and other matters. These
statements may be contained in our filings with the Securities and Exchange
Commission, in our press releases, in other written communications, and in oral
statements made by or with the approval of one of our authorized officers. Words
or phrases such as "believe," "plan," "will likely result," "expect," "intend,"
"will continue," "is anticipated," "estimate," "project," "may," "could,"
"would," "should" and similar expressions are intended to identify
forward-looking statements. These statements, and any other statements that are
not historical facts, are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, as codified in Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, as amended from time to time (the "Act").
19
In connection with the "safe harbor" provisions of the Act, we are
filing the following summary to identify important factors, risks and
uncertainties that could cause our actual results to differ materially from
those projected in forward-looking statements made by us, or on our behalf.
These cautionary statements are to be used as a reference in connection with any
forward-looking statements. The factors, risks and uncertainties identified in
these cautionary statements are in addition to those contained in any other
cautionary statements, written or oral, which may be made or otherwise addressed
in connection with a forward-looking statement or contained in any of our
subsequent filings with the Securities and Exchange Commission. Because of these
factors, risks and uncertainties, we caution against placing undue reliance on
forward-looking statements. Although we believe that the assumptions underlying
forward-looking statements are reasonable, any of the assumptions could be
incorrect, and there can be no assurance that forward-looking statements will
prove to be accurate. Forward-looking statements speak only as of the date on
which they are made. We do not undertake any obligation to modify or revise any
forward-looking statement to take into account or otherwise reflect subsequent
events, or circumstances arising after the date that the forward-looking
statement was made.
The following risk factors may affect our operating results and the
environment within which we conduct our business. If our projections and
estimates regarding these factors differ materially from what actually occurs,
our actual results could vary significantly from any results expressed or
implied by forward-looking statements. These risk factors include, but are not
limited to, a termination or adverse modification of the Company's license
relationships with Target and others, the success of its licensing program with
Target and The Hudson Bay Company and other licensees, the integration of Modern
Amusement and its success in growing its business, changes in consumer demands
and preferences, competition from other lines, risks generally associated with
product introductions and shifting trends in the overall retail and apparel
retailing markets and the other factors described in "Business-Risk Factors" in
the Company's Form 10-K filing for the year ended December 31, 2003.
20
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In May 2002, the Company made a demand for arbitration in connection
with a claim for overpayment of commissions paid to a third party who assisted
the Company in connection with entering into the initial agreement with Target.
The arbitration hearing was completed in October 2002. In November 2002, the
arbitration hearing panel issued a preliminary award in favor of the third
party, which became final in January 2003 and awarded the third party the
commissions owed, interest on the amounts due which had been withheld by the
Company, and the recovery of the third party's legal fees.
In January 2003, the Company filed a petition to vacate the award,
including commissions, third party legal fees, and interest, on the basis that
the evidence received during the arbitration hearing demonstrated that the
finder's agreement between the Company and the third party was illegal under
certain applicable California law. In January 2003 the third party filed a
petition to confirm the award, including commissions, the third party's legal
fees, and interest.
In June 2003, the award was confirmed and a judgment entered in favor
of the third party, and the third party was awarded additional interest. In June
2003 the Company filed an appeal to the judgment and in connection therewith
deposited with the court approximately $4,585,000. The $4,585,000 deposited with
the courts was classified as restricted cash on the Company's balance sheet as
of December 31, 2003. The deposit secured 150% of the judgment amount. In
January 2004 the appeal decision was rendered in favor of the third party, and
the Company proceeded with an appeal to the Supreme Court of the State of
California.
In March 2004, the California Supreme Court denied the Company's
appeal. The California Supreme Court's decision not to review the trial court
judgment reaffirms the validity of the original finder's agreement between the
third party and Mossimo and the third party 's right to be paid all amounts
currently due, including interest at the legal rate and all post-judgment
amounts as well as attorney's fees.
During the three months ended March 31, 2004 the Company paid all
unpaid commissions and interest payable to the third party in connection with
this matter. At March 31, 2004 the Company still owed to the third party
$413,000 for legal fees. No further expenses, other than new commissions
incurred under the original agreement, are anticipated.
The Company is involved in certain other legal and administrative
proceedings and threatened legal and administrative proceedings from time to
time in the normal course of business. While the outcome of such proceedings and
threatened proceedings can not be predicted with certainty, in the opinion of
management, the ultimate resolution of these matters individually or in the
aggregate are not expected to have a material adverse effect on the Company's
business as a whole.
21
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are included herein:
31.1 Certification of Principal Executive Officer as
required by Rule 13a - 14(a) of the Securities Exchange
Act of 1934
31.2 Certification of Principal Financial Officer as
required by Rule 13a - 14(a) of the Securities Exchange
Act of 1934
32.1 Certification of Principal Executive Officer as
required by Rule 13a - 14(b) of the Securities Exchange
Act of 1934
32.2 Certification of Principal Financial Officer as
required by Rule 13a - 14(b) of the Securities Exchange
Act of 1934
(b) Reports on Form 8-K
The Company filed the following reports on Form 8-K during the
first quarter of its fiscal year ended December 31, 2004:
On March 11, 2004, the registrant filed a report on
Form 8-K announcing its financial results for the quarter and
the year ended December 31, 2003.
On March 18, 2004, the registrant filed a report on
Form 8-K commenting on the Supreme Court ruling in connection
with a claim for overpayment of commissions paid to a third
party who assisted the Company in connection with entering
into the initial agreement with Target.
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 on the fourteenth day of May 2004.
MOSSIMO, INC.
/s/ MOSSIMO GIANNULLI
-------------------------------------------
Mossimo Giannulli
Chairman and Chief Executive Officer
/s/ MALI SHRINIVAS
-------------------------------------------
Mali Shrinivas
Chief Financial Officer
22