SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
Amendment No. 1
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 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: 1-14208
MOSSIMO, INC.
(Exact name of Registrant as specified in its charter)
Delaware 33-0684524
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(State or other jurisdiction of (I.R.S. Employer ID No.)
incorporation or organization)
15320 Barranca Parkway
Irvine, California 92618
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(Address of principal (Zip Code)
executive offices)
(714) 453-1300
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(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 the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Common Stock, par value 15,000,000
$.001 per share (Outstanding on November 7, 1996)
(Class)
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The undersigned registrant hereby amends the following items of its
Quarterly Report for the third quarter of 1996 on Form 10-Q as set forth in
the pages attached hereto.
PART I
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Item 1. Financial Statements
Consolidated Balance Sheets as of
December 31, 1995 and September 30, 1996
(unaudited)........................................................3
Consolidated Statements of Income for the
three month and nine month periods ended
September 30, 1995 and 1996 (unaudited)............................4
Consolidated Statements of Cash Flows for the
nine month periods ended September 30, 1995
and 1996 (unaudited)...............................................5
Notes to Consolidated Financial Statements.........................7
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.
November 12, 1996 /s/ Tony Cherbak
------------------------------------
Tony Cherbak
Executive Vice President and
Chief Financial Officer
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MOSSIMO, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
SEPTEMBER 30, DECEMBER 31,
1996 1995
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 5,107 $ 481
Accounts receivable, net 6,891 844
Due from factor 15,294 3,255
Royalties receivable 875 683
Inventories 14,144 9,773
Prepaid expenses 488 588
Deferred taxes 700 --
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Total current assets 43,499 15,624
PROPERTY AND EQUIPMENT, net 3,754 1,420
OTHER ASSETS 1,383 118
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$48,636 $17,162
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 5,236 $ 2,032
Accrued liabilities 660 915
Income taxes payable 354 6
Current portion of long-term debt 63 50
S distribution note 150 -
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Total current liabilities 6,463 3,003
DEFERRED ROYALTY INCOME 1,100 -
DEFERRED RENT, net of current portion 116 94
LONG-TERM DEBT, net of current portion 58 30
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
13,000,000 (1995) and 15,000,000 (1996) shares 15 13
Additional paid-in capital 31,663 1,187
Retained earnings 9,221 12,835
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40,899 14,035
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$48,636 $17,162
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See accompanying notes to financial statements
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MOSSIMO, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
For The Three Months For The Nine Months
Ended September 30, Ended September 30,
--------------------- -------------------
1996 1995 1996 1995
-------- ------- ------- -------
NET SALES $31,913 $18,816 $81,915 $53,805
COST OF SALES 21,792 11,086 50,168 30,262
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GROSS PROFIT 10,121 7,730 31,747 23,543
ROYALTY INCOME 843 599 3,036 2,528
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10,964 8,329 34,783 26,071
OPERATING EXPENSES:
General and administrative 2,897 1,498 6,516 4,290
Selling 2,444 1,557 6,737 4,206
Marketing 1,360 455 3,065 1,556
Design 504 262 1,389 672
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7,205 3,772 17,707 10,724
------- ------- ------- -------
OPERATING INCOME 3,759 4,557 17,076 15,347
OTHER EXPENSE (INCOME):
Other (6) (57) (53) (108)
Interest (130) 78 (131) 102
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(136) 21 (184) (6)
------- ------- ------- -------
INCOME BEFORE TAXES 3,895 4,536 17,260 15,353
PROVISION FOR INCOME TAXES 1,597 52 5,178 230
------- ------- ------- -------
NET INCOME $ 2,298 $ 4,484 $12,082 $15,123
======= ======= ======= =======
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE $ 0.15
=======
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 15,208
======
PRO FORMA DATA:
Historical income before pro
forma provision for income taxes $ 4,536 $17,260 $15,353
Pro forma provision for
income taxes 1,848 7,077 6,255
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PRO FORMA NET INCOME $ 2,688 $10,183 $ 9,098
======= ======= =======
PRO FORMA NET INCOME PER COMMON
AND COMMON EQUIVALENT SHARE $0.69
=====
PRO FORMA WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING 14,802
======
See accompanying notes to financial statements
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MOSSIMO, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
(in thousands)
(unaudited)
1996 1995
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $12,082 $15,123
Adjustment to reconcile net income to
net cash (used) provided by operating activities:
Depreciation and amortization 399 264
Loss on disposition of property and equipment 2 31
Deferred rent 22 (47)
Provision for doubtful receivables 260 379
Changes in:
Accounts receivable (6,157) (442)
Due from factor (8,402) (664)
Royalties receivable (62) 33
Inventories (4,371) (4,017)
Prepaid expenses 99 -
Other assets (1,265) (75)
Accounts payable 3,204 1,425
Accrued liabilities (255) 210
Income taxes payable (352) (15)
Deferred royalty income 1,100 -
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Net cash (used in) provided by operating activities (3,696) 12,205
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CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for acquisition of property and equipment (2,614) (665)
Proceeds from disposition of property and equipment 0 76
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Net cash used in investing activities (2,614) (589)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (79) (39)
Net change in factor advances (3,917) 3,522
Dividends paid (17,208) (15,103)
Net proceeds from issuance of common stock 32,140 -
Repayment of note payable to stockholder - (225)
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Net cash (used in) provided by financing activities 10,936 (11,845)
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,626 (229)
CASH AND CASH EQUIVALENTS, beginning of period 481 407
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CASH AND CASH EQUIVALENTS, end of period $ 5,107 $ 178
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 146 $ 78
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Income taxes $ 5,482 $ 245
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MOSSIMO, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
(in thousands)
(unaudited)
(CONTINUED)
1996 1995
---- ----
SCHEDULE OF NONCASH INVESTING AND FINANCING TRANSACTIONS:
Contractual obligations incurred for
the acquisition of equipment $ 120 $ 22
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S distribution note payable to stockholder $ 150 $ -
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See accompanying notes to financial statements
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MOSSIMO, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
---------------------
The accompanying consolidated financial statements of Mossimo, Inc. and
subsidiary ("Mossimo" or the "Company") have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles ("GAAP") for complete financial statements. The
financial statements should be read in conjunction with the financial statements
and notes thereto included in the Company's registration statement on Form S-1
(33-80597) declared effective by the SEC on February 21, 1996.
In the opinion of management, the consolidated financial statements contain all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair statement of the consolidated balance sheets as of September 30, 1996 and
December 31, 1995, the consolidated statements of income for the three month and
nine month periods ended September 30, 1996 and 1995, and the consolidated
statements of cash flows for the nine month periods ended September 30, 1996 and
1995. Operating results for the three month and nine month periods ended
September 30, 1996 are not necessarily indicative of the results that may be
expected for the entire fiscal year ending December 31, 1996.
On February 15, 1996, the Company effected a 13,000-for-one stock split of its
common stock. All share and per share amounts included in the accompanying
consolidated financial statements and footnotes have been restated to reflect
the stock split.
Certain of the 1995 amounts have been reclassified to conform to the
presentation used in 1996.
2. Initial Public Offering
-----------------------
In February 1996, the Company completed an initial public offering of 2,000,000
shares of its common stock for $18 per share, netting proceeds to the Company
after underwriting discounts and expenses of approximately $32.4 million.
Proceeds to the Company were used to repay indebtedness of $5.6 million in
outstanding advances under the Company's factoring agreement and pay $17.2
million in connection with the final S corporation distribution. (See Note 5.)
The remaining proceeds are being used for general corporate purposes, including
the construction of in-store shops, start-up costs of the Company's
screenprinting subsidiary and tenant improvements and equipment for a new
headquarters and distribution facility expected to be occupied by the Company in
the first half of 1997.
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3. Pro Forma Data
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PRO FORMA NET INCOME - Pro forma net income represents the results of operations
adjusted to reflect a provision for income taxes on historical income before
provision for income taxes, which gives effect to the change in the Company's
income tax status to a C corporation as a result of the public sale of its
common stock.
The principal difference between the pro forma income tax rate and the federal
statutory rate of 35% relates to state income taxes.
PRO FORMA NET INCOME PER SHARE - Pro forma net income per share has been
computed by dividing pro forma net income by the weighted average number of
shares of common stock outstanding during the period. Historical net income per
common share is not presented because it is not indicative of the ongoing
entity.
4. Income Taxes
------------
Prior to February 27, 1996, the Company had elected to be taxed as an S
corporation under the provisions of the Internal Revenue Code and similar
statutes in the State of California. Accordingly, the Company's taxable income
was treated as if it were distributed to the sole stockholder, who was
responsible for payment of taxes thereon. In addition, the Company was subject
to a California franchise tax rate of 1.5%. Effective February 27, 1996, the
Company converted to a C corporation and became subject to Federal and State
income taxes on an ongoing basis. As a result, the Company recorded $700,000 of
deferred income tax assets on February 27, 1996.
5. Stockholders' Equity
--------------------
In conjunction with its initial public offering, the Company terminated its S
corporation status and distributed to its stockholder $17.2 million,
representing previously earned and undistributed taxable S corporation earnings
as of February 27, 1996 in the form of promissory notes (S distribution notes).
The estimated remaining amount payable to stockholder for previously earned and
undistributed taxable S corporation earnings under the S distribution notes was
$150,000 at September 30, 1996.
In accordance with a regulation of the Securities and Exchange Commission, the
Company reclassified $1,624,000 to additional paid-in capital for that portion
of the previously earned and undistributed taxable S corporation earnings at
February 27, 1996 which was in excess of the balance of retained earnings at
such date.
6. Credit Agreement
----------------
In February 1996, the Company entered into a $10 million unsecured line of
credit with a bank. The credit agreement contains certain restrictive covenants
that require the maintenance of various financial levels and ratios and
prohibits the payment of dividends by the Company.
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7. Deferred Royalty Income
-----------------------
In August 1996, the Company acquired its exclusive license for Southeast
Asia from its then-existing licensee for a payment of $1.1 million and
simultaneously negotiated a new agreement with an unrelated party to license
that same territory for an initial term of 5 years with licensee's option to
extend for an additional 5 years. In consideration of the new agreement, the
Company received $1.1 million, consisting of a license fee of $550,000 and
$550,000 to be applied against future minimum royalty payments required under
the agreement. The Company will amortize the licensing rights (included in
other assets) and deferred royalty income over the initial 5-year term of the
agreement.
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