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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                            ------------------------

                                   FORM 10-K

(MARK ONE)

<TABLE>
<C>        <S>
   /X/     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934
</TABLE>

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
                                       OR

<TABLE>
<C>        <S>
   / /     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934
</TABLE>

        FOR THE TRANSITION PERIOD FROM ______________ TO ______________

                        COMMISSION FILE NUMBER: 1-14208

                            ------------------------

                                 MOSSIMO, INC.

             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                               <C>
         DELAWARE                              33-0684524
     (State or other                    (I.R.S. Employer ID No.)
     jurisdiction of
     incorporation or
      organization)

2450 WHITE ROAD 2ND FLOOR                      92614-6250
    IRVINE, CALIFORNIA                         (zip code)
  (Address of principal
    executive offices)
</TABLE>

                                 (949) 797-0200
              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: Common stock, par
value $.001 per share

Securities registered pursuant to Section 12(g) of the Act: None

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 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 / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference and Part III of this Form 10-K or any amendment to
this Form 10-K. / /

The aggregate market value of the voting stock held by non-affiliates of the
registrant at April 4, 2000 was approximately $12,219,000.

The registrant had 15,080,042 shares of common stock, par value $.001 per share,
outstanding at April 4, 2000.

Documents Incorporated by Reference (To the Extent Indicated Herein): Portions
of the Definitive Proxy Statement for the 2000 Annual Meeting (in Part III)

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<PAGE>
ITEM 1--BUSINESS

GENERAL

    On March 28, 2000, Mossimo, Inc. ("Mossimo" or the "Company") entered into a
multi-year licensing agreement (the "Target Agreement") with Target Corporation
(Target). Under terms of the Target Agreement, Target will have the exclusive
United States license for production and distribution through Target stores of
substantially all Mossimo products sold in the United States, other than those
covered under existing Mossimo licensing arrangements. The Target licensed
product line will initially include men's and women's apparel and is scheduled
to be launched in February 2001. This licensed product line may be expanded to
include all soft line categories, fragrances, other accessories and house wares.

    The Target Agreement provides that the Company will contribute, and will
cause Mossimo Giannulli, its President, Chief Executive Officer and principal
designer, to contribute, design services and will have approval rights for
product design and marketing and advertising materials. Target will collaborate
on design and will be responsible for product development, sourcing, quality
control and inventory management with respect to the Target licensed product
line. Under the Target Agreement, Target is obligated to pay the Company a
royalty based upon a percentage of its net sales of Mossimo brand products, with
a minimum guaranteed royalty, beginning in 2001, of approximately $27.8 million
over the initial three-year term of the agreement. The Target Agreement is
subject to early termination under certain circumstances. If Target is current
in its payments of the minimum guaranteed royalty amount, Target has the right
to renew the Target Agreement, on the same terms and conditions, for additional
terms of two years each.

    As a result of entering into the Target Agreement, management will be
implementing several changes to the Company's operations during the period from
March 28, 2000 to the commencement of royalty payments under the Target
Agreement in May 2001 (the "Restructuring Period"). The most significant changes
will include a work force reduction of approximately 90% of all employees,
closure of the Company's signature retail store and outlet store, termination of
all sourcing, production and sales operations and termination of relationships
with substantially all existing customers and suppliers. During the
Restructuring Period, the Company will suffer the elimination of all wholesale
and retail sales, continuation of operating losses and negative cash flows and
recognition of a significant restructuring charge. Due to the broad changes to
the Company's operations, the timing and magnitude of these consequences are
uncertain at this time.

    The Company's current credit facility includes a $15.0 million revolving
credit line, collateralized by inventory, receivables, machinery and equipment
and intangibles, bearing interest at the prime rate plus 1.0%. Borrowings are
limited to 50% of eligible inventory and 85% of eligible receivables. The
facility also allows for up to approximately $6.0 million in letters of credit.

    Due to the restructuring of the Company's business, available borrowings
under the current credit facility are expected to be substantially eliminated by
June 2000. The Company is actively seeking financing to cover anticipated
shortfalls and is in the process of renegotiating its credit facility, including
its factoring agreement. Should these efforts be unsuccessful, additional funds
may not be available to the Company. See "Risk Factors--Going Concern".

    The Company also licenses its trademarks for use in collections of eyewear,
women's swimwear and bodywear, men's hosiery and men's tailored suits and dress
shirts. Currently, Mossimo has four additional license agreements pursuant to
which third party licensees have the exclusive right to manufacture and
distribute certain products bearing the Company's trademarks according to
designs furnished or approved by the Company in specified territories outside of
the United States. Mossimo products are characterized by quality workmanship and
are targeted towards the fashion conscious consumer generally age 30 or under.

    Prior to entering into the Target Agreement, the Company's primary line of
business was designing, sourcing and marketing a lifestyle collection of
designer men's and women's sportswear and activewear,

                                       2
<PAGE>
including knit and woven shirts, outerwear, denim and related products, dresses,
pants, sweatshirts, tee-shirts and shorts.

    Mossimo is a Delaware corporation formed in November 1995 to succeed to the
assets and liabilities of Mossimo, Inc., a California corporation, which was
organized in 1988 to continue the business founded by Mossimo Giannulli in 1987
as a sole proprietorship. References herein to the "Company" and "Mossimo" refer
to Mossimo, Inc. and, unless the context otherwise indicates, its subsidiary and
predecessors.

PRODUCT DESIGN

    The cornerstone of the Company's business is its ability to design products
which embody the Mossimo image of a contemporary and youthful lifestyle. The
Company's designs are inspired by subtle changes in culture and society,
including such areas as music, television, cinema, architecture and other forms
of artistic expression, and appeal to the contemporary consumer. Mossimo
Giannulli provides leadership and direction for all aspects of the design
process. The Company's design staff reflects the Company's fashion conscious
consumer as they consistently monitor changes in fashion, style, culture and
society. Mr. Giannulli's active participation in, and oversight of, the design
process for all Mossimo products is intended to ensure consistency of the
quality of such products and their adherence to the Company's distinctive image.

PRODUCTS

    The Company has licensed the rights to manufacture and distribute
collections of men's and women's apparel (under the Target Agreement), eyewear,
women's swimwear and bodywear, men's hosiery and men's tailored suits and dress
shirts bearing its trademarks utilizing designs approved by the Company.
Currently, Mossimo has four additional license agreements pursuant to which
third party licensees have the exclusive right to manufacture and distribute
certain products bearing the Company's trademarks according to designs furnished
or approved by the Company in specified territories outside of the United
States.

    Prior to entering into the Target Agreement, the Company's primary line of
business was designing, sourcing and marketing collections of men's and women's
apparel, including knit and woven tops, outerwear, denim and related products,
dresses, pants, sweatshirts, tee-shirts and shorts. The Company discontinued its
Moss line, which consisted of activewear products, in 1998. The Company also
discontinued its Optics line in 1998 and entered into a license agreement for
the production and distribution of eyewear in 1999. During the Restructuring
Period, the Company will discontinue sourcing, production and sales activities,
and its ongoing operations will be limited to design and other activities
specified in its license agreements. The following table sets forth the
components of the Company's net sales by product for the periods indicated:

<TABLE>
<CAPTION>
                                                                   YEARS ENDED DECEMBER 31,
                                              ------------------------------------------------------------------
                                                      1999                   1998                   1997
                                              --------------------   --------------------   --------------------
                                              NET SALES      %       NET SALES      %       NET SALES      %
                                              ---------   --------   ---------   --------   ---------   --------
                                                                   (NET SALES IN THOUSANDS)
<S>                                           <C>         <C>        <C>         <C>        <C>         <C>
Men's and Women's Apparel...................   $45,101      95.2%     $36,529      80.6%     $63,877      90.0%
Moss Line...................................        --       0.0        2,346       5.2        1,109       1.6
Optics Line.................................       546       1.1        1,742       3.8        3,086       4.4
Other (1)...................................     1,746       3.7        4,693      10.4        2,864       4.0
                                               -------     -----      -------     -----      -------     -----
Total.......................................   $47,393     100.0%     $45,310     100.0%     $70,936     100.0%
                                               =======     =====      =======     =====      =======     =====
</TABLE>

(1) Other is comprised primarily of: sales by the Company's retail stores; sales
    by the Company's screen printing subsidiary (discontinued in 1998); sales of
    the Company's Time collection of watches

                                       3
<PAGE>
    (discontinued in 1997); and sales of fabric, trim, merchandising supplies
    and fixtures to certain of the Company's licensees.

    MEN'S AND WOMEN'S APPAREL.  The Company's men's and women's lines encompass
a variety of products, including: knit and woven tops, including polo shirts and
collared, button-down shirts; outerwear, including sweaters and jackets; denim
and related products, including jeans, shirts and jackets; dresses; pants;
screenprinted and embroidered sweatshirts and tee-shirts; and shorts. In
March 2000, the Company entered into the Target Agreement for the production and
distribution of the men's and women's apparel lines in the United States. The
initial Target licensed product lines are scheduled to be launched in
February 2001. These licensed product lines may be expanded to include all soft
line categories, fragrances, other accessories and house wares not covered under
existing Mossimo licensing arrangements.

    OPTICS LINE.  The Company's Optics line, comprised of high quality men's and
women's sunglasses, was discontinued in 1998. In June 1999, the Company signed
an exclusive license agreement with the Marcolin Group for the production and
distribution of the Mossimo line of eyewear. The line includes sunglasses, sport
glasses and optical frames for men, women and children. The line is scheduled to
be launched in April 2000.

    WOMEN'S SWIMWEAR AND BODYWEAR.  The Mossimo line of women's swimwear and
bodywear is manufactured and distributed in the United States through an
exclusive license agreement with The Lunada Bay Corporation, which utilizes
designs approved by the Company bearing Mossimo trademarks. The high quality
swimwear products include both one-piece and two-piece swimsuits which are
fashion-oriented and targeted towards youthful-minded, body-conscious women. The
women's bodywear line is a collection of fashionable aerobic and fitness
activewear which bear Mossimo trademarks and is designed using materials such as
lycra, tactel and flexcel nylon that stretch and compensate for body movements
during strenuous exercise.

    MEN'S HOSIERY.  The Mossimo line of men's hosiery is manufactured and
distributed through an exclusive license agreement with Mountain High
Hosiery, Ltd. and is designed to complement Mossimo's men's products. This line
was introduced in the fourth quarter of 1998.

    MEN'S TAILORED SUITS AND DRESS SHIRTS.  The Company has entered into an
exclusive license agreement with GFT Apparel Corporation for the manufacture and
distribution of men's tailored suits and dress shirts under the Mossimo and
Mossimo Giannulli brand names. This line was launched in Fall 1998 and
discontinued in Spring 1999.

    MEN'S NECKWEAR.  The Mossimo line of men's neckwear, which was launched in
Spring 1997, was manufactured and distributed through an exclusive license
agreement with Superba, Inc. This license agreement expired in March 2000.

SOURCING AND MANUFACTURING

    Under the Target Agreement, substantially all Mossimo products sold in the
United States, other than those covered under existing Mossimo licensing
arrangements, will be manufactured and distributed exclusively by Target. The
Target licensed product line will initially include men's and women's apparel
and is scheduled to be launched in February 2001. This licensed product line may
be expanded to include all soft line categories, fragrances, other accessories
and house wares.

    The Target Agreement provides that Target will be responsible for product
development, sourcing, quality control and inventory management with respect to
the Target licensed product line. The Company believes that these functions can
be executed more effectively by a large retailer due to significant economies of
scale and vertical integration.

                                       4
<PAGE>
    The Company sources each of its product lines, other than its licensed
product lines, separately based on the individual design, styling and quality
specifications of such products through independently owned contractors with
manufacturing facilities primarily in the United States, Mexico, China, India,
Hong Kong, Macau, Korea, Philippines, Thailand, Burma and Indonesia. The Company
believes that outsourcing its production allows it to enhance production
flexibility and capacity while substantially reducing capital expenditures and
avoiding the costs of managing a large production work force. In addition,
outsourcing provides the Company with expertise in fabric selection and
manufacturing processes. The Company utilizes international sourcing agents who
assist the Company in selecting and overseeing third party contractors, sourcing
fabric and monitoring quotas and other trade regulations. The Company's
production staff and independent sourcing agents oversee all aspects of apparel
manufacturing and production. The Company and its sourcing agents separately
negotiate with suppliers for the purchase of fabric which is then purchased by
the Company's contractors. Under the Target Agreement, Target will be
responsible for sourcing the Target licensed product line, and the Company will
eliminate its sourcing operations.

    Mossimo contracts for the manufacture and sewing of its products, other than
its licensed product lines, with approximately six factories in North America
and 18 factories overseas. During 1999, approximately 70% of the Company's
products were manufactured outside of North America. The balance of the
Company's finished goods was manufactured by North American suppliers. The
Company arranges for production of its products primarily based on projected
sales and orders received. While the Company receives a portion of its customer
orders prior to placement of its initial manufacturing orders, occasionally
these customer orders may change with respect to colors, sizes, allotments or
assortments prior to the delivery date. The Company utilizes such orders and its
historical experience to estimate production requirements in order to secure
necessary fabric and manufacturing capacity. Because the Company's foreign
manufacturers are located at greater geographic distances from the Company than
its domestic manufacturers, the Company is generally required to allow greater
lead time for foreign manufacturing orders. Under the Target Agreement, Target
will be responsible for the manufacture of the Target licensed product line, and
the Company will eliminate its production operations.

    In 1998, the Company sold substantially all of the assets of its subsidiary,
Giannico, Inc., to Winterland Concession Company (Winterland), a San Francisco
based producer of licensed and private label apparel and merchandise. In
connection with this transaction, the Company and Winterland entered into a
multi-year agreement whereby Winterland agreed to be the preferred manufacturer
of Mossimo's tee-shirts and sweatshirts, subject to certain conditions. The
agreement allows Winterland to bid on the production of tee-shirts and
sweatshirts, and the Company has the option to accept or reject the bid based on
various factors, including pricing. In the event a bid is rejected, the Company
may engage another manufacturer to produce its tee-shirts and sweatshirts.

    The Company does not own or operate any manufacturing facilities and has
therefore been dependent on independent contractors for the manufacture of its
products. Except for the Winterland contract, there are no formal arrangements
between the Company and any of its contractors or suppliers. In instances where
manufacturers have failed to ship the Company's products on schedule or to meet
the Company's quality standards, the Company's ability to deliver products to
its customers in a timely manner has been adversely affected. Also, in instances
where these shipments have failed to clear United States Customs or to clear
United States Customs in a reasonable time period, the Company's ability to
deliver products to its customers in a timely manner has been adversely
affected.

    The Company's quality control program is designed to ensure that all goods
bearing Mossimo trademarks meet the Company's standards. With respect to its
products, the Company has typically developed prototypes of each product,
established fittings based on the prototype, inspected samples and, through its
employees or sourcing agents, inspected fabric prior to cutting. The Company or
its sourcing agents have then inspected the final product prior to shipment to
the Company's Irvine, California warehouse. With respect to licensed products,
the Company ensures that quality control programs are in place for licensees.

                                       5
<PAGE>
MARKETING AND ADVERTISING

    The Company has developed a distinctive image of a contemporary and youthful
lifestyle and strives to maintain consistency through the coordination of
advertising, merchandising and promotion. As a result of the Target Agreement,
the Company will primarily rely on its licensees to advertise the Mossimo brand
and intends to continue to promote a positive brand image through
licensee-sponsored advertising. Under the terms of the Target Agreement, the
Company will have approval rights for marketing and advertising materials.

    The Company currently utilizes print advertisements in magazines such as
DETAILS, ELLE, GQ, IN-STYLE, ROLLING STONE, SPIN and VANITY FAIR as well as bus
posters to promote its image and products. This image is also carried forward in
the design of the Company's in-store shops and in its Southern California
signature retail store. The Company maintains showrooms in Irvine, California,
New York City and Dallas, Texas to display various portions of its product line.
In connection with the Target Agreement, the Company will essentially eliminate
its print and outdoor advertising efforts and will close its signature retail
store and showrooms prior to the scheduled launch by Target of the initial line
in February 2001.

    Effective January 1, 2000, the Company entered into an exclusive, multi-year
endorsement agreement with David Duval, one of the world's top-ranked golfers,
to further enhance worldwide brand recognition. Under the terms of this
agreement, Mossimo will outfit Duval exclusively during his global golf
activities.

DISTRIBUTION

    Under the Target Agreement, substantially all Mossimo products sold in the
United States, other than those covered under existing Mossimo licensing
arrangements, will be distributed exclusively through Target stores. The Target
licensed product line will initially include men's and women's apparel and is
scheduled to be launched in February 2001. This licensed product line may be
expanded to include all soft line categories, fragrances, other accessories and
house wares.

    The Target Agreement provides that Target will be responsible for product
development, sourcing, quality control and inventory management with respect to
the Target licensed product line. The Company believes that these functions can
be executed more effectively by a large retailer due to significant economies of
scale and vertical integration.

    During the Restructuring Period, distribution of all Mossimo non-licensed
products will continue to be centralized in the Company's Irvine, California
facility. Upon receipt from the manufacturers, the Company's products are
inspected, sorted, packed and shipped to retail accounts in the United States.
The Company's licensees are responsible for the distribution of licensed
products.

    During 1999, the Company's products were sold in over 1,000 department and
specialty retail store locations throughout the United States. The Company's
largest customer, Dillard's, accounted for approximately 38% of net sales in
1999. Additionally, cumulative sales to various divisions of Federated
Department Stores, Inc., Saks, Inc. and Newton Buying Group accounted for
approximately 15%, 11% and 11%, respectively, of net sales in 1999. As a result
of the Target Agreement, the Company anticipates a significant decline in sales
to department and specialty retail stores in 2000, which could have a material
adverse effect on the Company's financial condition and results of operations.

RETAIL STORES

    The Company operates one signature retail store located in South Coast
Plaza, Costa Mesa, California (established in 1993). The Company formerly
operated a second retail store in Old Town, Pasadena, California, which was
closed during the second quarter of 1998.

    The Company also operates one outlet store, which provides a location to
sell prior season and overstocked goods. The store is located in Ontario Mills
Plaza, Ontario, California (established in 1997).

                                       6
<PAGE>
    In connection with the Target Agreement, the Company will close its
signature retail store and outlet store prior to the scheduled launch by Target
of the initial line in February 2001.

LICENSING

    Through the Target Agreement, the Company has licensed to Target the
exclusive right to manufacture and distribute, in the United States,
substantially all Mossimo products sold in the United States, other than those
covered under existing Mossimo licensing arrangements. This agreement expires in
January 2004, and is subject to renewal by the licensee for additional terms of
two years each, if minimum sales and royalty criteria are met. The Target
Agreement is subject to early termination under certain circumstances, including
the termination of employment, death or permanent disability of Mr. Giannulli or
a material change in his ownership or control of the Company which is deemed by
Target to materially affect the Company's ability to perform its obligations
under the Target Agreement.

    Prior to entering into the Target Agreement, the Company entered into
licensing agreements for certain products and geographical territories when the
Company believed such arrangements would provide more effective manufacturing,
distribution or marketing of such products than could otherwise be achieved in
house. The Company generally maintains substantial control over the design and
advertising of its licensed products and maintains a policy of evaluating its
licensing arrangements to ensure consistent presentation of the Mossimo image.

    Mossimo has licensed the exclusive right to manufacture and distribute
eyewear bearing its trademarks pursuant to a license agreement with the Marcolin
Group. This agreement expires in December 2003, and is subject to renewal upon
negotiation.

    The Company has licensed the exclusive right to manufacture and distribute
women's swimwear and bodywear bearing its trademarks in the United States
pursuant to a license agreement with The Lunada Bay Corporation. This agreement
expires in September 2000, and is subject to renewal upon negotiation.

    Mossimo has licensed the exclusive right to manufacture and distribute men's
hosiery bearing its trademarks in the United States and Canada pursuant to a
license agreement with Mountain High Hosiery, Ltd. This agreement expires in
December 2001, and is subject to renewal by the licensee for an additional
three-year term, if minimum sales and royalty criteria are met.

    The Company has licensed the exclusive right to manufacture and distribute
men's tailored suits and dress shirts under the Mossimo and Mossimo Giannulli
brand names in the United States, Canada and Mexico pursuant to a license
agreement with GFT Apparel Corporation. This license expires June 2003, and is
subject to renewal by the licensee for an additional five-year term, if minimum
sales and royalty requirements are met.

    The Company's exclusive license agreement with Superba, Inc. for the
manufacture and distribution of finer men's neckwear was terminated in
March 2000.

    Under all license agreements, Mossimo retains approval rights with respect
to the design of products and advertising. Royalty payments under these license
agreements are due on a monthly or quarterly basis and range from approximately
3% to 10% of the licensee's net sales.

    Currently, Mossimo has four additional license agreements pursuant to which
third party licensees have the exclusive right to manufacture and distribute
certain products bearing the Company's trademarks according to designs furnished
or approved by the Company in specified territories outside of the United
States. These territories include Australia, Bolivia, Japan, Mexico, New
Zealand, Paraguay, Peru, and Uruguay. The present terms of these agreements
(exclusive of renewal terms) expire at various dates ranging from December 2000
through December 2004.

                                       7
<PAGE>
TRADEMARKS

    The Company utilizes a variety of trademarks, including the script Mossimo
trademark. Currently, the Company has 15 registrations and eight pending
applications for its trademarks in the United States, and approximately 340
trademark registrations and applications in over 65 other countries. The Company
regards its trademarks and other proprietary rights as valuable assets and
believes they have significant value in the marketing of its products. The
Company vigorously protects its trademarks against infringement by using, among
other things, cease-and-desist letters, administrative proceedings and lawsuits.

COMPETITION

    Mossimo brand products are subject to extensive competition from designer
and non-designer lines, as well as from department stores, including some of the
Company's major retail customers, which have increased in recent years the
amount of sportswear and activewear manufactured specifically for them and sold
under their own labels. The Company's products compete based on factors
including brand appeal, design, style and color selection, quality and price.
Many of the Company's competitors are significantly larger and more diversified
and have substantially greater financial, distribution, marketing and other
resources and have achieved greater recognition for their brand names than the
Company. Increased competition by existing and future competitors could result
in reductions in sales or prices of Mossimo products that could have a material
adverse effect on the Company's financial condition and results of operations.

    The Company's men's and women's designer sportswear lines have historically
encountered substantial competition from Liz Claiborne, DKNY, Perry Ellis,
Esprit, Guess, Calvin Klein, Tommy Hilfiger, Nautica and Polo/Ralph Lauren, as
well as from certain other designer and non-designer lines. With respect to its
activewear products, the Company has historically encountered substantial
competition from various activewear lines including Quiksilver, Billabong and
Hurley. Additionally, the Company has historically encountered substantial
competition from department stores, including some of the Company's major retail
customers. The Company expects that its products will continue to face
significant competition after the launch of the Target licensed product line.

BACKLOG

    The Company generally receives the bulk of the orders for each of the
Spring, Summer, Fall and Holiday seasons a minimum of three months prior to the
date the products are shipped to stores. Such orders are cancelable by the
retailer up to 30 days prior to the shipments' start dates. At December 31,
1999, the Company's backlog of orders for delivery primarily in the first and
second quarters of 2000 was approximately $44.1 million, as compared with
backlog of approximately $9.0 million at December 31, 1998. Historically, the
Company has shipped less than all orders in its backlog. The Company's backlog
depends upon a number of factors, including the timing of New York Market Week
during which a significant percentage of the Company's orders are received, the
timing of shipments and customer orders, product mix and the amount of in-season
orders. Accordingly, a comparison of backlog from period to period is not
necessarily meaningful and may not be indicative of actual shipments. As a
result of entering into the Target Agreement and slow sell-throughs at retail
during the 1999 Holiday season, the Company anticipates shipping significantly
less than all orders in its backlog at December 31, 1999 during the first and
second quarters of 2000.

EMPLOYEES

    At December 31, 1999, the Company had approximately 102 full-time employees,
compared to 105 at the same time last year. None of the Company's employees are
covered by collective bargaining agreements. The Company considers its relations
with its employees to be satisfactory. As a result of the Target Agreement, the
Company anticipates implementing a significant number of layoffs in 2000.

                                       8
<PAGE>
RISK FACTORS

    In addition to the matters set forth in the foregoing discussion of the
Company's business, the operations and financial results of the Company are
subject to the risks described below.

GOING CONCERN

    During the three year period ended December 31, 1999, the Company
experienced a significant decline in revenues, resulting in operating losses,
negative cash flow and a working capital deficit. As of December 31, 1999, the
Company was in violation of one covenant of its revolving credit facility that
is used to fund operations. The Company subsequently received a waiver for the
violation.

    In response to these declining financial conditions, the Company began cost
cutting measures during the latter part of 1997 and restructured its management
team in the fourth quarter of 1998. Despite these efforts, the Company reported
an operating loss for the year ended December 31, 1999.

    On March 28, 2000, the Company entered into the Target Agreement under which
Target is obligated to pay the Company a royalty based upon a percentage of its
net sales of Mossimo brand products, with a minimum guaranteed royalty,
beginning in 2001, of approximately $27.8 million over the initial three-year
term of the agreement. The Target Agreement is subject to early termination
under certain circumstances.

    As a result of entering into the Target Agreement, management will be
implementing several changes to the Company's operations during the period from
March 28, 2000 to the commencement of royalty payments under the Target
Agreement in May 2001 (the "Restructuring Period"). The most significant changes
will include a work force reduction of approximately 90% of all employees,
closure of the Company's signature retail store and outlet store, termination of
all sourcing, production and sales operations and termination of relationships
with substantially all existing customers and suppliers. During the
Restructuring Period, the Company will suffer the elimination of all wholesale
and retail sales, continuation of operating losses and negative cash flows and
recognition of a significant restructuring charge. In addition, the Company may
experience increased difficulties in collecting its accounts receivable and
maintaining its licensing revenues. Due to the broad changes to the Company's
operations, the timing and magnitude of these consequences are uncertain at this
time.

    The Company's current credit facility includes a $15.0 million revolving
credit line, collateralized by inventory, receivables, machinery and equipment
and intangibles, bearing interest at the prime rate plus 1.0%. Borrowings are
limited to 50% of eligible inventory and 85% of eligible receivables. The
facility also allows for up to approximately $6.0 million in letters of credit.

    Due to the restructuring of the Company's business, available borrowings
under the current credit facility are expected to be substantially eliminated by
June 2000. The Company is actively seeking financing to cover anticipated
shortfalls and is in the process of renegotiating its credit facility, including
its factoring agreement. Should these efforts be unsuccessful, additional funds
may not be available to the Company.

    These factors, among others, indicate that there is substantial doubt about
the Company's ability to continue as a going concern. The Company's continuation
as a going concern is dependent upon its ability to (a) generate sufficient cash
flow to meet its obligations on a timely basis, (b) obtain additional financing
as may be required and (c) ultimately attain profitability.

CHANGES IN FASHION TRENDS

    The apparel industry is subject to rapidly changing consumer demands and
preferences, which may adversely affect companies which misjudge such demands
and preferences. The Company believes that its success depends on its ability to
anticipate, gauge and respond in a timely manner to changing consumer demands
and fashion trends. There can be no assurance that the Company will be
successful in this regard. If fashion trends shift away from the Company's
products, or if the Company otherwise misjudges the

                                       9
<PAGE>
market for its product lines, resulting in a decline in sell-through rates at
retail, the Company may be faced with conditions which could have a material
adverse effect on the Company's financial condition and results of operations.
Decisions with respect to product designs often need to be made several months
in advance of the time when consumer acceptance of such products is known. In
addition, any failure by the Company to identify and respond to changing demands
and trends could adversely affect consumer acceptance of the Mossimo brand name,
which may have an adverse effect on the Company's business and prospects.

SUBSTANTIAL COMPETITION

    Mossimo brand products are subject to extensive competition from designer
and non-designer lines, as well as from department stores, including some of the
Company's major retail customers, which have increased in recent years the
amount of sportswear and activewear manufactured specifically for them and sold
under their own labels. The Company's products compete based on factors
including brand appeal, design, style and color selection, quality and price.
Many of the Company's competitors are significantly larger and more diversified
and have substantially greater financial, distribution, marketing and other
resources and have achieved greater recognition for their brand names than the
Company. Increased competition by existing and future competitors could result
in reductions in sales or prices of Mossimo products that could have a material
adverse effect on the Company's financial condition and results of operations.

    The Company's men's and women's designer sportswear lines have historically
encountered substantial competition from Liz Claiborne, DKNY, Perry Ellis,
Esprit, Guess, Calvin Klein, Tommy Hilfiger, Nautica and Polo/Ralph Lauren, as
well as from certain other designer and non-designer lines. With respect to its
activewear products, the Company has historically encountered substantial
competition from various activewear lines including Quiksilver, Billabong and
Hurley. Additionally, the Company has historically encountered substantial
competition from department stores, including some of the Company's major retail
customers. The Company expects that its products will continue to face
significant competition after the launch of the Target licensed product line.

NEW PRODUCT INTRODUCTIONS

    The Company's success is dependent upon its ability to design and deliver
new products and new product lines. As is typical with new products, demand for
and market acceptance of new products introduced by the Company are subject to
uncertainty. Achieving market acceptance for new products may require
substantial marketing and other efforts to create customer demand. There can be
no assurance that the Company's or its licensees' efforts will be successful. In
addition, the failure of new products or new product lines to gain sufficient
market acceptance could adversely affect the image of the Mossimo brand name and
demand for other Mossimo products.

DEPENDENCE ON KEY PERSONNEL

    The success of the Company is largely dependent on the personal efforts and
abilities of Mossimo Giannulli, the Company's President, Chief Executive Officer
and principal designer. The Target Agreement is subject to early termination
under certain circumstances, including the termination of employment, death or
permanent disability of Mr. Giannulli or a material change in his ownership or
control of the Company which is deemed by Target to materially affect the
Company's ability to perform its obligations under the Target Agreement.
Mr. Giannulli is subject to a consulting agreement with the Company, which
expires in January 2001 and includes a non-competition provision effective
through such expiration date.

    On March 28, 2000, Edwin Lewis resigned from his positions as President,
Chief Executive Officer and Director of the Company. Mr. Lewis had served as
President, Chief Executive Officer and Director

                                       10
<PAGE>
since December 1, 1998, and his resignation could have a material adverse effect
on the Company's operations.

UNCERTAINTIES IN APPAREL RETAILING; GENERAL ECONOMIC CONDITIONS

    The apparel industry historically has been subject to substantial cyclical
variations. During recessionary periods, when disposable income is low,
purchases of apparel and related goods tend to decline. Accordingly, a recession
in the general economy or uncertainties regarding future economic prospects that
affect consumer spending habits could have a material adverse effect on the
Company's results of operations. The Company cannot predict what effect, if any,
continued changes within the retail industry will have on the Company's
business.

DEPENDENCE ON CERTAIN CUSTOMERS AND LICENSEES

    Royalty payments from the Target Agreement are expected to commence in
May 2001, and will represent a significant portion of the Company's future
income. Termination of the Target Agreement could have a material adverse effect
on the Company's financial condition and results of operations.

    Historically, the Company's customers have included major United States
department store retailers. The Company's largest customer, Dillard's, accounted
for approximately 38% of net sales in 1999. Additionally, cumulative sales to
various divisions of Federated Department Stores, Inc., Saks, Inc. and Newton
Buying Group accounted for approximately 15%, 11% and 11%, respectively, of net
sales in 1999. As a result of the Target Agreement, the Company anticipates a
significant decline in sales to department stores in 2000 which could have a
material adverse effect on the Company's financial condition and results of
operations.

    In addition, the Company may experience decreased royalties from existing
licensees due to the fact that it will not have a major presence in the United
States in stores other than Target under terms of the Target Agreement. Such a
decrease could have a material adverse effect on the Company's financial
condition and results of operations.

FOREIGN OPERATIONS

    During 1999, approximately 70% of the Company's products were manufactured
outside of North America. The Company's future foreign operations, if any, may
be adversely affected by political instability resulting in disruption of trade
from foreign countries in which the Company's contractors and suppliers are
located, the imposition of additional regulations related to imports or duties,
taxes and other charges on imports, any significant fluctuation in the value of
the United States dollar against foreign currencies and restrictions on the
transfer of funds.

PROTECTION OF TRADEMARKS

    The Company believes that its trademarks and other proprietary rights are
important to its success and its competitive position. Accordingly, the Company
devotes substantial resources (including time and attention by its executive
officers) to the establishment and protection of its trademarks on a worldwide
basis. There can be no assurance that the actions taken by the Company to
establish and protect its trademarks and other proprietary rights will be
adequate to prevent imitation of its products by others or to prevent others
from seeking to block sales of the Company's products as violative of the
trademarks and proprietary rights of others. No assurance can be given that
others will not assert rights in, and ownership of, trademarks and other
proprietary rights of the Company. In addition, the laws of certain foreign
countries do not protect proprietary rights to the same extent as do the laws of
the United States.

                                       11
<PAGE>
CONTROL BY PRINCIPAL STOCKHOLDERS

    Mossimo Giannulli has majority control of the Company and the ability to
control the election of directors and the results of other matters submitted to
a vote of stockholders. Such concentration of ownership, together with the
anti-takeover effects of certain provisions in the Delaware General Corporation
Law and in the Company's Certificate of Incorporation and Bylaws, may have the
effect of delaying or preventing a change in control of the Company.

SEASONALITY

    The Company's business is impacted by general seasonal trends that are
characteristic of many companies in the apparel industry. However, due primarily
to the declining sales experienced in 1997, 1998 and the first, second and
fourth quarters of 1999, past quarterly sales and profit trends have not
reflected normal apparel industry seasonality. In future years, the Company
expects that its results of operations may reflect greater seasonal trends.

ITEM 2--PROPERTIES

    The Company's current corporate headquarters and distribution facility are
located in Irvine, California and consist of two leased buildings totaling
approximately 106,000 square feet of space. In addition, the Company leases
showrooms in Irvine, California, New York City and Dallas, Texas as well as one
signature retail store in Costa Mesa, California and one outlet store in
Ontario, California.

ITEM 3--LEGAL PROCEEDINGS

    On January 23, 1997, plaintiff Chaile Steinberg filed a purported class
action suit against the Company and certain other defendants on behalf of
individuals who purchased the Company's common stock in the initial public
offering pursuant to the Registration Statement and Prospectus (Prospectus),
dated February 22, 1996, and on the open market from February 22, 1996 through
January 14, 1997 (the "Class Period"). On April 7, 1997, the plaintiffs Igor
Glaudnikov, Cara Debra Marks and Lois Burke filed a second related action
against the same defendants. The two cases were subsequently consolidated by
court order, dated May 19, 1997. Both STEINBERG and GLAUDNIKOV (collectively,
the "State Actions") contain identical factual allegations, and only differ in
the number of shares purchased by plaintiffs and the California residence of two
of the plaintiffs in the GLAUDNIKOV action.

    The State Actions allege that defendants made false and misleading
statements and intentionally concealed material negative information in the
Prospectus and afterward during the Class Period, which artificially inflated
prices for the Company's common stock. Plaintiffs contend that the class was
damaged in an unspecified amount as a result of this artificial inflation of the
Company's stock price.

    On September 23, 1997, a federal class action complaint was filed on behalf
of plaintiff James Frenkil by the same law firm that represents the plaintiffs
in the State Actions (the "Federal Action"). One of the named plaintiffs in the
Federal Action is a plaintiff in the State Actions. The class period and
precipitating events are the same as in the State Actions, but the federal
complaint purports to allege violations of certain federal securities laws. On
October 17, 1997, the judge stayed the Federal Action pending resolution of the
State Actions.

    Defendants filed a general demurrer in the State Actions, challenging the
legal sufficiency of the complaints. On June 26, 1997, the judge sustained the
defendants' demurrer, finding that neither complaint pleaded facts sufficient to
constitute causes of action against the defendants. The judge sustained the
demurrer as to four of the causes of action with leave to amend, and as to the
fifth cause of action for unlawful, unfair or fraudulent business practices and
false or misleading advertising without leave to amend.

                                       12
<PAGE>
    On July 9, 1998, plaintiffs filed their first amended consolidated complaint
against the same defendants, alleging three causes of action. On September 22,
1998, defendants filed a general demurer to the first amended consolidated
complaint. On March 16, 1999, the judge sustained the demurrer as to the Company
with respect to two of the three causes of action with leave to amend. As to the
third cause of action, the judge sustained the demurrer as to the Company with
respect to three of the five plaintiffs with leave to amend, and overruled the
demurrer with respect to the other two plaintiffs. On April 14, 1999, plaintiffs
filed their second amended consolidated complaint, alleging one cause of action.
Thereafter, plaintiffs expressed a desire to file a third amended consolidated
complaint. On June 24, 1999, the parties stipulated that plaintiffs must file a
third amended consolidated complaint on or before July 30, 1999. Plaintiffs did
not file a third amended consolidated complaint.

    On March 20, 2000, District Court Judge Gary L. Taylor approved a
$13.0 million settlement of the State Actions and Federal Action. There were no
objections to the settlement. The settlement was funded by the Company's
insurance coverage, a portion of which the Company obtained during the second
quarter of 1999. Absent unforeseen circumstances, the settlement will become
final on or about April 19, 2000. If the settlement does not become final, the
outcome of the litigation cannot be predicted, but management believes that the
Company has meritorious defenses to the claims alleged and would defend this
action with vigor.

    The Company is involved in certain other legal and administrative
proceedings and threatened legal and administrative proceedings arising in the
normal course of its business. While the outcome of such proceedings and
threatened proceedings cannot be predicted with certainty, in the opinion of
management, the ultimate resolution of these matters individually or in the
aggregate will not have a material adverse effect on the Company.

ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    No matters were submitted to a vote of security holders during the fourth
quarter of 1999.

ITEM 5--MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

    The Company's common stock, par value $.001 per share (common stock), trades
on the New York Stock Exchange under the trading symbol "MGX". As of April 4,
2000, there were approximately 6,542 shareholders of record. The following table
sets forth the high and low sales prices for the common stock for each quarterly
period as reported on the New York Stock Exchange Composite Tape:

<TABLE>
<CAPTION>
                                                                     1998
                                                              -------------------
                                                                HIGH       LOW
                                                              --------   --------
<S>                                                           <C>        <C>
First Quarter...............................................    $ 7 5/8     $3
Second Quarter..............................................    $ 9 9/16    $3 3/4
Third Quarter...............................................    $ 4 5/8     $1
Fourth Quarter..............................................    $16         $2 1/2
</TABLE>

<TABLE>
<CAPTION>
                                                                     1999
                                                              -------------------
                                                                HIGH       LOW
                                                              --------   --------
<S>                                                           <C>        <C>
First Quarter...............................................    $12 5/16    $7 3/8
Second Quarter..............................................    $11 3/4     $8 1/4
Third Quarter...............................................    $11 1/4     $7 1/16
Fourth Quarter..............................................    $10 3/16    $6 3/8
</TABLE>

    Since its initial public offering, the Company has not paid a dividend on
its common stock. Any future determination as to the payment of dividends will
be at the discretion of the Company's Board of Directors and will depend upon
the Company's results of operations, financial condition, contractual
restrictions and other factors deemed relevant by the Board of Directors.

                                       13
<PAGE>
ITEM 6--SELECTED FINANCIAL DATA

    The following table sets forth certain selected financial data regarding the
Company which is qualified by reference to, and should be read in conjunction
with, the consolidated financial statements and notes thereto (see "Index to
Consolidated Financial Statements") and "Item 7--Management's Discussion and
Analysis of Financial Condition and Results of Operations." The income statement
and balance sheet data presented below has been derived from the Company's
consolidated financial statements. The selected pro forma income statement data
set forth below is for informational purposes only and may not necessarily be
indicative of the Company's results of operations in the future.

<TABLE>
<CAPTION>
                                                            YEARS ENDED DECEMBER 31,
                                                -------------------------------------------------
                                                  1999      1998      1997      1996       1995
                                                --------  --------  --------  --------    -------
                                                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                             <C>       <C>       <C>       <C>         <C>
INCOME STATEMENT DATA:
Net sales.....................................  $ 47,393  $ 45,310  $ 70,936  $108,674    $71,961
Cost of sales.................................    37,069    35,994    63,963    69,364     41,210
                                                --------  --------  --------  --------    -------
Gross profit..................................    10,324     9,316     6,973    39,310     30,751
Royalty income, net...........................     3,686     3,214     3,798     3,919      3,413
Operating expenses............................    26,101    25,469    32,802    25,283     14,586
                                                --------  --------  --------  --------    -------
Operating income (loss).......................   (12,091)  (12,939)  (22,031)   17,946     19,578
Other income (expense), net...................        (3)     (140)     (362)       19        114
Interest income (expense), net................      (834)     (612)     (278)      191       (233)
                                                --------  --------  --------  --------    -------
Income (loss) before income taxes.............   (12,928)  (13,691)  (22,671)   18,156     19,459
Provision (benefit) for income taxes..........        13       107    (3,935)    5,526(1)     297(1)
                                                --------  --------  --------  --------    -------
Net income (loss).............................  $(12,941) $(13,798) $(18,736) $ 12,630    $19,162
                                                ========  ========  ========  ========    =======
Net income (loss) per share:
  Basic and diluted...........................  $  (0.86) $  (0.92) $  (1.25) $   0.84    $  1.47
                                                ========  ========  ========  ========    =======
PRO FORMA DATA (2):
Historical income before income taxes.........                                $ 18,156    $19,459
Pro forma provision for income taxes..........                                   7,374      7,946
                                                                              --------    -------
Pro forma net income..........................                                $ 10,782    $11,513
                                                                              ========    =======
Pro forma net income per share:
  Basic and diluted...........................                                $   0.73
                                                                              ========
Pro forma weighted average common shares
  outstanding
  Basic and diluted...........................                                  14,853
                                                                              ========
</TABLE>

<TABLE>
<CAPTION>
                                                                                 DECEMBER 31,
                                                             -----------------------------------------------------
                                                               1999       1998       1997       1996       1995
                                                             ---------  ---------  ---------  ---------  ---------
                                                                                (IN THOUSANDS)
<S>                                                          <C>        <C>        <C>        <C>        <C>
BALANCE SHEET DATA:
Working capital (deficit)..................................  $    (680) $   4,532  $  13,419  $  36,152  $  12,621
Total assets...............................................  $  10,736  $  17,359  $  36,824  $  50,754  $  17,162
Long-term debt.............................................  $       3  $      10  $      31  $      85  $      30
Stockholders' equity.......................................  $   2,396  $   8,639  $  22,395  $  41,131  $  14,035
</TABLE>

------------------------

(1) Represents California state franchise taxes for periods prior to the
    Company's conversion to C corporation status in February 1996.

(2) The Company converted from S corporation to C corporation status commencing
    February 1996. Amounts reflect adjustment for federal and state income taxes
    as if the Company had been taxed as a C corporation rather than an S
    corporation.

                                       14
<PAGE>
ITEM 7-- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

    Management's discussion and analysis should be read in conjunction with the
Company's consolidated financial statements and the notes thereto set forth in
this Form 10-K commencing on page F-1.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

    Net sales increased to $47.4 million in 1999 from $45.3 million in 1998. Net
sales of the men's and women's lines, which represented 95% of the Company's net
sales in 1999, increased to $45.1 million in 1999 from $36.5 million in 1998.
The increase in net sales of the men's and women's lines in 1999 was primarily
due to additional business with new customers as a result of the Company's
broader product lines and focused sales efforts in the second, third and fourth
quarters, partially offset by narrower product lines and the reduction of
unprofitable accounts during the first quarter and severe price reductions in
department stores, resulting in additional markdown provisions during the fourth
quarter.

    The Moss and Optics lines were discontinued during 1998, resulting in a
decrease in net sales of $2.3 million and $1.2 million, respectively, during
1999 compared to 1998. In June 1999, the Company entered into a license
agreement for the production and distribution of the Optics line. Also during
1998, the Company discontinued operations of its screen printing business, which
contributed $2.2 million of net sales in 1998.

    Gross profit increased to $10.3 million in 1999 from $9.3 million in 1998.
Gross profit as a percentage of net sales increased to 22% in 1999 from 21% in
1998. The increase was primarily due to better inventory management, increased
men's and women's regular-priced sales and increased margins on sales of excess
inventory during 1999, partially offset by additional production costs for
product which did not clear, or was delayed by, United States Customs and
additional markdown provisions during the fourth quarter of 1999, as compared to
1998. Additionally, during 1998, the Company recorded write-downs of its excess
and Optics inventory.

    Royalty income increased to $3.7 million in 1999 from $3.2 million in 1998.
The increase was primarily due to increased royalties from some of the Company's
domestic licensees, which were offset in part by reduced royalties as a result
of the termination of the Company's accessories license agreement as of
December 31, 1998.

    Operating expenses increased to $26.1 million in 1999 from $25.5 million in
1998. Selling, general and administrative expenses decreased to $20.0 million in
1999 compared to $21.7 million in 1998. This decrease was primarily due to
reduced staffing levels and reduced rent, legal and professional services
expenses, partially offset by additional marketing expenditures.

    During the second quarter of 1999, the Company's Chairman of the Board and
principal stockholder personally purchased excess insurance coverage for the
benefit of the Company in connection with its agreement to settle a class action
lawsuit. Accordingly, this one-time, non-cash charge of $6.1 million is included
in operating expenses in 1999 with an offsetting credit to stockholders' equity.
This charge did not impact the Company's cash flow or total stockholders' equity
position.

    During the second quarter of 1998, the Company recorded a lease
restructuring charge of $3.8 million. This charge included (i) $2.7 million in
corporate lease restructuring expense and costs, including the write-down of
certain fixed assets; (ii) $900,000 for the discontinuation of the Company's
screen printing business; and (iii) $200,000 for closing the Company's Pasadena
retail store.

    Total operating expenses for 1999, excluding the non-cash insurance premium,
were $20.0 million, or 42% of net sales, compared to total operating expenses
for 1998, excluding the lease restructuring charge, of $21.7 million, or 48% of
net sales.

                                       15
<PAGE>
    The Company had other expense of $3,000 in 1999 compared to $140,000 in
1998. The decrease was primarily due to reduced losses on disposals of fixed
assets.

    The Company had net interest expense of $834,000 in 1999 compared to
$612,000 in 1998. The increase was due to increased interest expense
corresponding to increased borrowings on the Company's line of credit during
1999, partially offset by additional fees paid during 1998 associated with
continuing the revolving line of credit.

    The Company recorded minimum state tax provisions of $13,000 in 1999
compared to alternative minimum tax expense of $107,000 in 1998. Losses for 1999
were not benefited due to carryback limitations and uncertainty regarding
realization of the related deferred tax asset. Losses for 1998 were benefited
only to the extent the Company could apply for carryback claims in its income
tax returns.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

    Net sales decreased to $45.3 million in 1998 from $70.9 million in 1997.
This decrease was primarily a result of a decrease of $24.3 million in sales of
the men's line, which represented a 46% of the Company's net sales in 1998 and a
$3.1 million decrease in sales of the women's line, which represented 35% of the
Company's net sales in 1998. The decrease in net sales of the men's line
resulted from reduced sales of tee-shirts, tank tops and shorts to specialty
stores and a strategic reduction in sales to unprofitable accounts. The decline
in the men's apparel sales was partially offset by a $1.2 million increase in
sales of the Moss line (discontinued in 1998) to $2.3 million in 1998 from
$1.1 million in 1997. The decline in women's apparel sales resulted from a
reduction in denim sales in the second half of the year due to lack of consumer
demand and a strategic reduction of sales to unprofitable accounts. Net sales of
the Optics line, which represented 3.8% of the Company's net sales in 1998,
decreased to $1.7 million in 1998 from $3.1 million in 1997 due to reduced
product releases, particularly in the Moss line, resulting from excess
inventories with core customers.

    Gross profit increased to $9.3 million in 1998 from $7.0 million in 1997.
Gross profit as a percentage of net sales increased to 21% in 1998 from 10% in
1997. The increase was primarily due to lower inventory write-downs in 1998
compared to 1997. Gross profit as a percentage of sales, excluding excess
inventory sales, additional reserves and inventory shortages, increased to 34%
compared to 31% in the same period in 1997.

    Royalty income decreased to $3.2 million in 1998 as compared to
$3.8 million in 1997. The decrease was primarily due to reduced royalties from
the Company's swimwear/bodywear and accessories licensees. Management believes
that sales of the Company's swimwear/bodywear licensee were negatively impacted,
in part, by poor weather conditions on the West Coast of the United States
during 1998. Sales of the Company's accessories licensee declined due to a
reduction in product categories offered during 1998 compared to 1997. In
addition, unfavorable foreign exchange rate variances further impacted royalty
income from the Company's Australian licensee in 1998.

    Operating expenses decreased to $25.5 million in 1998 from $32.8 million in
1997. Selling, general and administrative expenses decreased to $21.7 million in
1998 compared to $32.8 million in 1997. This decrease was primarily due to
reduced staffing levels, sales commissions and marketing expenditures as well as
overall cost cutting measures, partially offset by increased salary expense for
in-house sales representatives and an in-store fixture reserve of $463,000.

    During the second quarter of 1998, the Company recorded a lease
restructuring charge of $3.8 million. The charge included (i) $2.7 million in
corporate lease restructuring expenses and costs, including the write down of
certain fixed assets; (ii) $900,000 for the discontinuation of the Company's
screen printing business; and (iii) $200,000 for closing the Company's Pasadena
retail store.

    During 1998, the Company reevaluated its office and facilities requirements
and agreed to relinquish its existing space for its corporate headquarters and
approximately half of the space for its warehouse/

                                       16
<PAGE>
distribution. This lease restructuring relieved the Company of annual rental
obligations of approximately $1.0 million. The Company moved into its new
corporate headquarters located in Irvine, California and leased office space in
Santa Monica, California. The Company's annual rent obligation for both
locations is approximately $260,000. The Company, accordingly, will realize a
reduction in annual rental obligations of approximately $740,000.

    Total operating expenses for 1998, excluding the lease restructuring charge,
were $21.7 million, or 48% of net sales, compared to $32.8 million, or 46% of
net sales, in 1997.

    The Company had other expense of $140,000 in 1998 compared to $362,000 in
1997. The decrease was primarily due to reduced losses on disposals of fixed
assets.

    The Company had interest expense of $612,000 in 1998 compared to $278,000 in
1997. The increase was primarily due to increased interest expense corresponding
to increased borrowings on the Company's line of credit during 1998 and
additional fees paid during 1998 associated with continuing the revolving line
of credit.

    The Company had alternative minimum tax expense of $107,000 in 1998 compared
to an income tax benefit of $3,935,000 in 1997. Losses for 1997 and 1998 were
benefited only to the extent the Company could apply for carryback claims in its
income tax returns.

LIQUIDITY AND CAPITAL RESOURCES

    The Company's primary cash requirements are to fund the Company's working
capital needs related to inventories and accounts receivable. Net cash provided
by operating activities totaled $2.9 million during 1999. Cash provided by
operating activities was comprised primarily of the Company's net loss of
$12.9 million, offset by a non-cash insurance premium of $6.1 million, a
$4.5 million reduction in receivables, a $2.6 million reduction in inventories,
depreciation and amortization expense of $1.4 million and a $1.1 million
increase in accounts payable and accrued liabilities. At December 31, 1999,
working capital (deficit) was approximately ($680,000) as compared to
$4.5 million at December 31, 1998 due primarily to a $4.5 million decrease in
receivables, a $2.6 million reduction in the Company's line of credit, a
$2.6 million decrease in inventories and a $1.7 million increase in accounts
payable, partially offset by a $544,000 decrease in accrued liabilities, a
$300,000 increase in prepaids and other current assets and a $297,000 increase
in cash.

    During the three year period ended December 31, 1999, the Company
experienced a significant decline in revenues, resulting in operating losses,
negative cash flow and a working capital deficit. As of December 31, 1999, the
Company was in violation of one covenant of its revolving credit facility that
is used to fund operations. The Company subsequently received a waiver for the
violation.

    On March 28, 2000, the Company entered into the Target Agreement under which
Target is obligated to pay the Company a royalty based upon a percentage of its
net sales of Mossimo brand products, with a minimum guaranteed royalty,
beginning in 2001, of approximately $27.8 million over the initial three-year
term of the agreement. The Target Agreement is subject to early termination
under certain circumstances.

    As a result of entering into the Target Agreement, management will be
implementing several changes to the Company's operations during the period from
March 28, 2000 to the commencement of royalty payments under the Target
Agreement in May 2001 (the "Restructuring Period"). The most significant changes
will include a work force reduction of approximately 90% of all employees,
closure of the Company's signature retail store and outlet store, termination of
all sourcing, production and sales operations and termination of relationships
with substantially all existing customers and suppliers. During the
Restructuring Period, the Company will suffer the elimination of all wholesale
and retail sales, continuation of operating losses and negative cash flows and
recognition of a significant restructuring charge. In addition, the Company may
experience increased difficulties in collecting its accounts receivable

                                       17
<PAGE>
and maintaining its licensing revenues. Due to the broad changes to the
Company's operations, the timing and magnitude of these consequences are
uncertain at this time.

    Effective January 1, 2000, the Company entered into an endorsement agreement
with David Duval, one of the world's top-ranked golfers, under which the Company
is obligated to pay cash compensation. Future minimum commitments under this
agreement are approximately $2.4 million payable in 2000 and $850,000 payable in
each year from 2001 through 2003. This agreement also has certain performance
provisions that allow for additional cash compensation.

    The Company's current credit facility includes a $15.0 million revolving
credit line, collateralized by inventory, receivables, machinery and equipment
and intangibles, bearing interest at the prime rate plus 1.0%. Borrowings are
limited to 50% of eligible inventory and 85% of eligible receivables. The
facility also allows for up to approximately $6.0 million in letters of credit.

    The Company's current credit facility has various restrictive covenants
which include earnings before interest, tax, depreciation and amortization
(EBITDA), exposure in excess of accounts receivable availability and capital
expenditure limitations. The Company had borrowings of $2.1 million outstanding
on the line of credit as of December 31, 1999.

    Historically, the Company has sold a substantial portion of its trade
accounts receivable to a factor, which assumes the credit risk with respect to
collection of nonrecourse accounts receivable in exchange for a fee. The factor
approves the credit of the Company's customers prior to sale. If the factor
disapproves of a sale to a customer and the Company decides to proceed with the
sale, the Company bears the credit risk.

    Due to the restructuring of the Company's business, available borrowings
under the current credit facility are expected to be substantially eliminated by
June 2000. The Company is actively seeking financing to cover anticipated
shortfalls and is in the process of renegotiating its credit facility, including
its factoring agreement. Should these efforts be unsuccessful, additional funds
may not be available to the Company.

    These factors, among others, indicate that there is substantial doubt about
the Company's ability to continue as a going concern. The Company's continuation
as a going concern is dependent upon its ability to (a) generate sufficient cash
flow to meet its obligations on a timely basis, (b) obtain additional financing
as may be required and (c) ultimately attain profitability.

SIGNIFICANT ACCOUNTING ESTIMATES

    In recent years certain customers of the Company have experienced financial
difficulties, including the filing of reorganization under bankruptcy laws. The
Company has not generally incurred significant losses outside the normal course
of business as a result of the financial difficulties of these customers. While
management believes that its allowance for doubtful accounts and allowance for
sales returns and markdowns at December 31, 1999 are adequate, the Company
carefully monitors developments regarding its major customers. Additional
material financial difficulties encountered by these or other customers could
have an adverse impact on the Company's financial position or results of
operations.

SEASONALITY

    The Company's business is impacted by general seasonal trends that are
characteristic of many companies in the apparel industry. However, due primarily
to the declining sales experienced in 1997, 1998 and the first, second and
fourth quarters of 1999, past quarterly sales and operating trends have not
reflected normal apparel industry seasonality. In future years, the Company
expects that its results of operations may reflect greater seasonal trends.

                                       18
<PAGE>
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 net sales or profitability. Although higher rates of
inflation have been experienced in a number of foreign countries in which the
Company's products are manufactured, the Company does not believe that they have
had a material effect on the Company's net sales or profitability. In the past,
the Company has been able to offset its foreign product cost increases by
increasing prices or changing suppliers, although no assurance can be given that
the Company will be able to continue to make such increases or changes in the
future.

EXCHANGE RATES

    The Company receives United States dollars for substantially all of its
product sales and its licensing revenues. Inventory purchases from overseas
contract manufacturers are primarily denominated in United States dollars;
however, purchase prices for the Company's products may be impacted by
fluctuations in the exchange rate between the United States dollar and the local
currencies of the contract manufacturers, which may have the effect of
increasing the Company's cost of goods sold in the future. During the last three
fiscal years, exchange rate fluctuations have not had a material impact on the
Company's inventory costs. The Company does not engage in hedging activities
with respect to such exchange rate risk.

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

    In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133 "Accounting for
Derivative Instruments and Hedging Activities". SFAS No. 133 requires that all
derivative instruments be recorded on the balance sheet at their fair value.
Changes in the fair value of derivatives are recorded each period in current
earnings or other comprehensive income, depending on whether a derivative is
designed as part of a hedge transaction and, if it is, the type of hedge
transaction. In June 1999, the FASB issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities--Deferral of the Effective Date of
FASB Statement No. 133". SFAS No. 137 delays the effective date of SFAS No. 133
to fiscal years beginning after June 15, 2000. The Company does not expect that
the adoption of SFAS Nos. 133 and 137 will have a material impact on its
consolidated financial statements because the Company does not currently hold
any derivative instruments.

YEAR 2000

    The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. The Company's
computer equipment and software and devices with embedded technology that are
date-sensitive may recognize a date using "00" as the year 1900 rather than the
year 2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, and engage in similar normal business
activities. The Company has not encountered any material Year 2000 problems and
believes that it is unlikely that it will. Costs related to Year 2000 compliance
were approximately $35,000.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

    The Company is exposed to market risks related to fluctuations in variable
interest rates on its revolving line of credit and factoring agreement. For
variable rate debt, changes in interest rates generally do not influence fair
market value, but do affect future earnings and cash flows. Holding the variable
rate debt balance constant, a 1.0% increase in interest rates occurring on
January 1, 2000 would result in an increase in interest expense for the
following 12 months of approximately $21,000.

                                       19
<PAGE>
FORWARD LOOKING INFORMATION

    This report on Form 10-K contains certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These forward
looking statements relate to matters such as the Company's future operating
results, the success of its licensing program with Target and other licensees,
the ability of the Company to timely deliver its products to customers, and the
outcome of the Company's legal proceedings. Such forward-looking statements are
based on the beliefs of the Company's management as well as assumptions made by
and information currently available to the Company's management. The words
"anticipate", "believe", "may", "estimate", "plan", "expect", "future",
"intend", "will", "should", "continue" and similar expressions, variations of
such terms or the negative of such terms as they relate to the Company or its
management when used in this document, are intended to identify such
forward-looking statements. Such statements are based on management's current
expectations and are subject to certain risks, uncertainties and assumptions,
including those described in "Business--Risk Factors". Should one or more risks
or uncertainties materialize, or should underlying assumptions prove incorrect,
the Company's actual results, performance or achievements could differ
materially from those expressed in, or implied by such forward-looking
statements. The Company's future operations, financial performance, business and
share price may be affected by a number of factors, including 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." Accordingly, undue reliance should not be placed on these
forward-looking statements.

ITEM 8--FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    See "Index to Consolidated Financial Statements" at Item 14(a) for a listing
of the consolidated financial statements and supplementary data submitted as
part of this report.

                                    PART III

ITEM 10--DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    The information required by this item will be contained in the Company's
Proxy Statement for its 2000 Annual Stockholders Meeting to be filed with the
Securities and Exchange Commission within 120 days after December 31, 1999 and
is incorporated herein by reference.

ITEM 11--EXECUTIVE COMPENSATION

    The information required by this item will be contained in the Company's
Proxy Statement for its 2000 Annual Stockholders Meeting to be filed with the
Securities and Exchange Commission within 120 days after December 31, 1999 and
is incorporated herein by reference.

ITEM 12--SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The information required by this item will be contained in the Company's
Proxy Statement for its 2000 Annual Stockholders Meeting to be filed with the
Securities and Exchange Commission within 120 days after December 31, 1999 and
is incorporated herein by reference.

ITEM 13--CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    The information required by this item will be contained in the Company's
Proxy Statement for its 2000 Annual Stockholders Meeting to be filed with the
Securities and Exchange Commission within 120 days after December 31, 1999 and
is incorporated herein by reference.

                                       20
<PAGE>
ITEM 14--EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

    (a) The following documents are filed as a part of this Report:

(1) Financial Statements:

<TABLE>
<CAPTION>
                                                                PAGE
                                                              --------
<S>                                                           <C>
Report of Independent Public Accountants....................    F-2

Consolidated Balance Sheets as of December 31, 1999 and
  1998......................................................    F-3

Consolidated Statements of Operations for the Years Ended
  December 31, 1999, 1998 and 1997..........................    F-4

Consolidated Statements of Stockholders' Equity for the
  Years Ended December 31, 1999, 1998 and 1997..............    F-5

Consolidated Statements of Cash Flows for the Years Ended
  December 31, 1999, 1998 and 1997..........................    F-6

Notes to Consolidated Financial Statements..................    F-7
</TABLE>

                                       21
<PAGE>
(2) Exhibits: The Exhibits listed on the accompanying Index to Exhibits
    immediately following the financial statement schedules are filed as part
    of, or incorporated by reference into, this Report.

<TABLE>
<CAPTION>
EXHIBIT NO.                                     DESCRIPTION
-----------                                     -----------
<S>                     <C>
 3.1                    Certificate of Incorporation of Registrant(1)

 3.2                    Bylaws of the Registrant(1)

 4.1                    Specimen certificate of shares of Common Stock of the
                        Registrant(1)

 4.2                    Stockholders Agreement, dated as of November 30, 1998,
                        between the Registrant, Mossimo Giannulli and Edwin H.
                        Lewis(7)

 10.1                   Registrant's 1995 Stock Plan(1)

 10.2                   Registrant's 1995 Directors Stock Option Plan(1)

 10.3                   Employment Agreement, dated January 1, 1996, by and between
                        the Registrant and Mossimo Giannulli(1)

 10.4                   Factoring Agreement, dated January 2, 1990, by and between
                        the Registrant and The CIT Group, as amended to date(1)

 10.4.1                 Letter Amendment to Factoring Agreement dated June 16,
                        1995(1)

 10.4.2                 Letter Amendment to Factoring Agreement dated February 1,
                        1996(1)

 10.4.3                 Letter Amendment to Factoring Agreement dated November 1,
                        1996(2)

 10.4.4                 Letter Amendment to Factoring Agreement dated May 21,
                        1998(5)

 10.4.5                 Letter Amendment to Factoring Agreement dated March 22,
                        1999(8)

 10.5                   Form of Indemnification Agreement between the Registrant and
                        its directors and officers(1)

 10.6                   Lease, dated May 3, 1996, between the Registrant and The
                        Irvine Company(3)

 10.6.1                 Amendment to the lease agreement with The Irvine Company,
                        dated July 10, 1998(5)

 10.7                   Financing Agreement, dated July 15, 1997, by and between the
                        Registrant and The CIT Group/Commercial Services, Inc.(4)

 10.7.1                 Amendment to the Financing Agreement dated April 1, 1998(5)

 10.7.2                 Amendment to the Financing Agreement dated March 22, 1999(8)

 10.8                   Lease, dated August 19, 1998, between the Registrant and
                        Cornucopia, Inc.(6)

 10.9                   Lease, dated July 20, 1998, between the Registrant and 3002
                        Pennsylvania Avenue, LLC(6)

 10.10                  Registration Rights Agreement, dated as of November 30,
                        1998, by and among the Registrant, Edwin Lewis and Mossimo
                        Giannulli(9)

 10.11                  Contribution Agreement dated as of November 30, 1998,
                        between the Registrant and Mossimo Giannulli(7)

 10.12                  Mossimo License Agreement, dated as of March 28, 2000,
                        between the Registrant and Target Stores, a division of
                        Target Corporation(10)

 10.13                  Cherokee-Mossimo Finders Agreement dated March 27, 2000
                        between the Registrant and Cherokee Inc.(10)

 10.14                  Endorsement Agreement, dated January 1, 2000, between the
                        Registrant and David Duval Enterprises, Inc.

 10.15                  Separation Agreement and Release, dated as of March 28,
                        2000, by and among the Registrant, Edwin Lewis and Mossimo
                        Giannulli

 10.16                  Stock Option Termination Agreement, dated as of March 28,
                        2000, by and among the Registrant, Edwin Lewis and Mossimo
                        Giannulli
</TABLE>

                                       22
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO.                                     DESCRIPTION
-----------                                     -----------
<S>                     <C>
 23.1                   Consent of Independent Public Accountants--Arthur Andersen
                        LLP

 27                     Financial Data Schedule
</TABLE>

                                       23
<PAGE>
------------------------

(1) Incorporated by reference from the Registrant's Registration Statement on
    Form S-1 (No. 33-80597), as amended, which became effective February 22,
    1996.

(2) Incorporated by reference from the Registrant's Annual Report on Form 10-K
    for the year ended December 31, 1996.

(3) Incorporated by reference from the Registrant's Quarterly Report on
    Form 10-Q for the quarter ended June 30, 1996.

(4) Incorporated by reference from the Registrant's Quarterly Report on
    Form 10-Q for the quarter ended June 30, 1997.

(5) Incorporated by reference from the Registrant's Quarterly Report on
    Form 10-Q for the Quarter ended June 30, 1998.

(6) Incorporated by reference from the Registrant's Quarterly Report on
    Form 10-Q for the Quarter ended September 30, 1998.

(7) Incorporated by reference from the Registrant's Current Report on Form 8-K,
    dated December 8, 1998.

(8) Incorporated by reference from the Registrant's Quarterly Report on
    Form 10-Q for the Quarter ended March 31, 1999.

(9) Incorporated by reference from the Registrant's Annual Report on Form 10-K
    for the year ended December 31, 1999.

(10) Incorporated by reference from the Registrant's Current Report on
    Form 8-K, dated March 28, 2000.

    (b) Reports on Form 8-K:

       The Registrant did not file any reports on Form 8-K during the three
       months ended December 31, 1999.

                                       24
<PAGE>
                                   SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) 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 14(th) day of
April 2000.

<TABLE>
<S>                                                    <C>  <C>
                                                       MOSSIMO, INC.

                                                       By:            /s/ MOSSIMO GIANNULLI
                                                            -----------------------------------------
                                                                        Mossimo Giannulli
                                                               CHAIRMAN OF THE BOARD, PRESIDENT AND
                                                                     CHIEF EXECUTIVE OFFICER
</TABLE>

    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 14(th) day of April 2000.

<TABLE>
<CAPTION>
                        NAME                                               TITLE
                        ----                                               -----
<C>                                                    <S>
                /s/ MOSSIMO GIANNULLI
     -------------------------------------------       Chairman of the Board, President and Chief
                  Mossimo Giannulli                      Executive Officer

                  /s/ JODY L. LOVE
     -------------------------------------------       Vice President of Finance (Principal
                    Jody L. Love                         Accounting Officer)

                 /s/ ROBERT MARTINI
     -------------------------------------------       Director
                   Robert Martini

                  /s/ JOHN STAFFORD
     -------------------------------------------       Director
                    John Stafford
</TABLE>

                                       24
<PAGE>
                          MOSSIMO, INC. AND SUBSIDIARY
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                PAGE
                                                              --------
<S>                                                           <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS....................    F-2

FINANCIAL STATEMENTS:
Consolidated balance sheets as of December 31, 1999 and
  1998......................................................    F-3
Consolidated statements of operations for the years ended
  December 31, 1999, 1998 and 1997..........................    F-4
Consolidated statements of stockholders' equity for the
  years ended December 31, 1999, 1998 and 1997..............    F-5
Consolidated statements of cash flows for the years ended
  December 31, 1999, 1998 and 1997..........................    F-6
Notes to consolidated financial statements..................    F-7
</TABLE>

                                      F-1
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Mossimo, Inc.:

    We have audited the accompanying consolidated balance sheets of
Mossimo, Inc. (a Delaware corporation) and subsidiary as of December 31, 1999
and 1998, and the related consolidated statements of operations, stockholders'
equity and cash flows for the three years ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

    We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

    In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Mossimo, Inc. and subsidiary
as of December 31, 1999 and 1998, and the results of their operations and their
cash flows for the three years ended December 31, 1999 in conformity with
accounting principles generally accepted in the United States.

    The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations
that raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to this matter are also described in Note 1. The
financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.

                                          ARTHUR ANDERSEN LLP

Orange County, California
April 10, 2000

                                      F-2
<PAGE>
                          MOSSIMO, INC. AND SUBSIDIARY

                          CONSOLIDATED BALANCE SHEETS

                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
                                     ASSETS
CURRENT ASSETS:
  Cash......................................................  $    473   $   176
  Accounts receivable, net of allowance for doubtful
    accounts of $587 and $696--1999 and 1998,
    respectively............................................       787       979
  Due from factor, net......................................        --     3,064
  Inventories...............................................     5,682     8,325
  Refundable taxes..........................................        --       171
  Prepaid expenses and other current assets.................       502       202
                                                              --------   -------
    Total current assets....................................     7,444    12,917
PROPERTY AND EQUIPMENT, at cost, net of accumulated
  depreciation and amortization.............................     3,097     4,207
OTHER ASSETS................................................       195       235
                                                              --------   -------
                                                              $ 10,736   $17,359
                                                              ========   =======
                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Due to factor, net........................................  $  1,298   $    --
  Line of credit............................................     2,135     4,759
  Accounts payable..........................................     3,178     1,505
  Accrued liabilities.......................................     1,290     1,834
  Current portion of long-term debt.........................         8        21
  S distribution note.......................................       215       266
                                                              --------   -------
    Total current liabilities...............................     8,124     8,385
DEFERRED ROYALTY INCOME.....................................       213       325
LONG-TERM DEBT, net of current portion......................         3        10
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 15,077,253 and
    15,011,529--1999 and 1998, respectively.................        15        15
  Additional paid-in capital................................    38,126    31,428
  Accumulated deficit.......................................   (35,745)  (22,804)
                                                              --------   -------
    Total stockholders' equity..............................     2,396     8,639
                                                              --------   -------
                                                              $ 10,736   $17,359
                                                              ========   =======
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-3
<PAGE>
                          MOSSIMO, INC. AND SUBSIDIARY

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Net sales...................................................  $ 47,393   $ 45,310   $ 70,936
Cost of sales...............................................    37,069     35,994     63,963
                                                              --------   --------   --------
  Gross profit..............................................    10,324      9,316      6,973
Royalty income, net.........................................     3,686      3,214      3,798
                                                              --------   --------   --------
                                                                14,010     12,530     10,771
                                                              --------   --------   --------
OPERATING EXPENSES:
  Selling, general and administrative.......................    20,001     21,677     32,802
  Non-cash insurance premium................................     6,100         --         --
  Lease restructuring.......................................        --      3,792         --
                                                              --------   --------   --------
    Total operating expenses................................    26,101     25,469     32,802
                                                              --------   --------   --------
Operating loss..............................................   (12,091)   (12,939)   (22,031)
                                                              --------   --------   --------
OTHER EXPENSE:
  Other, net................................................        (3)      (140)      (362)
  Interest, net.............................................      (834)      (612)      (278)
                                                              --------   --------   --------
    Net other expense.......................................      (837)      (752)      (640)
                                                              --------   --------   --------
Loss before income taxes....................................   (12,928)   (13,691)   (22,671)
Provision (benefit) for income taxes........................        13        107     (3,935)
                                                              --------   --------   --------
Net loss....................................................  $(12,941)  $(13,798)  $(18,736)
                                                              ========   ========   ========
Net loss per common share:
  Basic and diluted.........................................  $  (0.86)  $  (0.92)  $  (1.25)
                                                              ========   ========   ========
Weighted average common shares outstanding:
  Basic and diluted.........................................    15,050     15,010     15,000
                                                              ========   ========   ========
</TABLE>

          See accompanying notes to consolidated financial statements

                                      F-4
<PAGE>
                          MOSSIMO, INC. AND SUBSIDIARY

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                    RETAINED
                                                  COMMON STOCK       ADDITIONAL     EARNINGS
                                               -------------------    PAID-IN     (ACCUMULATED
                                                SHARES     AMOUNT     CAPITAL       DEFICIT)      TOTAL
                                               --------   --------   ----------   ------------   --------
<S>                                            <C>        <C>        <C>          <C>            <C>
BALANCE, December 31, 1996...................   15,000      $15        $31,386      $  9,730     $41,131
Net loss.....................................       --       --             --       (18,736)    (18,736)
                                                ------      ---        -------      --------     -------
BALANCE, December 31, 1997...................   15,000       15         31,386        (9,006)     22,395
Issuance of common stock.....................       11       --             42            --          42
Net loss.....................................       --       --             --       (13,798)    (13,798)
                                                ------      ---        -------      --------     -------
BALANCE, December 31, 1998...................   15,011       15         31,428       (22,804)      8,639
Issuance of common stock.....................       66       --            298            --         298
Non-cash compensation........................       --       --            300            --         300
Non-cash insurance premium...................       --       --          6,100            --       6,100
Net loss.....................................       --       --             --       (12,941)    (12,941)
                                                ------      ---        -------      --------     -------
BALANCE, December 31, 1999...................   15,077      $15        $38,126      $(35,745)    $ 2,396
                                                ======      ===        =======      ========     =======
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>
                          MOSSIMO, INC. AND SUBSIDIARY

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss....................................................  $(12,941)  $(13,798)  $(18,736)
Adjustments to reconcile net loss to net cash provided by
  (used in) operating activities:
Depreciation and amortization...............................     1,356      1,766      1,751
Loss on disposition of property and equipment...............        --      2,992        265
Write-down of in-store fixtures.............................        --        461         --
Provision for doubtful receivables..........................        79        419        406
Deferred income taxes.......................................        --         --      1,455
Deferred royalty income.....................................      (112)      (125)      (650)
Non-cash compensation expense...............................       300         --         --
Non-cash insurance premium..................................     6,100         --         --
Changes in:
  Accounts receivable, net..................................       113      1,075        (48)
  Due from factor, net......................................     3,064        937      9,560
  Inventories...............................................     2,643      6,112      2,978
  Refundable taxes..........................................       171      5,334     (4,159)
  Prepaid expenses and other current assets.................      (300)        94        573
  Other assets..............................................        40         40      1,136
  Due to factor, net........................................     1,298         --         --
  Accounts payable..........................................     1,673     (2,621)    (2,575)
  Accrued liabilities.......................................      (544)      (623)     1,233
  S distribution note.......................................       (51)       (96)       (65)
                                                              --------   --------   --------
    Net cash provided by (used in) by operating
      activities............................................     2,889      1,967     (6,876)
                                                              --------   --------   --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of property and equipment...............        --        500         16
Payments for acquisition of property and equipment..........      (246)      (744)    (6,355)
                                                              --------   --------   --------
    Net cash used in investing activities...................      (246)      (244)    (6,339)
                                                              --------   --------   --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in line of credit................................    (2,624)    (2,203)     6,962
Proceeds from issuance of common stock......................       298         42         --
Repayment of long-term debt.................................       (20)       (41)       (99)
                                                              --------   --------   --------
Net cash provided by (used in) financing activities.........    (2,346)    (2,202)     6,863
                                                              --------   --------   --------
NET INCREASE (DECREASE) IN CASH.............................       297       (479)    (6,352)
CASH, beginning of year.....................................       176        655      7,007
                                                              --------   --------   --------
CASH, end of year...........................................  $    473   $    176   $    655
                                                              ========   ========   ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
  Interest..................................................  $    857   $    638   $    355
                                                              ========   ========   ========
  Income taxes..............................................  $     18   $     --   $    225
                                                              ========   ========   ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-6
<PAGE>
                          MOSSIMO, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    DESCRIPTION OF BUSINESS--On March 28, 2000, Mossimo, Inc. ("Mossimo" or the
"Company") entered into a multi-year licensing agreement (the "Target
Agreement") with Target Corporation (Target). Under terms of the Target
Agreement, Target will have the exclusive United States license for production
and distribution through Target stores of substantially all products sold in the
United States, other than those covered under existing Mossimo licensing
arrangements. The Target licensed product line will initially include men's and
women's apparel and is scheduled to be launched in February 2001. This licensed
product line may be expanded to include all soft line categories, fragrances,
other accessories and house wares.

    The Target Agreement provides that the Company will contribute, and will
cause Mossimo Giannulli, its President, Chief Executive Officer and principal
designer, to contribute, design services and will have approval rights for
product design and marketing and advertising materials. Target will collaborate
on design and will be responsible for product development, sourcing, quality
control and inventory management with respect to the Target licensed product
line. Under the Target Agreement, Target is obligated to pay the Company a
royalty based upon a percentage of its net sales of Mossimo brand products, with
a minimum guaranteed royalty, beginning in 2001, of approximately $27.8 million
over the initial three-year term of the agreement. The Target Agreement is
subject to early termination under certain circumstances. If Target is current
in its payments of the minimum guaranteed royalty amount, Target has the right
to renew the Target Agreement, on the same terms and conditions, for additional
terms of two years each.

    The Company also licenses its trademarks for use in collections of eyewear,
women's swimwear and bodywear, men's hosiery and men's tailored suits and dress
shirts. Currently, Mossimo has four additional license agreements pursuant to
which third party licensees have the exclusive right to manufacture and
distribute certain products bearing the Company's trademarks according to
designs furnished or approved by the Company in specified territories outside of
the United States. Mossimo products are characterized by quality workmanship and
are targeted towards the fashion conscious consumer generally age 30 or under.

    Prior to entering into the Target Agreement, the Company's primary line of
business was designing, sourcing and marketing a lifestyle collection of
designer men's and women's sportswear and activewear, including knit and woven
shirts, outerwear, denim and related products, dresses, pants, sweatshirts,
tee-shirts and shorts. The products were distributed to a diversified account
base, including department stores, specialty retailers, and sports and
activewear stores located throughout the United States, as well as one signature
retail store and one outlet store in Southern California.

    GOING CONCERN MATTERS--The accompanying financial statements have been
prepared on a going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. As shown
in the financial statements, during the three year period ended December 31,
1999, the Company has experienced a significant decline in revenues, resulting
in operating losses, negative cash flow and a working capital deficit. As of
December 31, 1999, the Company was in violation of one covenant of its revolving
credit facility that is used to fund operations. The Company subsequently
received a waiver for the violation.

    In response to these declining financial conditions, the Company began cost
cutting measures during the latter part of 1997 and restructured its management
team in the fourth quarter of 1998. Despite these efforts, the Company reported
an operating loss for the year ended December 31, 1999.

                                      F-7
<PAGE>
                          MOSSIMO, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    Under the Target Agreement, Target is obligated to pay the Company a royalty
based upon a percentage of its net sales of Mossimo brand products, with a
minimum guaranteed royalty, beginning in 2001, of approximately $27.8 million
over the initial three-year term of the agreement. The Target Agreement is
subject to early termination under certain circumstances.

    As a result of entering into the Target Agreement, management will be
implementing several changes to the Company's operations during the period from
March 28, 2000 to the commencement of royalty payments under the Target
Agreement in May 2001 (the "Restructuring Period"). The most significant changes
will include a work force reduction of approximately 90% of all employees,
closure of the Company's signature retail store and outlet store, termination of
all sourcing, production and sales operations and termination of relationships
with substantially all existing customers and suppliers. During the
Restructuring Period, the Company will suffer the elimination of all wholesale
and retail sales, continuation of operating losses and negative cash flows and
recognition of a significant restructuring charge. In addition, the Company may
experience increased difficulties in collecting its accounts receivable and
maintaining its licensing revenues. Due to the broad changes to the Company's
operations, the timing and magnitude of these consequences are uncertain at this
time.

    The Company's current credit facility includes a $15.0 million revolving
credit line, collateralized by inventory, receivables, machinery and equipment
and intangibles, bearing interest at the prime rate plus 1.0%. Borrowings are
limited to 50% of eligible inventory and 85% of eligible receivables. The
facility also allows for up to approximately $6.0 million in letters of credit.

    Due to the restructuring of the Company's business, available borrowings
under the current credit facility are expected to be substantially eliminated by
June 2000. The Company is actively seeking financing to cover anticipated
shortfalls and is in the process of renegotiating its credit facility, including
its factoring agreement. Should these efforts be unsuccessful, additional funds
may not be available to the Company.

    These factors, among others, indicate that there is substantial doubt about
the Company's ability to continue as a going concern. The financial statements
do not include any adjustments relating to the recoverability and classification
of asset carrying amounts or the amount and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern.
The Company's continuation as a going concern is dependent upon its ability to
(a) generate sufficient cash flow to meet its obligations on a timely basis,
(b) obtain additional financing as may be required and (c) ultimately attain
profitability.

    PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include
the accounts of Mossimo, Inc., a Delaware corporation and its wholly-owned
subsidiary, Giannico, Inc. (collectively, the "Company"). Giannico's operations
were discontinued in the third quarter of 1998. All significant intercompany
balances and transactions have been eliminated in consolidation.

    SEGMENT AND GEOGRAPHIC INFORMATION--The Company operates in one principal
business segment across domestic and international markets. International sales
are primarily made through the Company's licensees in their respective
territories.

    COMPREHENSIVE INCOME (LOSS)--As of January 1, 1998, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income", which establishes standards for the reporting and display
of comprehensive income and its components in the financial statements. There
are no items of comprehensive income (loss) that the Company is required to
report.

                                      F-8
<PAGE>
                          MOSSIMO, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    CONCENTRATION OF CREDIT RISK--The Company assigns a substantial portion of
its receivables to a factor, which assumes the credit risk with respect to
collection of nonrecourse receivables. Ongoing customer credit evaluations are
performed with respect to the Company's trade receivables, and collateral is
generally not required.

    INVENTORIES--Inventories are stated at the lower of cost, determined by the
first-in, first-out method, or market.

    PROPERTY AND EQUIPMENT--Property and equipment are stated at cost, net of
accumulated depreciation and amortization. Depreciation is computed using the
straight-line method over generally a five to ten-year period for furniture and
fixtures, machinery and equipment and automobiles. Leasehold improvements are
amortized over the term of the related lease if less than the estimated service
life. The Company's share of the cost of constructing in-store shop displays is
capitalized and amortized using the straight-line method over a three-year
period. These costs are included in furniture and fixtures.

    REVENUE RECOGNITION--Revenue is recognized when merchandise is shipped to a
customer. Reserves for estimated returns and allowances are recorded at the time
of shipment based upon management's estimates and the Company's historical
experience.

    INCOME TAXES--The Company accounts for income taxes under the provisions of
SFAS No. 109, "Accounting for Income Taxes". Deferred taxes on income result
from temporary differences between the reporting of income for financial and tax
reporting purposes and are provided for using the liability method as prescribed
by SFAS No. 109.

    USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

    STOCK-BASED COMPENSATION--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 income (loss) and net income (loss) per share
in the financial statement footnotes. See Note 12--Stockholders' Equity.

    EARNINGS PER SHARE--The Company calculates earnings (loss) per share in
accordance with SFAS No. 128, "Earnings Per Share". This statement requires the
presentation of both basic and diluted net income (loss) per share. Basic net
income (loss) per share is computed by dividing income (loss) available to
common stockholders by the weighted average number of common shares outstanding.
Diluted net income (loss) per share includes the effect of potential shares
outstanding, including dilutive stock options, using the treasury stock method.
For the years ended December 31, 1999, 1998 and 1997, there was no dilution from
outstanding options.

    During 1998, the Company issued stock options to Edwin Lewis, President,
Chief Executive Officer and Director, under the Stock Option Plan for Edwin
Lewis (the "Lewis Plan"). In the event of exercise of options issued under the
Lewis Plan, the shares of common stock to be issued are to be contributed to the
Company by Mossimo Giannulli, Chairman of the Board, under a Contribution
Agreement (Note 12).

                                      F-9
<PAGE>
                          MOSSIMO, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Accordingly, these shares are included in basic weighted average shares
outstanding as of December 31, 1999 and 1998. On March 28, 2000, Edwin Lewis
resigned from his positions as President, Chief Executive Officer and Director
of the Company. In connection with his resignation, Mossimo Giannulli was
appointed as President and Chief Executive Officer of the Company, all options
granted under the Lewis Plan were canceled and the Lewis Plan and Contribution
Agreement were terminated.

    IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS--In June 1998, the Financial
Accounting Standards Board (FASB) issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities". SFAS No. 133 requires that all
derivative instruments be recorded on the balance sheet at their fair value.
Changes in the fair value of derivatives are recorded each period in current
earnings or other comprehensive income, depending on whether a derivative is
designed as part of a hedge transaction and, if it is, the type of hedge
transaction. In June 1999, the FASB issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities--Deferral of the Effective Date of
FASB Statement No. 133". SFAS No. 137 delays the effective date of SFAS No. 133
to fiscal years beginning after June 15, 2000. The Company does not expect that
the adoption of SFAS Nos. 133 and 137 will have a material impact on its
consolidated financial statements because the Company does not currently hold
any derivative instruments.

    MERCHANDISE RISK--The Company's success is largely dependent upon its
ability to gauge the fashion tastes of its targeted consumers and provide
merchandise that satisfies consumer demand. Any inability to provide appropriate
merchandise in sufficient quantities in a timely manner could have a material
adverse effect on the Company's business, operating results and financial
condition.

    RECLASSIFICATIONS--Certain reclassifications have been made in the audited
consolidated 1998 and 1997 financial statements to conform to the 1999
presentation.

2. DUE FROM (TO) FACTOR

    Pursuant to the provisions of a factoring agreement, the Company assigns a
substantial portion of its trade accounts receivable to a factor, which assumes
the credit risk with respect to collection of the nonrecourse accounts
receivable. The Company may request advances against a percentage, determined by
the factor, of the qualifying accounts receivable factored at any time before
their maturity date. The factoring charge ranges from 0.5% to 0.8% of the
receivables assigned. Interest at the prime rate plus 1.0% per annum is charged
on advances received through the Company's credit facility. Outstanding advances
on the credit facility are collateralized by the Company's receivables,
inventories, machinery and equipment and intangibles.

    Due to the restructuring of the Company's business as a result of entering
into the Target Agreement, available borrowings under the current credit
facility are expected to be substantially eliminated by June 2000. The Company
is actively seeking financing to cover anticipated shortfalls and is in the
process of renegotiating its credit facility, including its factoring agreement.

                                      F-10
<PAGE>
                          MOSSIMO, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. DUE FROM (TO) FACTOR (CONTINUED)
    Due from (to) factor consists of the following at December 31, 1999 and
1998:

<TABLE>
<CAPTION>
                                                                1999       1998
                                                              --------   --------
                                                                (IN THOUSANDS)
<S>                                                           <C>        <C>
Unmatured accounts receivable:
  Nonrecourse...............................................  $ 8,017     $4,187
  With recourse.............................................       48         93
Allowance for sales returns and markdowns...................   (9,363)    (1,216)
                                                              -------     ------
                                                              $(1,298)    $3,064
                                                              =======     ======
</TABLE>

3. INVENTORIES

    Inventories consist of the following at December 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                                                1999       1998
                                                              --------   --------
                                                                (IN THOUSANDS)
<S>                                                           <C>        <C>
Raw materials...............................................   $1,301     $2,415
Work-in-process.............................................      168        665
Finished goods..............................................    4,213      5,245
                                                               ------     ------
                                                               $5,682     $8,325
                                                               ======     ======
</TABLE>

    The Company's import operations are subject to constraints imposed by
bilateral textile agreements between the United States and a number of foreign
countries. These agreements impose quotas on the amount and type of goods which
can be imported into the United States from these countries and can limit or
prohibit importation of products on very short notice. The inability of these
shipments to clear United States Customs or to clear United States Customs in a
reasonable time period could adversely affect the Company's ability to deliver
products to its customers in a timely manner. The Company's imported products
are also subject to United States Customs duties which are a material portion of
the Company's cost of imported goods. A substantial increase in customs duties
or a substantial reduction in quota limits applicable to the Company's imports
could have a material adverse effect on the Company's financial condition and
results of operations.

                                      F-11
<PAGE>
                          MOSSIMO, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. INCOME TAXES

    The provision (benefit) for income taxes consists of the following for the
years ended December 31, 1999, 1998 and 1997:

<TABLE>
<CAPTION>
                                                                1999        1998       1997
                                                              ---------   --------   --------
                                                                      (IN THOUSANDS)
<S>                                                           <C>         <C>        <C>
Current:
    Federal.................................................  $     --     $  91     $(5,390)
    State...................................................        13        16          --
                                                              ---------    -----     -------
                                                                    13       107      (5,390)
                                                              ---------    -----     -------
Deferred:
    Federal.................................................        --        --       1,205
    State...................................................        --        --         250
                                                              ---------    -----     -------
                                                                    --        --       1,455
                                                              ---------    -----     -------
Total provision (benefit) for income taxes..................  $     13     $ 107     $(3,935)
                                                              =========    =====     =======
</TABLE>

    The provision (benefit) for income taxes differs from the amount of tax
determined by applying the federal statutory rate to pretax income. The
components of this difference for the years ended December 31, 1999, 1998 and
1997 are summarized as follows:

<TABLE>
<CAPTION>
                                                              1998       1997       1999
                                                            --------   --------   --------
                                                                    (IN THOUSANDS)
<S>                                                         <C>        <C>        <C>
Benefit on income at federal statutory tax rate...........  $(4,529)   $(4,655)   $(7,708)
State tax benefit, net of federal tax effect..............     (776)      (821)    (1,383)
Increase in valuation allowance...........................    4,222      4,777      5,096
Limitations on state net operating loss utilization.......    1,096        773         --
Other.....................................................       --         33         60
                                                            -------    -------    -------
Total provision (benefit) for income taxes................  $    13    $   107    $(3,935)
                                                            =======    =======    =======
</TABLE>

    Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred income taxes as of December 31, 1999 and 1998 are as
follows:

<TABLE>
<CAPTION>
                                                                1999       1998
                                                              --------   --------
                                                                (IN THOUSANDS)
<S>                                                           <C>        <C>
Deferred income tax assets (liabilities):
  Reserves not currently deductible.........................  $ 4,760     $1,867
  State income taxes........................................     (892)      (687)
  Net operating loss carryforward...........................   10,227      8,510
  Other.....................................................       --        183
                                                              -------     ------
Net deferred tax assets.....................................   14,095      9,873
Valuation allowance.........................................  (14,095)    (9,873)
                                                              -------     ------
Total net deferred tax asset................................  $    --     $   --
                                                              =======     ======
</TABLE>

                                      F-12
<PAGE>
                          MOSSIMO, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. INCOME TAXES (CONTINUED)
    The Company has provided a full valuation allowance on the net deferred tax
asset at December 31, 1999 and 1998 due to the uncertainty regarding its
realization.

    As of December 31, 1999, the Company has approximately $24,700,000 and
$17,900,000 of federal and state net operating loss carryforwards, respectively,
available to offset future taxable income which expire in various years through
2014.

5. PROPERTY AND EQUIPMENT

    Property and equipment consists of the following at December 31, 1999 and
1998:

<TABLE>
<CAPTION>
                                                                1999       1998
                                                              --------   --------
                                                                (IN THOUSANDS)
<S>                                                           <C>        <C>
Furniture and fixtures......................................   $4,437     $3,986
Machinery and equipment.....................................    3,053      2,937
Automobiles.................................................      153        153
Construction in progress....................................       21        342
                                                               ------     ------
                                                                7,664      7,418
Accumulated depreciation and amortization...................   (4,567)    (3,211)
                                                               ------     ------
                                                               $3,097     $4,207
                                                               ======     ======
</TABLE>

6. LINE OF CREDIT AND LONG-TERM DEBT

    The Company's current credit facility includes a $15.0 million revolving
credit line, collateralized by inventory, receivables, machinery and equipment
and intangibles, bearing interest at the prime rate plus 1.0% (prime rate plus
0.5% or 9.0% at December 31, 1999). Borrowings under the amended agreement are
limited to 50% of eligible inventory and 85% of eligible receivables. The
facility also allows for up to approximately $6.0 million in letters of credit.

    The Company's current credit agreement has various restrictive covenants
which include earnings before interest, tax, depreciation and amortization
(EBITDA), exposure in excess of accounts receivable availability and capital
expenditure limitations. As of December 31, 1999, the Company was in violation
of one covenant, however, the Company subsequently received a waiver for the
violation. The Company had borrowings of approximately $2.1 million outstanding
on the line of credit as of December 31, 1999.

    Due to the restructuring of the Company's business as a result of entering
into the Target Agreement, available borrowings under the current credit
facility are expected to be substantially eliminated by June 2000. The Company
is actively seeking financing to cover anticipated shortfalls and is in the
process of renegotiating its credit facility, including its factoring agreement.

    Notes payable are due in aggregate monthly installments of $1,000, including
interest from 8.6% to 12.4% per annum, which mature at various dates through
June 2001. The notes are collateralized by the related equipment.

                                      F-13
<PAGE>
                          MOSSIMO, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. EMPLOYEE BENEFIT PLANS

    The Company has a defined contribution plan under Section 401(k) of the
Internal Revenue Code covering all full-time employees after six months of
employment. The plan provides for annual matching contributions by the Company
as a percentage of employee contributions and annual wages. Contributions made
to the plan for the years ended December 31, 1999, 1998 and 1997 were $17,000,
$31,000 and $64,000, respectively.

    In February 1997, the Company adopted the Mossimo, Inc. Employee Stock
Purchase Plan (the "Employee Plan"), which provides eligible employees of the
Company the opportunity to acquire stock in the Company through periodic payroll
deductions that are applied at semi-annual intervals to purchase shares of
common stock at a discount from the then current market price. The purchase
price of the shares is the lower of 85% of the fair market value of the
Company's common stock on the first day of the purchase period; or, 85% of the
fair market value of the Company's common stock on the purchase date. During
1999, the Company issued 4,524 shares to employees through the Employee Plan. As
of December 31, 1999, the Company had collected $18,000 toward the purchase of
stock under the Employee Plan and had not yet issued the stock. This amount is
included in accrued liabilities on the accompanying balance sheet. A total of
500,000 shares have been reserved under the Employee Plan, and 483,947 are
available for issuance at December 31, 1999.

8. COMMITMENTS AND CONTINGENCIES

    OPERATING LEASES--The Company is committed under noncancelable operating
leases expiring at various dates through June 2007. Rent expense for the years
ended December 31, 1999, 1998 and 1997 was $1,814,000, $2,492,000 and
$2,603,000, respectively.

    Future minimum annual rental payments required under noncancelable operating
leases in excess of one year are as follows (in thousands):

<TABLE>
<S>                                                           <C>
Year ending December 31:
  2000......................................................   $1,661
  2001......................................................      965
  2002......................................................      635
  2003......................................................      560
  2004......................................................      492
  Thereafter................................................    1,149
                                                               ------
Total scheduled maturities..................................    5,462
Sublease income.............................................     (380)
                                                               ------
                                                               $5,082
                                                               ======
</TABLE>

    LETTERS OF CREDIT--The Company has an agreement with its factor to
facilitate the purchase of goods by issuing letters of credit to various
companies overseas. The letters of credit are collateralized by inventories. At
December 31, 1999, the Company had outstanding letters of credit of $6,343,000.

    ENDORSEMENT AGREEMENT--Effective January 1, 2000, the Company entered into
an exclusive, multi-year endorsement agreement with a PGA professional. Under
the terms of this agreement, Mossimo will outfit this PGA professional
exclusively during his global golf activities and is obligated to pay cash
compensation. Future minimum commitments under this agreement are $2,350,000
payable in 2000 and

                                      F-14
<PAGE>
                          MOSSIMO, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
$850,000 payable in each year from 2001 through 2003. This agreement also has
certain performance provisions that allow for additional cash compensation.
Obligations under these provisions, if any, will be accrued and charged to
operations during the period in which they arise.

    LITIGATION--On January 23, 1997, plaintiff Chaile Steinberg filed a
purported class action suit against the Company and certain other defendants on
behalf of individuals who purchased the Company's common stock in the initial
public offering pursuant to the Registration Statement and Prospectus
(Prospectus), dated February 22, 1996, and on the open market from February 22,
1996 through January 14, 1997 (the "Class Period"). On April 7, 1997, the
plaintiffs Igor Glaudnikov, Cara Debra Marks and Lois Burke filed a second
related action against the same defendants. The two cases were subsequently
consolidated by court order, dated May 19, 1997. Both STEINBERG and GLAUDNIKOV
(collectively, the "State Actions") contain identical factual allegations, and
only differ in the number of shares purchased by plaintiffs and the California
residence of two of the plaintiffs in the GLAUDNIKOV action.

    The State Actions allege that defendants made false and misleading
statements and intentionally concealed material negative information in the
Prospectus and afterward during the Class Period, which artificially inflated
prices for the Company's common stock. Plaintiffs contend that the class was
damaged in an unspecified amount as a result of this artificial inflation of the
Company's stock price.

    On September 23, 1997, a federal class action complaint was filed on behalf
of plaintiff James Frenkil by the same law firm that represents the plaintiffs
in the State Actions (the "Federal Action"). One of the named plaintiffs in the
Federal Action is a plaintiff in the State Actions. The class period and
precipitating events are the same as in the State Actions, but the federal
complaint purports to allege violations of certain federal securities laws. On
October 17, 1997, the judge stayed the Federal Action pending resolution of the
State Actions.

    Defendants filed a general demurrer in the State Actions, challenging the
legal sufficiency of the complaints. On June 26, 1997, the judge sustained the
defendants' demurrer, finding that neither complaint pleaded facts sufficient to
constitute causes of action against the defendants. The judge sustained the
demurrer as to four of the causes of action with leave to amend, and as to the
fifth cause of action for unlawful, unfair or fraudulent business practices and
false or misleading advertising without leave to amend.

    On July 9, 1998, plaintiffs filed their first amended consolidated complaint
against the same defendants, alleging three causes of action. On September 22,
1998, defendants filed a general demurer to the first amended consolidated
complaint. On March 16, 1999, the judge sustained the demurrer as to the Company
with respect to two of the three causes of action with leave to amend. As to the
third cause of action, the judge sustained the demurrer as to the Company with
respect to three of the five plaintiffs with leave to amend, and overruled the
demurrer with respect to the other two plaintiffs. On April 14, 1999, plaintiffs
filed their second amended consolidated complaint, alleging one cause of action.
Thereafter, plaintiffs expressed a desire to file a third amended consolidated
complaint. On June 24, 1999, the parties stipulated that plaintiffs must file a
third amended consolidated complaint on or before July 30, 1999. Plaintiffs did
not file a third amended consolidated complaint.

    On March 20, 2000, District Court Judge Gary L. Taylor approved a
$13.0 million settlement of the State Actions and Federal Action. There were no
objections to the settlement. The settlement was funded by the Company's
insurance coverage, a portion of which the Company obtained during the second
quarter of 1999. Absent unforeseen circumstances, the settlement will become
final on or about April 19, 2000. If

                                      F-15
<PAGE>
                          MOSSIMO, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
the settlement does not become final, the outcome of the litigation cannot be
predicted, but management believes that the Company has meritorious defenses to
the claims alleged and would defend this action with vigor.

    The Company is involved in certain other legal and administrative
proceedings and threatened legal and administrative proceedings arising in the
normal course of its business. While the outcome of such proceedings and
threatened proceedings cannot be predicted with certainty, in the opinion of
management, the ultimate resolution of these matters individually or in the
aggregate will not have a material adverse effect on the Company.

9. MAJOR CUSTOMERS

    During the years ended December 31, 1999, 1998 and 1997, sales to one
department store customer in its various regions represented approximately 38%,
8% and 13% of net sales, respectively. Cumulative sales to various divisions of
one department store group represented approximately 15%, 30% and 18% of net
sales during the years ended December 31, 1999, 1998 and 1997, respectively.
Additionally, cumulative sales to various divisions of two department store
groups each represented approximately 11% of net sales during the year ended
December 31, 1999. A decision by an individual significant customer or the
controlling owner of a group of department stores to decrease the amount
purchased from the Company or to cease carrying the Company's products could
have a material adverse effect on the Company's financial condition and results
of operations.

10. ROYALTY INCOME, NET

    The Company has licensing agreements with several unrelated companies for
the use of its trademarks and designs. Royalty payments are due on a monthly or
quarterly basis and range from 3% to 10% of the licensee's sales.

11. FAIR VALUE OF FINANCIAL INSTRUMENTS

    The Company's consolidated balance sheets include the following financial
instruments: cash, accounts receivable, amounts due to and from its factor and
long-term debt. The Company considers the carrying amounts in the financial
statements to approximate fair value for cash, accounts receivable and amounts
due to and from its factor, because of the relatively short period of time
between origination and their expected realization. The carrying value of
long-term debt approximates fair value as it bears interest at rates currently
available to the Company.

12. STOCKHOLDERS' EQUITY

    In February 1996, the Company completed an initial public offering of
2,000,000 shares of the Company's common stock for $18.00 per share, generating
proceeds to the Company after underwriting discounts and expenses of
approximately $32,100,000. In conjunction with its initial public offering, the
Company terminated its S corporation status and distributed to its stockholder
$17,600,000, representing previously earned and undistributed taxable S
corporation earnings 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
$215,000 and $266,000 at December 31, 1999 and 1998, respectively.

                                      F-16
<PAGE>
                          MOSSIMO, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. STOCKHOLDERS' EQUITY (CONTINUED)
    1995 STOCK OPTION PLAN--In December 1995, 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 certain advisors or
consultants to the Company. A total of 1,500,000 shares have been reserved for
issuance under the 1995 Plan. Options granted thereunder have an exercise price
equal to the fair market value of the common stock on the date of grant.

    1995 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN--The Company's Non-Employee
Directors Stock Option Plan (the "Directors Plan") provides for the automatic
grant to each of the Company's non-employee directors of (i) an option to
purchase 30,000 shares of common stock on the date of such director's initial
election or appointment to the Board of Directors and (ii) an option to purchase
3,000 shares of common stock on each anniversary thereof on which the director
remains on the Board of Directors. A total of 250,000 shares have been reserved
under the Directors Plan. Options granted thereunder have an exercise price
equal to the fair market value of the common stock on the date of grant.

    During 1999, the Company canceled the option grants made to its non-employee
directors upon their initial election or appointment to the Board of Directors
and replaced them with options to purchase 25,000 shares of common stock at an
exercise price equal to the fair market value of the common stock on the date of
grant. These transactions are reflected below in the total number of options
granted and canceled during the year ended December 31, 1999.

    Changes in shares under option for the 1995 Plan and the Directors Plan (the
"Plans") are summarized as follows:

<TABLE>
<CAPTION>
                                                               YEARS ENDED DECEMBER 31,
                                   --------------------------------------------------------------------------------
                                             1999                        1998                        1997
                                   -------------------------   -------------------------   ------------------------
                                                 WEIGHTED                    WEIGHTED                   WEIGHTED
                                    SHARES     AVERAGE PRICE    SHARES     AVERAGE PRICE    SHARES    AVERAGE PRICE
                                   ---------   -------------   ---------   -------------   --------   -------------
<S>                                <C>         <C>             <C>         <C>             <C>        <C>
Outstanding, beginning of year...  1,207,450       $5.40         405,600      $18.02       494,500       $20.23
  Granted........................    140,450        8.83       1,148,200        3.45        90,600         7.56
  Canceled.......................    179,440       16.05         346,350       13.71       179,500        18.85
  Exercised......................     61,200        4.47              --          --            --           --
                                   ---------       -----       ---------      ------       -------       ------
Outstanding, end of year.........  1,107,260       $4.16       1,207,450      $ 5.40       405,600       $18.02
                                   =========       =====       =========      ======       =======       ======
Options exercisable, end of
  year...........................    377,960       $4.91         236,825      $12.96       113,832       $20.70
                                   =========       =====       =========      ======       =======       ======
Weighted average fair value of
  options granted during the
  year...........................                  $4.68                      $ 3.01                     $ 4.16
                                                   =====                      ======                     ======
</TABLE>

                                      F-17
<PAGE>
                          MOSSIMO, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. STOCKHOLDERS' EQUITY (CONTINUED)
    Outstanding stock options for the Plans at December 31, 1999 consist of the
following:

<TABLE>
<CAPTION>
                              OPTIONS OUTSTANDING          OPTIONS EXERCISABLE
                        --------------------------------   -------------------
                                    WEIGHTED
                                     AVERAGE    WEIGHTED              WEIGHTED
      RANGE OF                      REMAINING   AVERAGE               AVERAGE
   EXERCISE PRICES       SHARES       LIFE       PRICE      SHARES     PRICE
---------------------   ---------   ---------   --------   --------   --------
<S>                     <C>         <C>         <C>        <C>        <C>
  $2.00-$5.00             957,850       8.8     $  3.26    301,400     $3.57
  $7.00-$9.00              82,500       7.6        8.38     57,250      8.69
  $9.01-$18.00             66,910       8.4       11.85     19,310     14.75
                        ---------     -----     -------    -------     -----
                        1,107,260       8.7     $  4.16    377,960     $4.91
                        =========     =====     =======    =======     =====
</TABLE>

    The fair value of each option grant was estimated as of the grant date using
the Black-Scholes option-pricing model for the years ended December 31, 1999,
1998 and 1997 assuming risk-free interest rates of 5.75%, 5.29% and 5.75%,
respectively; volatility of 99%, 141% and 106%, respectively; zero dividend
yield; and expected lives of five years for all periods. 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.

    As of December 31, 1999 there were 581,540 shares of common stock under the
Plans that were available for future grant.

    STOCK OPTION PLAN FOR EDWIN LEWIS.  On November 30, 1998, the Board of
Directors adopted the Stock Option Plan for Edwin Lewis (the "Lewis Plan"). The
total number of shares of common stock of the Company authorized for issuance
upon exercise of options under the Lewis Plan is established at 6,186,111,
subject to adjustment.

    On November 30, 1998, subject to approval by the stockholders of the
Company, the Board of Directors granted the following stock options to
Mr. Lewis (the "Lewis Options") under the Lewis Plan: (i) a Nonqualified Stock
Option Agreement, under which Mr. Lewis was granted an immediately exercisable
option to purchase up to 5,152,778 shares of the common stock at a purchase
price of $3.00 per share, (i.e., the fair market value of the common stock on
the date of grant); (ii) an Incentive Stock Option Agreement, under which
Mr. Lewis was granted an immediately exercisable option to purchase up to 33,333
shares of common stock at a purchase price of $3.00 per share; (iii) a
Nonqualified Performance Stock Option Agreement, under which Mr. Lewis was
granted an option to purchase up to 966,667 shares of common stock at a purchase
price of $3.00 per share, with such options vesting on November 30, 2005,
subject to accelerated vesting upon the happening of certain events relating in
part to the common stock price; and (iv) a Performance Incentive Stock Option
Agreement, under which Mr. Lewis was granted an option to purchase 33,333 of
common stock at a purchase of $3.00 per share, with such options vesting on
November 30, 2005, subject to accelerated vesting upon the happening of certain
events relating in part to the common stock price (together, the "Stock Option
Agreements").

    In connection with the execution of the Stock Option Agreements, the Company
and Mossimo Giannulli entered into (i) a Contribution Agreement dated as of
November 30, 1998, pursuant to which Mr. Giannulli has agreed to contribute to
the Company a number of shares of common stock equal to the aggregate number of
shares of common stock to be issued by the Company upon Mr. Lewis' exercise of
the Lewis Options and (ii) an Escrow Agreement dated as of November 30, 1998,
pursuant to which

                                      F-18
<PAGE>
                          MOSSIMO, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. STOCKHOLDERS' EQUITY (CONTINUED)
Mr. Giannulli agreed to place 6,186,111 shares of common stock in an escrow
account pending Mr. Lewis' exercise of the Lewis Options (together, the "Funding
Agreements"). Mr. Giannulli entered into the Funding Agreements for no
consideration payable by the Company.

    The options contemplated by the Nonqualified Stock Option Agreement and the
Nonqualified Performance Stock Option Agreement will expire upon the earlier of
(i) November 30, 2018 and (ii) one year from the date of the death of
Mr. Lewis. The options contemplated by the Incentive Stock Option Agreement and
the Performance Incentive Stock Option Agreement will expire upon the earlier of
(i) November 30, 2008 and (ii) one year from the date of the death of
Mr. Lewis. Pursuant to the terms of the Escrow Agreement, if any Lewis Options
expire, shares of common stock underlying the Lewis Options will revert back to
Mr. Giannulli.

    The Lewis Options have a weighted average remaining life of 17.4 years. The
fair value of each option is $2.86 and was estimated as of the grant date using
the Black-Scholes option-pricing model assuming a risk-free interest rate of
5.29% volatility of 141%, zero dividend yield and an expected life of seven
years.

    As of December 31, 1999, 5,436,111 options were exercisable. There are no
remaining shares available for grant under the Lewis Plan. On March 28, 2000,
Edwin Lewis resigned from his positions as President, Chief Executive Officer
and Director of the Company. In connection with his resignation, Mossimo
Giannulli was appointed as President and Chief Executive Officer of the Company,
all options granted under the Lewis Plan were canceled and the Lewis Plan and
the related Funding Agreements were terminated.

    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
loss and net loss per share would have resulted in the approximate pro forma
amounts indicated below for the years ended December 31, 1999, 1998 and 1997:

<TABLE>
<CAPTION>
                                                           1999        1998        1997
                                                         ---------   ---------   ---------
                                                          (IN THOUSANDS EXCEPT PER SHARE)
<S>                                                      <C>         <C>         <C>
Actual net loss........................................  $(12,941)   $(13,798)   $(18,736)
Pro forma net loss.....................................   (14,352)    (28,827)    (19,113)
Actual net loss per share:
  Basic and diluted....................................  $  (0.86)   $  (0.92)   $  (1.25)
Pro forma net loss per share:
  Basic and diluted....................................  $  (0.95)   $  (1.92)   $  (1.27)
</TABLE>

                                      F-19
<PAGE>
                          MOSSIMO, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. VALUATION AND QUALIFYING ACCOUNTS

    Changes in the allowance for doubtful accounts, allowance for sales returns
and markdowns and lease restructuring reserve for the years ended December 31,
1999, 1998 and 1997, are as follows:

<TABLE>
<CAPTION>
                                                           ADDITIONS
                                             BALANCE AT   CHARGED TO                   BALANCE AT
                                             BEGINNING     COSTS AND                      END
                                             OF PERIOD     EXPENSES      DEDUCTIONS    OF PERIOD
                                             ----------   -----------   ------------   ----------
<S>                                          <C>          <C>           <C>            <C>
Year ended December 31, 1999:
  Allowance for doubtful accounts..........  $  696,000   $    79,000   $   (188,000)  $  587,000
  Allowance for sales returns and
    markdowns..............................   1,216,000    16,748,000     (8,601,000)   9,363,000
  Allowance for lease restructuring........     199,000            --       (199,000)          --
Year ended December 31, 1998:
  Allowance for doubtful accounts..........  $  891,000   $   419,000   $   (614,000)  $  696,000
  Allowance for sales returns and
    markdowns..............................   2,491,000     4,162,000     (5,437,000)   1,216,000
  Allowance for lease restructuring........          --     3,792,000     (3,593,000)     199,000
Year ended December 31, 1997:
  Allowance for doubtful accounts..........  $  700,000   $   406,000   $   (215,000)  $  891,000
  Allowance for sales returns and
    markdowns..............................   1,165,000    11,578,000    (10,252,000)   2,491,000
</TABLE>

14. RELATED PARTY TRANSACTIONS

    In October 1998, the Company entered into a lease agreement for a facility
in Santa Monica, California with 3002 Pennsylvania Avenue, LLC, of which
Mr. Giannulli is a partner. The Company intended to open a design studio in the
facility, however, due to management changes within the Company, these plans
were terminated. During 1999, the Company entered into a sublease agreement with
a third party. The lease and sublease agreements have concurrent termination
dates. The annual rent obligation under the lease for the facility is
approximately $77,000.

    On November 30, 1998, in connection with the transactions associated with
the appointment of Edwin Lewis as President, Chief Executive Officer and
Director of the Company, the Company entered into a Registration Rights
Agreement (the "Registration Rights Agreement") with Mossimo Giannulli and Edwin
Lewis. Pursuant to the Registration Rights Agreement, the Company granted each
of Mr. Giannulli and Mr. Lewis limited demand registration rights to facilitate
the resale of certain securities owned by them and certain piggyback rights to
sell their securities in connection with certain offerings of securities of the
Company.

                                      F-20