<PAGE>
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   -----------

                                    FORM 10-K

(MARK ONE)



|X|      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
                                       OR

|_|      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

               FOR THE TRANSITION PERIOD FROM ________ TO ________

                         COMMISSION FILE NUMBER: 1-14208

                                   -----------

                                  MOSSIMO, INC.

             (Exact name of registrant as specified in its charter)

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

              2016 BROADWAY                                       90404
        SANTA MONICA, CALIFORNIA                                (Zip Code)
(Address of principal executive offices)


                                 (310) 460-0040
              (Registrant's telephone number, including area code)

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

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

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. Yes |X| No |_|

The aggregate market value of the voting stock held by non-affiliates of the
registrant at March 8, 2002 was approximately $29,731,000.

The registrant had 15,344,042 shares of common stock, par value $.001 per share
outstanding at March 8, 2002.

Documents Incorporated by Reference (To the Extent Indicated Herein): Portions
of the Definitive Proxy Statement for the 2002 Annual Meeting (in Part III)

================================================================================
<PAGE>

ITEM 1 - BUSINESS

GENERAL

         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 has 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 previously existing Mossimo
licensing arrangements. The Target licensed product line includes men's,
women's, boy's and girl's apparel and footwear, cosmetics and other fashion
accessories such as jewelry, watches, handbags, belts, neckwear and gloves.

         Under the Target Agreement, the Company and Mossimo Giannulli, its
Chief Executive Officer and principal designer, contribute design services and
the Company has approval rights for product design and marketing and advertising
materials. Target collaborates on design and is responsible for product
development, sourcing, quality control and inventory management with respect to
the Target licensed product line. Target is obligated to pay the Company a
royalty based upon a percentage of its net sales of Mossimo brand products, with
minimum guaranteed royalties of approximately $8.5 million, $9.6 million and
$9.6 million in the contract years ended January 31, 2002, 2003 and 2004,
respectively. Target pays royalties due on net sales achieved based on
percentages defined in the Target Agreement. The Company is obligated to pay 15%
of all royalties received from Target to a third party who assisted the Company
in connection with entering into the Target Agreement. The Target Agreement is
subject to early termination under certain circumstances. If Target is current
in its payments of its obligations under the Target Agreement, Target has the
right to renew the Target Agreement, on the same terms and conditions, for
additional terms of two years each.

         As a result of entering into the Target Agreement, substantially all of
the Company's revenues are now derived from royalties due from Target. Royalties
due from Target represented approximately 92% and 24% of royalty revenues during
the years ended December 31, 2001 and 2000, respectively.

         In addition to the Target Agreement, the Company also licenses its
trademarks to third party licensees for use in collections of eyewear and
women's swimwear and bodywear sold in Target stores in the United States.
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. In connection with the
Target Agreement, the Company restructured its operations. Currently, the
Company operates as a licensor and contributes design services to Target, but it
does not manufacture, source or directly market its products.

         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.

<PAGE>

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, the Company's founder and principal designer, 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 in
the United States collections of men's, women's, boy's and girl's apparel and
footwear, cosmetics eyewear, women's swimwear and bodywear and other fashion
accessories such as jewelry, watches, handbags, belts, neckwear and gloves
bearing its trademarks and 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 Optics line in 1998 and entered into a license agreement for
the production and distribution of eyewear in 1999. As a result of the Target
Agreement, the Company discontinued sourcing, production and sales activities,
and its ongoing operations have been limited to design and other activities
specified in its license agreements. The following table sets forth the
components of the Company's net sales of apparel and related products, by
product, for the periods indicated. There were no such sales in 2001 as all of
the Company's revenues were generated as a result of the Target Agreement and
licenses with the Company's other licensees.
<TABLE>
<CAPTION>
                                                         YEARS ENDED DECEMBER 31,
                                                         ------------------------
                                                         2000                  1999
                                                         ----                  ----
                                                   NET SALES      %      NET SALES     %
                                                   ---------     ---     ---------    ---
                                                           (NET SALES IN THOUSANDS)
<S>                                                <C>           <C>     <C>          <C>
Men's and Women's Apparel......................    $ 23,353      96.7%   $ 45,101     95.2%
Optics Line....................................           -       0.0         546      1.1
Other (1)......................................         797       3.3       1,746      3.7
                                                   --------   --------   --------   --------
Total..........................................    $ 24,150     100.0%   $ 47,393    100.0%
                                                   ========   ========   ========   ========
</TABLE>

(1)      Other is comprised primarily of: sales by the Company's retail stores;
         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 under which
it licensed to Target the right to produce and distribute its men's and women's
apparel lines in the United States. The initial Target licensed product lines
were launched in Target's stores in the Fall of 2000 and, in addition to men's
and women's apparel, include boy's and girl's apparel and footwear, cosmetics
and other fashion accessories such as jewelry, watches, handbags, belts,
neckwear and gloves.
<PAGE>

         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, including sunglasses, sport
glasses and optical frames. This agreement was amended in December 2000 to
permit Target to sell Mossimo branded eyewear in Target stores. Marcolin
continues to sell Mossimo branded eyewear through specialty retail stores such
as opticians, optical chains and specialty eyeglass and sunglass stores.

         WOMEN'S SWIMWEAR AND BODYWEAR. The Mossimo line of women's swimwear and
bodywear is manufactured and distributed through Target stores 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. The license agreement has been extended to
September 30, 2002 pursuant to a letter agreement between the parties.

         MEN'S HOSIERY. From the fourth quarter of 1998 through June 2000, the
Mossimo line of men's hosiery was manufactured and distributed through an
exclusive license agreement with Mountain High Hosiery, Ltd. This license
agreement was terminated in June 2000.

         MEN'S TAILORED SUITS AND DRESS SHIRTS. From Fall 1998 through Spring
1999, the Mossimo line of men's tailored suits and dress shirts was manufactured
and distributed through an exclusive license agreement with GFT Apparel
Corporation. This license agreement was terminated in August 2000.

         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.

         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. (See footnote 1 to the
consolidated financial statements)

SOURCING AND MANUFACTURING

         Under the Target Agreement, substantially all Mossimo products sold in
the United States, other than those covered under Mossimo licensing arrangements
existing at the time of the Target Agreement, are manufactured and distributed
exclusively by Target. The Target licensed product line includes men's, women's,
boy's and girl's apparel and footwear, cosmetics and other fashion accessories
such as jewelry, watches, handbags, belts, neckwear and gloves.

         The Target Agreement provides that Target is 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.

         Prior to entering into the Target Agreement, the Company sourced 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. Under the Target Agreement, Target is
responsible for sourcing the Target licensed product line, and the Company has
eliminated its sourcing operations.

         Prior to entering the Target Agreement, Mossimo contracted for the
manufacture and sewing of its products, other than its licensed product lines,
with factories in North America and overseas. The Company arranged for
production of its products primarily based on projected sales and orders
received. Under the Target Agreement, Target is responsible for the manufacture
of the Target licensed product line, and the Company has eliminated its
production operations.
<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 has approval rights for marketing and advertising materials.

         In connection with the Target Agreement, the Company essentially
eliminated its print and outdoor advertising efforts and closed its signature
retail store and showrooms prior to the launch by Target of the initial line in
Fall 2000. Prior to entering into the Target Agreement, the Company utilized
print advertisements in magazines, bus posters, and its in-store shops and
signature retail store to promote its image and products.

         Effective January 1, 2000, the Company entered into an exclusive,
multi-year endorsement agreement with a PGA professional, to further enhance
worldwide brand recognition. Under the terms of this agreement, Mossimo had the
right to outfit the PGA professional exclusively during his global golf
activities. As a result of entering into the Target Agreement, the Company
terminated its agreement with the PGA professional effective November 1, 2000.

DISTRIBUTION

         Under the Target Agreement, substantially all Mossimo products sold in
the United States, other than those covered under Mossimo licensing arrangements
existing at the time of the Target Agreement, will be distributed exclusively
through Target stores. The Target licensed product line includes men's, women's,
boy's and girl's apparel and footwear, cosmetics and other fashion accessories
such as jewelry, watches, handbags, belts, neckwear and gloves. The Target
licensed product line was launched in Target's stores in the Fall of 2000.

         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.

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 Mossimo licensing arrangements existing at the time of the Target
Agreement. This agreement expires in January 2004, and is subject to renewal by
Target for additional terms of two years each if Target is current with its
payments of the minimum guaranteed royalty amount. The Target Agreement is
subject to early termination under certain circumstances, including a material
failure by Mossimo Giannulli to perform specified design services or 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 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 through specialty retail stores such as
opticians, optical chains and specialty eyeglass and sunglass stores pursuant to
a license agreement with the Marcolin Group. This agreement expires in December
2003, and is subject to renewal upon negotiation.
<PAGE>

         The Company has licensed the exclusive right to manufacture and
distribute women's swimwear and bodywear bearing its trademarks through Target
stores in the United States pursuant to a license agreement with The Lunada Bay
Corporation. The license agreement has been extended to September 30, 2002
pursuant to a letter agreement between the parties.

         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. In 2002, a license agreement was
canceled by Mossimo due to breach of the license agreement by the licensee as a
result of the non-payment of the guaranteed minimum royalties due under the
agreement. The remaining four license agreements (exclusive of renewal terms)
expire at various dates ranging from 2004 through 2011.

         Under all license agreements, Mossimo retains approval rights with
respect to the design of products and advertising. Royalty payments under the
Target agreement are due on a quarterly basis and range from 1% to 4% depending
on the net sales achieved in a contract year. Under all other license agreements
royalty payments are due on a quarterly basis and range from approximately 2% to
7% of the licensee's net sales.

TRADEMARKS

         The Company utilizes a variety of trademarks, including the script
Mossimo trademark. Currently, the Company has 17 registrations and 8 pending
applications for its trademarks in the United States, and approximately 370
trademark registrations and applications in over 70 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

         Competition in the contemporary apparel and related fashion accessories
industry is extensive. Mossimo brand products are subject to competition from
designer and non-designer lines sold in a wide variety of retail stores,
including Target stores, many of 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. 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 expects that its products will continue to face significant
competition in the future , in particular as other companies owning established
trademarks could also enter into licensing arrangements with retailers, similar
to the arrangement the Company has with Target.

PERSONNEL

         As a result of entering into the Target Agreement, the Company
implemented a significant number of layoffs in 2000. At December 31, 2001, the
Company had approximately 8 full-time employees. None of the Company's employees
are covered by collective bargaining agreements. The Company considers its
relations with its employees to be satisfactory.

         On March 20, 2002 Edwin Lewis was appointed Vice Chairman and President
of the Company.

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.
<PAGE>

DEPENDENCE ON CERTAIN LICENSEES

         The Company's revenues under the Target Agreement commenced in November
2000 and represented 92% of the Company's total revenues in 2001. The Company
expects that its revenues under the Target Agreement will continue to represent
a significant portion of the Company's total revenues during the remaining term
of the Target Agreement, which expires in January 2004, unless extended. Because
the amount of the Company's revenues under the Target Agreement is dependent, in
part, on the sales of Mossimo brand products in Target stores, the Company's
revenue potential is impacted by the number of Target stores and the patronage
at these stores. Termination or non-extension of the Target Agreement, or a
material adverse change in the business of Target stores, could have a material
adverse effect on the Company's financial condition and results of operations.

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 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.

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. There can be no assurance that the Company's 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 consumers' 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 Chief Executive Officer and
principal designer. The Target Agreement is subject to early termination under
certain circumstances, including a material failure by Mossimo Giannulli to
perform specified design services or 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 to materially affect the Company's
ability to perform its obligations under the Target Agreement. On May 17, 2001,
the Company entered into an employment agreement with Mr. Giannulli. The
employment agreement is effective as of February 1, 2001 and will continue in
effect through January 31, 2004, unless earlier terminated.

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.

<PAGE>

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.

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.

CERTAIN FEDERAL TAX CONSEQUENCES

         In addition to the Company's taxable income being subject to federal,
state and local income taxes, the Company is classified as a "personal holding
company" in 2001. Personal holding company status results from more than 50% of
the value of outstanding stock being owned directly or indirectly by five or
fewer individuals, and more than 60% of the Company's income being derived from
royalties. Personal holding companies are subject to an additional federal tax
at the highest personal income tax rate (39.1% for 2001) on undistributed after
tax earnings. A personal holding company is able to use its net operating loss,
if any, for the immediately preceding year to offset its income subject to the
personal holding company tax. Consequently the Company had no liability for
personal holding company tax in 2001 as a result of its net operating loss for
2000 being in excess of its undistributed after tax earnings in 2001.

         The Company intends to take appropriate measures to avoid being
classified as a personal holding company in years after 2001. However, there can
be no assurance that the Company will be successful in its efforts to avoid
classification as a personal holding company in these years.

ITEM 2 - PROPERTIES

         The Company's current corporate headquarters are located in Santa
Monica, California and consist of a leased building totaling approximately 3,000
square feet of space.

ITEM 3 - LEGAL PROCEEDINGS

         In February 2001, the Company filed actions in the Superior Court of
the State of California for the County of Los Angeles against Macy's West, Inc.,
Bloomingdale's, Inc., and Federated Department Stores, three former customers of
the Company. As to Macy's West, Inc., the complaint seeks damages of
approximately $857,000 for merchandise sold and delivered and $1,000,000 for
breach of contract related to cancelled orders. As to Bloomingdale's, Inc., the
complaint seeks damages of approximately $62,000 for merchandise sold and
delivered and $75,000 related to cancelled orders. As to Federated Department
Stores, the complaint sought damages for interference with contract of
approximately $3,000,000. In September 2001, the parties entered into an
agreement in principle for the settlement of the litigation and after the
settlement documents were executed in the fourth quarter of 2001 that litigation
was dismissed.

         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.
<PAGE>

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 2001.


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

COMMON STOCK

         As of March 21, 2002 there were 15,344,042 shares of our common stock
outstanding held of record by approximately 196 stockholders.

MARKET FOR SECURITIES

         The Company's common stock, par value $.001 per share (common stock),
began trading February 23, 1996 on the New York Stock Exchange ("NYSE") upon
completion of the Company's initial public offering (trading symbol "MGX"). On
May 25, 2000, trading of the Company's common stock was suspended by the NYSE
and the Company's common stock was subsequently delisted. On May 26, 2000 the
Company's common stock commenced trading on the National Association of
Securities Dealers Over-the-Counter Bulletin Board under the symbol MGXO.OB. On
March 21, 2002, the closing bid price of our common stock was $7.95 per share.
The high and low trades of our common stock reported by the Over-the-Counter
Bulletin Board during each quarter ended in 2000 and 2001 were as follows
(trading from January 1, 2000 to May 25, 2000 was reported by the NYSE):



                                                                    2000
                                                                    ----
                                                               HIGH       LOW
                                                               ----       ---

First Quarter..............................................  $   9.50  $   2.69
Second Quarter.............................................  $   3.00  $   0.25
Third Quarter..............................................  $   2.75  $   0.76
Fourth Quarter.............................................  $   3.12  $   1.03

                                                                    2001
                                                                    ----
                                                               HIGH       LOW
                                                               ----       ---

First Quarter..............................................  $   4.56  $   2.00
Second Quarter.............................................  $   4.16  $   2.10
Third Quarter..............................................  $   3.80  $   1.50
Fourth Quarter.............................................  $   3.60  $   1.75


         The high and low trades of our common stock reported by the
Over-the-Counter Bulletin Board reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not necessarily represent actual
transactions.

DIVIDENDS

         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.



<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.
<TABLE>
<CAPTION>

                                                                 YEARS ENDED DECEMBER 31,
                                                                 ------------------------
                                                  2001        2000        1999        1998        1997
                                                ---------   ---------   ---------   ---------   ---------
                                                         (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                             <C>         <C>         <C>         <C>         <C>
INCOME STATEMENT DATA:
Net sales of apparel and related products ...   $     --    $ 24,150    $ 47,393    $ 45,310    $ 70,936
Royalties ...................................     16,666       3,475       3,686       3,214       3,798
                                                ---------   ---------   ---------   ---------   ---------
     Total revenues .........................     16,666      27,625      51,079      48,524      74,734

Cost of sales of apparel and related products         --      20,730      37,069      35,994      63,963
                                                ---------   ---------   ---------   ---------   ---------

                                                  16,666       6,895      14,010      12,530      10,771
Operating expenses ..........................     10,455      19,017      26,101      25,469      32,802
                                                ---------   ---------   ---------   ---------   ---------


Operating income (loss) .....................      6,211     (12,122)    (12,091)    (12,939)    (22,031)
Other income (expense), net .................        536         760          (3)       (140)       (362)
Interest expense, net .......................       (864)       (923)       (834)       (612)       (278)
                                                ---------   ---------   ---------   ---------   ---------

Income (loss) before income taxes ...........      5,883     (12,285)    (12,928)    (13,691)    (22,671)
Provision (benefit) for income taxes ........     (3,153)          3          13         107      (3,935)
                                                ---------   ---------   ---------   ---------   ---------

Net income (loss) ...........................   $  9,036    $(12,288)   $(12,941)   $(13,798)   $(18,736)
                                                =========   =========   =========   =========   =========

Net income (loss) per share:
     Basic and diluted ......................   $   0.59    $  (0.81)   $  (0.86)   $  (0.92)   $  (1.25)
                                                =========   =========   =========   =========   =========
</TABLE>

<TABLE>
<CAPTION>

                                                         DECEMBER 31,
                                   --------------------------------------------------------
                                      2001       2000        1999        1998       1997
                                   ---------   ---------   ---------   ---------  ---------
                                                        (IN THOUSANDS)
<S>                                <C>         <C>         <C>         <C>        <C>
BALANCE SHEET DATA:
Working capital (deficit) ......   $ (1,342)   $ (5,423)   $   (680)   $  4,532   $ 13,419
Total assets ...................   $  9,294    $  1,964    $ 10,736    $ 17,359   $ 36,824
Long-term debt .................   $     --    $     --    $      3    $     10   $     31
Other long-term liabilities ....   $  1,596    $  5,676    $     --    $     --   $     --
Stockholders' (deficit) equity..   $   (678)   $(10,458)   $  2,396    $  8,639   $ 22,395


</TABLE>


<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.

RESTRUCTURING

         On March 28, 2000, the Company entered into the Target Agreement under
which Target has the exclusive right to use certain of the Company's United
States trademarks in connection with the design, manufacture and sale of
selected products in the United States. Under this agreement, Target is
obligated to pay the Company a royalty based upon a percentage of its net sales
of Mossimo brand products, with minimum guaranteed royalties of approximately
$8.5 million, $9.6 million and $9.6 million in the contract years ended January
31, 2002, 2003 and 2004, respectively. Target was obligated to pay royalties due
on net sales achieved in the period prior to February 1, 2001 based on
percentages defined in the Target Agreement. The Company is obligated to pay 15%
of all royalties received from Target to a third party who assisted the Company
in connection with entering into the Target Agreement. The Target Agreement is
subject to early termination under certain circumstances. If Target is current
in its payments of its obligations under the Target Agreement, Target has the
right to renew the Target Agreement, on the same terms and conditions, for
additional terms of two years each.

         As a result of entering into the Target Agreement, a restructuring of
the Company's business was initiated during the first quarter of 2000.
Management implemented several changes to the Company's operations during the
period from March 28, 2000 to the end of 2000 (the "Restructuring Period"). The
most significant changes included a work force reduction of approximately 90% of
all employees, closure of the Company's showrooms, 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. The Company now operates as a licensor of its trademarks and
contributes design services, principally to Target, and no longer manufactures,
sources or directly markets its own products.


RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

         Total revenues in the year ended December 31, 2001 were $16.7 million
compared to $27.6 million in the year ended December 31, 2000.

         As a result of entering into the Target Agreement, the Company made no
sales of apparel and related products in 2001. Net sales of apparel and related
products in 2000 were $24.1 million.

         Royalty revenues due under the Target Agreement are recognized as
Target achieves sales of the Company's products. Royalty payments are due on a
quarterly basis and range from 1% to 4% of net sales. The Target Agreement is
structured to provide royalty rate reductions for Target after it achieves
certain levels of retail sales of Mossimo branded products during each contract
year (i.e. each twelve month period beginning February 1). As a result, the
Company's royalty revenues from Target as a percentage of Target's retail sales
of Mossimo branded products will be highest at the beginning of each contract
year and decrease throughout each contract year as Target reaches certain retail
sales thresholds contained in the Target Agreement. Therefore, the amount of
royalty revenue received by the Company in any quarter from Target is dependent
not only on retail sales of branded products in such quarter, but also on the
cumulative level of retail sales for the contract year, and the resulting
attainment of royalty rate reductions in any preceding quarters in the same
contract year.

         Royalty revenues from the Company's other licensees are recognized as
those licensees achieve sales of the Company's products. Royalty payments are
due on a quarterly basis and range from 2% to 7% of net sales.
<PAGE>

         Royalty revenues increased to $16.7 million in 2001 from $3.5 million
in 2000. Royalty revenues due under the Target Agreement amounted to $15.3
million in 2001 compared to $835,000 in 2000 following the initial launch of the
Target licensed product line in the Fall of 2000. Royalty revenues from
licensees other than Target decreased to $1.4 million in 2001 from $2.7 million
in 2000. The decrease was primarily due to decreased royalty income from a
licensee who manufactures and distributes the Mossimo line of women's swimwear
and bodywear. As a result of entering into the Target Agreement, the license
agreement in respect of the Mossimo line of women's swimwear and bodywear was
amended and royalty payments decreased from 6% to 2% of net sales of women's
swimwear and bodywear. The Company received $536,000 from this licensee in 2001
compared to $1.3 million in 2000. Additionally, the Company received $150,000
and $213,000 in 2000 from two licensees whose license agreements were terminated
in 2000.

         Total operating expenses decreased to $10.5 million in 2001 from $19.0
million in 2000.

         Selling, general and administrative expenses decreased to $10.5 million
in 2001 from $16.7 million in 2000. The Company's aggregate payroll costs
increased to $6.1 million in 2001 from $3.4 million in 2000. The increase was
primarily due to a bonus to the Company's Chief Executive Officer and principal
designer of $3.3 million incurred in 2001. The Company's Chief Executive Officer
and principal designer receives a bonus, under the terms of an employment
agreement, equal to 50% of the Company's royalties due under the Target
Agreement, after deduction of 15% in respect of the Company's obligations to a
third party who assisted the Company with entering into the Target Agreement, in
excess of the minimum guaranteed royalties due under the Target Agreement. The
bonus accrues throughout the year as the Company's cumulative royalties from
Target are in excess of the cumulative minimum guaranteed royalties due under
the Target Agreement. All bonus obligations due to the Company's Chief Executive
Officer and principal designer as of December 31, 2001 had been paid as of that
date. The increase was also due to bonuses to other employees of $613,000
incurred in 2001. The Company's other employees receive a bonus based on the
level of Target's retail sales of Mossimo branded products during each contract
year. The bonus ranges from 10% to 100% of each employees base salary and the
bonus accrues throughout the year. No bonuses to the Company's Chief Executive
Officer and principal designer or other employees were incurred in 2000. These
increases were partially offset by a decrease in base payroll costs from $3.4
million in 2000 to $2.2 million in 2001 as a result of the significant reduction
in headcount due to the Company's restructuring initiated in the first quarter
of 2000 described above.

         Selling expenses increased to $2.3 million in 2001 from $187,000 in
2000 as a result of obligations due to a third party who assisted the Company in
connection with entering the Target Agreement and who receives 15% of all
royalties received by the Company from Target. The Company's obligations to this
third party were $2.3 million in 2001 compared to $125,000 in 2000.

         As a result of the Company's restructuring described above, the
Company's merchandising, travel, building and office expenses decreased to
$549,000 in 2001 from $2.5 million in 2000.

         The Company incurred no marketing expenses in 2001 compared to $4.0
million in 2000. The decrease was as a result of the elimination of $1.4 of
direct marketing expenses incurred in 2000 following entering into the Target
Agreement, and the elimination of $2.6 million of endorsement expenses incurred
in 2000 in connection with the initiation and termination of the endorsement
agreement with a PGA professional. The Company now relies on its licensees to
advertise the Mossimo brand.

         Additionally, general and administrative expenses decreased to $1.3
million in 2001 from $6.5 million in 2000 primarily as a result of a charge
incurred in 2000 in respect of doubtful accounts receivable of $3.2 million, the
elimination of commission expense of $208,000 incurred in respect of the
factoring of certain of the Company's receivables in 2000, a decrease in legal
and professional fees to $444,000 in 2001 from $1.6 million in 2000, and a
decrease in depreciation to $199,000 in 2001 from $503,000 in 2000 as a result
of the Company's restructuring described above.
<PAGE>

         During 2000, the Company recorded a restructuring charge of
approximately $3.5 million as a result of the changes to the Company's business
described above. This charge included (i) a write-down of property and equipment
of approximately $2.3 million; (ii) an accrual for lease obligations of
approximately $592,000; (iii) severance expense of approximately $531,000; (iv)
$93,000 of legal and professional services expenses; (v) a write-off of security
deposits of $61,000 and (vi) a gain on disposal of property and equipment
previously written down of $154,000. The restructuring was completed in 2000 and
no restructuring charges were incurred in 2001.

         In the second quarter of 2000, due to cash shortages and the
anticipated changes resulting from entering into the Target Agreement the
Company developed a creditor plan (the "Creditor Plan") to give certain of its
unsecured vendor creditors two repayment options: (i) a single cash payment of
50 cents on the dollar for the first $10,000 and 35 cents on the dollar for
amounts in excess of $10,000 or (ii) a 10 percent cash payment with the balance
to be paid in 36 equal monthly installments beginning June 15, 2001. The Company
completed its implementation of the Creditor Plan during 2000 and recorded
vendor discounts of $917,000, offset by related professional fees of $510,000,
during 2000.

         In 2000, the Company's Chief Executive Officer and principal
stockholder was personally assigned a refund by the Company in respect of the
excess insurance coverage previously purchased by him for the benefit of the
Company in 1999. Accordingly, one-time, non-cash earnings of $713,000 are
included as a reduction of operating expenses in 2000 with an offsetting debit
to stockholders' (deficit) equity. The one-time, non-cash earnings do not impact
the Company's cash flows or total stockholders' (deficit) equity position.

         In 2001, the Company recorded other income of $536,000 primarily as a
result of the collection of disputed receivables. During 2000, the Company
recorded other income of $760,000 primarily as a result of additional royalties
of $750,000 received in connection with the early termination of the Company's
men's tailored suits and dress shirts license.

         The Company had net interest expense of $864,000 in 2001 compared to
net interest expense of $923,000 in 2000. The decrease was primarily due to a
decrease in interest and facility fees due under the Company's credit facility
agreement to $696,000 in 2001 from $909,000 in 2000 as a result of lower
interest rates and lower average borrowings in 2001, and an increase in interest
income to $74,000 in 2001 from $27,000 in 2000. These amounts were partially
offset by interest of $72,000 incurred in 2001 in respect of interest on the
outstanding amount due under the Company's endorsement agreement with a PGA
professional, which was terminated effective November 1, 2000, $74,000 incurred
in 2001 in respect of interest due on certain tax obligations, and by $96,000
incurred in 2001, compared to $40,000 in 2000, in respect of amortization of
deferred financing costs, associated with continuing the line of credit
following entering into the Target Agreement.

         The Company accounts for income taxes under the provisions of Statement
of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes".
Deferred taxes result from temporary differences between the reporting of income
and losses for financial and tax reporting purposes and are provided for using
the liability method as prescribed by SFAS No. 109. Consequently, the Company
recorded a net tax benefit in 2001 of $3.2 million. The Company recorded a
deferred tax benefit at December 31, 2001 of $3.6 million following the
reevaluation of its forecasted operating results and resultant taxable income
during the remaining term of the Target Agreement, assuming the Company achieved
the annual guaranteed minimum royalties due under the Target Agreement, and the
consequent utilization of available net operating losses during the remaining
term of the Target Agreement. At December 31, 2000, the Company had recorded a
full valuation allowance on the Company's deferred tax assets due to the
uncertainty regarding their realization at that time following the Company
entering into the Target Agreement on March 28, 2000, and the first royalty
revenues being achieved thereunder in the fourth quarter of 2000. The deferred
tax benefit was partially offset by Alternative Minimum Tax in respect of 2001
and other tax obligations due by the Company for years prior to 2001, but not
previously recognized, of $200,000 and $241,000, respectively.
<PAGE>

         The Company is classified as a "personal holding company" in 2001.
Personal holding company status results from more than 50% of the value of
outstanding stock being owned directly or indirectly by five or fewer
individuals, and more than 60% of the Company's income being derived from
royalties. Personal holding companies are subject to an additional federal tax
at the highest personal income tax rate (39.1% for 2001) on undistributed after
tax earnings. A personal holding company is able to use its net operating loss,
if any, for the immediately preceding year to offset its income subject to the
personal holding company tax. Consequently the Company had no liability for
personal holding company tax in 2001 as a result of its net operating loss for
2000 being in excess of its undistributed after tax earnings in 2001. The
Company intends to take appropriate measures to avoid being classified as a
personal holding company in years after 2001.

         The Company recorded no tax benefit as a result of its pre-tax loss in
the year ended December 31, 2000. Losses for the year ended December 31, 2000
were not benefited due to carryback limitations and uncertainty regarding
realization of the related deferred tax assets as described above.

         The Company's net income for the year ended December 31, 2001 was $9.0
million compared to a net loss of $12.3 million for the year ended December 31,
2000 due to the factors discussed above.

YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999

         Net sales of apparel and related products decreased to $24.2 million
during 2000 from $47.4 million in 1999. Net sales of the men's and women's
lines, which represented 97% of the Company's net sales of apparel and related
products for 2000, decreased to $23.4 million in 2000 from $45.1 million in
1999. The decrease in net sales of apparel and related products was primarily
due to the termination of all sourcing, production and sales operations during
the second quarter of 2000 as a result of the Company entering into the Target
Agreement, partially offset by additional business with new customers as a
result of the Company's broader product lines and focused sales efforts during
the first quarter of 2000.

         Gross profit on apparel and related products decreased to $3.4 million
during 2000 from $10.3 million in 1999. Gross profit as a percentage of net
sales of apparel and related products decreased to 14% during 2000 from 22% in
1999. The decrease was primarily due to the termination of all sourcing,
production and sales operations during the second quarter of 2000 as a result of
the Company entering into the Target Agreement, partially offset by better
inventory management and increased men's and women's regular-priced sales during
the first quarter of 2000. This termination of certain operations substantially
eliminated regular-priced sales of the Company's men's and women's lines during
the final three quarters of 2000.

         Royalty revenues decreased to $3.5 million in 2000 from $3.7 million in
1999. The decrease was primarily due to reduced royalties from some of the
Company's foreign licensees and was partially offset by royalties due under the
Target Agreement of $835,000 following the initial launch of the Target licensed
product line in the Fall of 2000.

         Total operating expenses for 2000 decreased to $19.0 million from 26.1
million in 1999.

         Selling, general and administrative expenses decreased to $16.7 million
in 2000 from $20.0 million in 1999. Expenses related to payroll, selling,
design, merchandising, travel, building and office expenses decreased by
approximately $5.4 million from 1999 as a result of the changes to the Company's
operations implemented during the Restructuring Period. Marketing expenses
decreased to $4.0 million in 2000 from $4.7 million in 1999. Direct marketing
expenses decreased to $1.4 million in 2000 from $4.7 million in 1999 as a result
of the changes to the Company's operations implemented during the Restructuring
Period. This decrease was partially offset by endorsement expenses in connection
with the initiation and termination of the endorsement agreement with a PGA
professional of $2.6 million in 2000. General and administrative expenses
increased to $6.5 million in 2000 from $3.9 million in 1999 primarily as a
result of an increase in the provision for doubtful accounts receivable as a
result of the Company entering into the Target Agreement.
<PAGE>

         During 2000, the Company recorded a restructuring charge of $3.5
million as a result of the changes resulting from the restructuring described
above. This charge included (i) a write-down of property and equipment of
approximately $2.3 million; (ii)an accrual for lease obligations of
approximately $592,000; (iii) severance expense of approximately $531,000; (iv)
$93,000 of legal and professional services expenses; (v) a write-off of security
deposits of $61,000 and (vi) a gain on disposal of property and equipment
previously written down of $154,000.

         In the second quarter of 2000, due to cash shortages and the
anticipated changes resulting from entering into the Target Agreement, the
Company developed a creditor plan to give certain of its unsecured vendor
creditors two repayment options: (i) a single cash payment of 50 cents on the
dollar for the first $10,000 and 35 cents on the dollar for amounts in excess of
$10,000 or (ii) a 10 percent cash payment with the balance to be paid in 36
equal monthly installments beginning June 15, 2001. In connection with the
creditor plan the Company recorded vendor discounts of $917,000, offset by
related professional fees of $510,000, during 2000.

         During 1999, the Company's Chief Executive Officer and principal
stockholder personally purchased excess insurance coverage for the benefit of
the Company. Accordingly, a one-time, non-cash charge of $6.1 million is
included in operating expenses for 1999 with an offsetting credit to
stockholders' (deficit) equity. In 2000, the Company's Chief Executive Officer
and principal stockholder was personally assigned a refund by the Company in
respect of the excess insurance coverage purchased by him in 1999. Accordingly,
one-time, non-cash earnings of $713,000 are included as a reduction of operating
expenses in 2000 with an offsetting debit to stockholders' (deficit) equity.
Neither the earnings nor the charge impact the Company's cash flows or total
stockholders' (deficit) equity position.

         During 2000, the Company recorded other income of $760,000, which is,
primarily, comprised of additional royalties of $750,000 received in connection
with the early termination of the Company's men's tailored suits and dress
shirts license.

         The Company had net interest expense of $923,000 in 2000 compared to
net interest expense of $834,000 in 1999. The increase is due to increased
interest expense on increased borrowings under the Company's line of credit in
2000 as compared to 1999, and amortization of capitalized deferred financing
costs associated with continuing the line of credit following entering into the
Target Agreement.

         The Company recorded no tax benefit in 2000 and 1999 as a result of its
pretax losses. Losses for 2000 and 1999 were not benefited due to carryback
limitations and uncertainty regarding realization of the related deferred tax
asset. The uncertainty regarding realization of the related deferred tax asset
at December 31, 2000 was primarily as a result of revenues due under the Target
Agreement only commencing in the fall of 2000 following entering into the Target
Agreement on March 28, 2000. The uncertainty regarding realization of the
related deferred tax asset at December 31, 1999 was primarily as a result of the
Company experiencing a significant decline in revenues, resulting in operating
losses, negative cash flow and a working capital deficit since the year ended
December 31, 1996, culminating in the Company entering into the Target Agreement
and initiating a restructuring of its operations in the first quarter of 2000.

LIQUIDITY AND CAPITAL RESOURCES

         Net cash provided by operating activities totaled $4.7 million for
2001. Cash provided by operating activities was comprised primarily of the
Company's net income of $9.0 million and increases in accrued bonus of $613,000
and in accrued liabilities of $370,000, offset by an increase in accounts
receivable of $749,000, a decrease in accounts and long term payables of
$421,000, an increase in deferred tax assets of $3.6 million and a decrease in
deferred compensation of $564,000. At December 31, 2001, working capital deficit
was approximately $1.3 million as compared to a deficit of $5.4 million at
December 31, 2000. The decrease in working capital deficit is primarily due to a
$3.1 million increase in the Company's cash balances, a $749,000 increase in
accounts receivable, a $1.8 million increase in current deferred tax assets, and
a decrease in deferred compensation of $564,000, partially offset by an increase
in accrued bonus of $613,000, an increase in accrued liabilities of $370,000, an
increase in accounts payable of $488,000 and by a $1.0 million increase in the
current portion of the Company's line of credit during 2001.
<PAGE>

         Net cash used in investing activities was $104,000 in 2001and comprised
payments for the acquisition of property and equipment.

         Net cash used in financing activities was $1.4 million in 2001. Cash
used in financing activities was primarily comprised of net repayments of $2.2
million under the Company's line of credit, partially offset by $744,000 of
additional paid-in capital received as a result of the exercise of certain stock
options in 2001.

         In July 2000, the Company entered into an amended credit facility
providing for a $9.0 million revolving credit line, which is collateralized by
substantially all of the Company's assets. The revolving credit line was also
secured by a $5.0 million personal guaranty given by the Company's Chairman of
the Board and Chief Executive Officer. Advances under the credit facility bear
interest at the prime rate plus 1.5%. Under the credit facility agreement, the
revolving credit line is reduced at the rate of $1.0 million per quarter
beginning on June 1, 2001, and by any amounts received by the Company related to
the settlement of certain legal matters, and terminates on June 1, 2003. The
personal guaranty given by the Company's Chairman of the Board and Chief
Executive Officer is reduced at the rate of $500,000 per quarter beginning on
June 1, 2001.

         At December 31, 2001, the Company's credit facility provided for a $5.5
million revolving credit line collateralized by substantially all of the
Company's assets and secured by a $3.5 million personal guaranty given by the
Company's Chairman of the Board and Chief Executive Officer. The revolving
credit line shall be further reduced at the rate of $1.0 million per quarter
beginning on March 1, 2002. The personal guaranty given by the Company's
Chairman of the Board and Chief Executive Officer shall be further reduced at
the rate of $500,000 per quarter beginning on March 1, 2002. At December 31,
2001 approximately $4.8 million was outstanding under the line of credit.

         In 2000, due to cash shortages and the anticipated changes resulting
from entering into the Target Agreement the Company developed a creditor plan to
give certain of its unsecured vendor creditors two repayment options: (i) a
single cash payment of 50 cents on the dollar for the first $10,000 and 35 cents
on the dollar for amounts in excess of $10,000 or (ii) a 10 percent cash payment
with the balance to be paid in 36 equal monthly installments beginning June 15,
2001. At December 31, 2001 approximately $1.3 million was outstanding to
unsecured vendor creditors of which approximately $558,000 is due to be repaid
in the year ended December 31, 2002.

         Effective November 1, 2000 the Company terminated its endorsement
agreement with a PGA professional. The termination obligated the Company to pay
to the PGA professional $1,760,993, payable by an initial payment of $325,000
followed by equal monthly installments for principal and interest of $127,586
from April 2001 through March 2002. Interest commencing April 2001 at the rate
of 12% accrues on the outstanding amount due. At December 31, 2001, principal of
$359,000 was outstanding under the termination agreement and is due to be repaid
in the year ended December 31, 2002.

         Effective August 1, 2000, the Company entered into a lease agreement
for its principal office space in Santa Monica, California. Rent obligations
under the lease agreement are approximately $9,000 per month for an initial term
of three years.

         The Company expects that its principal source of liquidity during the
remaining term of the Target Agreement will be its net operating cash flows.
Although no assurances can be given, the Company anticipates that, in
conjunction with its available cash balances at December 31, 2001, its net
operating cash flows during the remaining term of the Target Agreement, which
primarily will be derived from revenues due under the Target Agreement, assuming
only the minimum guaranteed royalties due under the Target Agreement, will be
adequate to meet the Company's currently anticipated liquidity needs through the
remaining term of the Target Agreement, in particular its obligations due under
its line of credit agreement, its obligations to unsecured vendor creditors and
its obligations due under the terminated endorsement agreement with a PGA
professional.

         From time to time, we also consider a number of different financing
alternatives, including the issuance of equity securities, debt securities and
equity-linked securities, as sources of liquidity.
<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 operations.

EXCHANGE RATES

         The Company receives United States dollars for substantially all of its
product sales and its licensing revenues. During the last three fiscal years,
exchange rate fluctuations have not had a material impact on the Company's
operating results. The Company does not engage in hedging activities with
respect to such exchange rate risk.

IMPACT OF RECENT 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 delayed the effective
date of SFAS No. 133 to fiscal years beginning after June 15, 2000. In June 2000
the FASB issued SFAS No. 138 "Accounting for Certain Derivative Instruments and
Certain Hedging Activities - an amendment of FASB Statement No. 133". SFAS No.
138 is effective concurrent with the delayed effective date of SFAS No. 133.
SFAS No. 138 amended the accounting and reporting standards for certain
derivative instruments and certain hedging activities. The Company adopted SFAS
Nos. 133, 137 and 138 on January 1, 2001. The adoption did not have a material
impact on the Company as the Company did not hold any derivative instruments in
2001.

         In June 2001, the FASB issued SFAS No. 141, "Business Combinations",
SFAS No. 142, "Goodwill and Other Intangible Assets", and SFAS No. 143,
"Accounting for Asset Retirement Obligations". SFAS No. 141 addresses financial
accounting and reporting for business combinations and is effective for all
business combinations after June 30, 2001. SFAS No. 142 addresses financial
accounting and reporting for acquired goodwill and other intangible assets and
is effective for fiscal years beginning after December 15, 2001. SFAS No. 143
addresses financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs and is effective for fiscal years beginning after June 15, 2002.

         In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS No. 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived assets and
is effective for fiscal years beginning after December 15, 2001.

         The adoption of these standards is not expected to have a material
impact on the Company's financial position or results of operations.


ITEM 7A - 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. 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, 2002 would
result in an increase in interest expense for the following 12 months of
approximately $48,000.

         The Company does not use interest rate swaps, futures contracts or
options on futures, or other types of derivative financial instruments. The
Company does not believe that future market risks arising from holdings of its
financial instruments will have a material impact on its financial position or
results of operations.
<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 and longevity of its licensing program with Target and
other licensees, the Company's ability to meet its liquidity needs, 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 a termination or
adverse modification of the Company's license relationships, 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 2002 Annual Stockholders Meeting to be filed
with the Securities and Exchange Commission within 120 days after December 31,
2001 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 2002 Annual Stockholders Meeting to be filed
with the Securities and Exchange Commission within 120 days after December 31,
2001 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 2002 Annual Stockholders Meeting to be filed
with the Securities and Exchange Commission within 120 days after December 31,
2001 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 2002 Annual Stockholders Meeting to be filed
with the Securities and Exchange Commission within 120 days after December 31,
2001 and is incorporated herein by reference.

<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

FINANCIAL STATEMENTS
Consolidated Balance Sheets as of December 31, 2001 and 2000.......................................     F-3
Consolidated Statements of Operations for the Years Ended December 31, 2001, 2000, and 1999........     F-4
Consolidated Statements of Stockholders' (Deficit) Equity for the Years Ended December 31, 2001,
   2000 and 1999...................................................................................     F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2001, 2000 and 1999.........     F-6
Notes to Consolidated Financial Statements.........................................................     F-7


</TABLE>


<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.

EXHIBIT NO.                    DESCRIPTION
-----------                    -----------

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)
10.1*    Registrant's 1995 Stock Plan (1)
10.2*    Registrant's 1995 Directors Stock Option Plan (1)
10.3     Form of Indemnification Agreement between the Registrant and its
         directors and officers (1)
10.4     Registrant's Employee Stock Purchase Plan (2)
10.5     Financing Agreement, dated July 15, 1997, by and between the Registrant
         and The CIT Group/Commercial Services, Inc. (3)
10.5.1   Amendment to the Financing Agreement dated April 1, 1998 (4)
10.5.2   Amendment to the Financing Agreement dated March 22, 1999 (5)
10.5.3   Amendment to the Financing Agreement dated July 25, 2000 (8)
10.6     Registration Rights Agreement, dated as of November 30, 1998, by and
         among the Registrant, Edwin Lewis and Mossimo Giannulli (6)
10.7     Mossimo License Agreement, dated as of March 28, 2000, between Mossimo,
         Inc. and Target Stores, a division of Target Corporation (7)
10.8     Cherokee-Mossimo Finders Agreement dated March 27, 2000 between
         Mossimo, Inc. and Cherokee Inc. (7)
10.9     Lease, dated June 29, 2000, between the Registrant and
         Lexington-Broadway Place, LLC (9)
10.10    Term Payment Agreement, dated October 6, 2000, between the Registrant
         and David Duval Enterprises, Inc. (10)
10.11    Mossimo License Agreement, dated as of December, 2000, between Mossimo,
         Inc. and Confitalia, S.A. DE C.V. (10)
10.12    Sunglasses Agreement, dated as of December 1, 2000, between Mossimo,
         Inc., Marcolin S.P.A. and Target Stores (10)
10.13*   Employment Agreement, dated May 17, 2001, effective February 1, 2001,
         by and between the Registrant and Mossimo Giannulli (11)
23.1     Independent Public Accountants Consent - Arthur Andersen LLP
99       Letter regarding Arthur Andersen LLP Representation

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

(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 Registration Statement
         on Form S-8 (No. 33-89810), which became effective May 28, 1997.

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

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

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

(6)      Incorporated by reference from the Registrant's Annual Report on Form
         10-K for the year ended December 31, 1998.

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

(8)      Incorporated by reference from the Registrant's Quarterly Report on
         Form 10-Q for the Quarter ended June 30, 2000.

(9)      Incorporated by reference from the Registrant's Quarterly Report on
         Form 10-Q for the Quarter ended September 30, 2000.

(10)     Incorporated by reference from the Registrant's Annual Report on Form
         10-K for the year ended December 31, 2000.

(11)     Incorporated by reference from the Registrant's Current Report on Form
         8-K, dated May 17, 2001.

*        Indicates a management contract or compensatory plan or arrangement

         (b)      Reports on Form 8-K:

                  The Registrant did not file any reports on Form 8-K during the
                  three months ended December 31, 2001.


<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 25th day of
March 2002.

                                               MOSSIMO, INC.

                                               By: /s/ MOSSIMO GIANNULLI
                                                  ------------------------------
                                                       Mossimo Giannulli
                                                   CHAIRMAN OF THE BOARD AND
                                                    CHIEF EXECUTIVE OFFICER


         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 25th day of March 2002.




   /s/ MOSSIMO GIANNULLI       Chairman of the Board and Chief Executive Officer
---------------------------
       Mossimo Giannulli


   /s/ EDWIN LEWIS             Vice-Chairman and President
---------------------------
       Edwin Lewis


   /s/ GIA CASTROGIOVANNI      Chief Operating Officer, Treasurer and Secretary
---------------------------       (Principal Accounting Officer)
       Gia Castrogiovanni


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


   /s/ WILLIAM HALFORD         Director
---------------------------
       William Halford


   /s/ BRETT WHITE             Director
---------------------------
       Brett White



<PAGE>
<TABLE>


                                                MOSSIMO, INC. AND SUBSIDIARY
                                         INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<CAPTION>


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

FINANCIAL STATEMENTS:
Consolidated balance sheets as of December 31, 2001 and 2000.......................................................   F-3
Consolidated statements of operations for the years ended December 31, 2001, 2000 and 1999.........................   F-4
Consolidated statements of stockholders' (deficit) equity for the years ended December 31, 2001, 2000 and 1999.....   F-5
Consolidated statements of cash flows for the years ended December 31, 2001, 2000 and 1999.........................   F-6
Notes to consolidated financial statements.........................................................................   F-7

</TABLE>



<PAGE>


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To Stockholders of Mossimo, Inc.:

We have audited the accompanying consolidated balance sheets of Mossimo, Inc. (a
Delaware corporation) and subsidiary as of December 31, 2001 and 2000, and the
related consolidated statements of operations, stockholders' (deficit) equity
and cash flows for the three years in the period ended December 31, 2001. 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, 2001 and 2000, and the results of their operations and their
cash flows for the three years in the period ended December 31, 2001 in
conformity with accounting principles generally accepted in the United States.




/s/ ARTHUR ANDERSEN LLP

Orange County, California
February 27, 2002


                                       F-2
<PAGE>
<TABLE>

                                      MOSSIMO, INC. AND SUBSIDIARY
                                       CONSOLIDATED BALANCE SHEETS
                                    (IN THOUSANDS, EXCEPT SHARE DATA)
<CAPTION>

                                                                                       DECEMBER 31,
                                                                                    2001        2000
                                                                                  ---------   ---------
<S>                                                                               <C>         <C>
                                                 ASSETS
CURRENT ASSETS:
  Cash ........................................................................   $  3,182    $     50
  Accounts receivable, net of allowances of $6,436 and
      $7,590 - 2001 and 2000, respectively ....................................      1,958       1,209
  Prepaid expenses and other current assets ...................................        118          64
  Deferred taxes ..............................................................      1,776          --
                                                                                  ---------   ---------

    Total current assets ......................................................      7,034       1,323

PROPERTY AND EQUIPMENT, at cost, net of accumulated
  depreciation and amortization ...............................................        251         346

DEFERRED FINANCING COSTS, net .................................................        151         247

DEFERRED TAXES ................................................................      1,821          --

OTHER ASSETS ..................................................................         37          48
                                                                                  ---------   ---------
                                                                                  $  9,294    $  1,964
                                                                                  =========   =========

                                 LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
  Due to factor, net ..........................................................   $     12    $     31
  Line of credit ..............................................................      4,000       3,000
  Accounts payable ............................................................      2,755       2,267
  Accrued liabilities .........................................................        996         626
  Accrued bonus ...............................................................        613          --
  Deferred compensation .......................................................         --         564
  Current portion of long-term debt ...........................................         --           3
  S distribution note .........................................................         --         255
                                                                                  ---------   ---------
    Total current liabilities .................................................      8,376       6,746

LINE OF CREDIT, net of current portion ........................................        817       3,988

LONG-TERM PAYABLES, net of current portion ....................................        779       1,688

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT:
  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 15,330,042 and 15,080,042- 2001 and 2000, respectively       15          15
  Additional paid-in capital ..................................................     38,304      37,560
  Accumulated deficit .........................................................    (38,997)    (48,033)
                                                                                  ---------   ---------

    Total stockholders' deficit ...............................................       (678)    (10,458)
                                                                                  ---------   ---------
                                                                                  $  9,294    $  1,964
                                                                                  =========   =========


                       See accompanying notes to consolidated financial statements
</TABLE>

                                                  F-3
<PAGE>
<TABLE>

                             MOSSIMO, INC. AND SUBSIDIARY
                         CONSOLIDATED STATEMENTS OF OPERATIONS
                         (IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>

                                                           YEAR ENDED DECEMBER 31,
                                                    ---------------------------------
                                                       2001        2000       1999
                                                    ---------   ---------   ---------
<S>                                                 <C>         <C>         <C>
Net sales of apparel and related products .......         --    $ 24,150    $ 47,393
Royalties .......................................     16,666       3,475       3,686
                                                    ---------   ---------   ---------
    Total revenues ..............................     16,666      27,625      51,079

Cost of sales of apparel and related products ...         --      20,730      37,069
                                                    ---------   ---------   ---------
                                                      16,666       6,895      14,010
                                                    ---------   ---------   ---------

OPERATING EXPENSES:
    Selling, general and administrative .........     10,455      16,677      20,001
    Non-cash insurance (refund) premium .........         --        (713)      6,100
    Restructuring ...............................         --       3,460          --
    Vendor discounts, net .......................         --        (407)         --
                                                    ---------   ---------   ---------
            Total operating expenses ............     10,455      19,017      26,101
                                                    ---------   ---------   ---------
Operating income (loss) .........................      6,211     (12,122)    (12,091)
                                                    ---------   ---------   ---------

OTHER INCOME (EXPENSE):
    Other, net ..................................        536         760          (3)
    Interest, net ...............................       (864)       (923)       (834)
                                                    ---------   ---------   ---------
        Other expense, net ......................       (328)       (163)       (837)
                                                    ---------   ---------   ---------
Income (loss) before income taxes ...............      5,883     (12,285)    (12,928)
(Benefit) provision for income taxes ............     (3,153)          3          13
                                                    ---------   ---------   ---------
Net income (loss) ...............................   $  9,036    $(12,288)   $(12,941)
                                                    =========   =========   =========
Net earnings (loss) per common share:
    Basic and diluted ...........................   $   0.59    $  (0.81)   $  (0.86)
                                                    =========   =========   =========

Weighted average common shares outstanding:
    Basic .......................................     15,254      15,080      15,050
                                                    =========   =========   =========

    Diluted .....................................     15,290      15,080      15,050
                                                    =========   =========   =========



              See accompanying notes to consolidated financial statements
</TABLE>

                                         F-4
<PAGE>
<TABLE>

                              MOSSIMO, INC. AND SUBSIDIARY
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
                                     (IN THOUSANDS)

<CAPTION>


                                                     ADDITIONAL
                                     COMMON STOCK      PAID-IN   ACCUMULATED
                                  SHARES     AMOUNT    CAPITAL     DEFICIT      TOTAL
                                ---------  ---------  ---------   ---------   ---------
<S>                               <C>      <C>        <C>         <C>         <C>
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
Issuance of common stock ....          3         --         22          --          22
Non-cash compensation .......         --         --        125          --         125
Non-cash insurance refund...          --         --       (713)         --        (713)
Net loss ....................         --         --         --     (12,288)    (12,288)
                                ---------  ---------  ---------   ---------   ---------

BALANCE, December 31, 2000...     15,080         15     37,560     (48,033)    (10,458)
Issuance of common stock ....        250         --        744          --         744
Net income ..................         --         --         --       9,036       9,036
                                ---------  ---------  ---------   ---------   ---------
BALANCE, December 31, 2001...     15,330   $     15   $ 38,304    $(38,997)   $   (678)
                                =========  =========  =========   =========   =========




</TABLE>


               See accompanying notes to consolidated financial statements

                                          F-5
<PAGE>
<TABLE>

                                                 MOSSIMO, INC. AND SUBSIDIARY
                                             CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                        (IN THOUSANDS)
<CAPTION>

                                                                                                 YEARS ENDED DECEMBER 31,
                                                                                            ---------------------------------
                                                                                              2001        2000        1999
                                                                                            ---------   ---------   ---------
<S>                                                                                         <C>         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) .......................................................................   $  9,036    $(12,288)   $(12,941)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization ...........................................................        295         545       1,356
Write-down of property and equipment ....................................................         --       2,331          --
Gain on disposition of property and equipment ...........................................         --        (154)         --
Provision for doubtful receivables ......................................................         --        (380)         79
Restructuring charge ....................................................................         --          61          --
Vendor discounts, net ...................................................................         --        (407)         --
Deferred royalty income .................................................................         --        (213)       (112)
Deferred taxes ..........................................................................     (3,597)         --          --
Non-cash compensation expense ...........................................................         --         125         300
Non-cash insurance (refund) premium .....................................................         --        (713)      6,100
Changes in:
     Accounts receivable, net ...........................................................       (749)        (42)        113
     Due from factor, net ...............................................................         --          --       3,064
     Inventories ........................................................................         --       5,682       2,643
     Refundable taxes ...................................................................         --          --         171
     Prepaid expenses and other current assets ..........................................        (54)        438        (300)
     Other assets .......................................................................         11        (201)         40
     Due to factor, net .................................................................        (19)     (1,267)      1,298
     Accounts and long-term payables ....................................................       (421)      1,184       1,673
     Accrued liabilities ................................................................        370        (664)       (544)
     Accrued bonus ......................................................................        613          --          --
     Deferred compensation ..............................................................       (564)        564          --
     S distribution note ................................................................       (255)         --         (51)
                                                                                            ---------   ---------   ---------

         Net cash provided by (used in) operating activities ............................      4,666      (5,399)      2,889
                                                                                            ---------   ---------   ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of property and equipment ...........................................         --         329          --
Payments for acquisition of property and equipment ......................................       (104)       (220)       (246)
                                                                                            ---------   ---------   ---------

         Net cash (used in) provided by investing activities ............................       (104)        109        (246)
                                                                                            ---------   ---------   ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in line of credit ............................................................     (2,171)      4,853      (2,624)
Proceeds from issuance of common stock ..................................................        744          22         298
Repayment of long-term debt .............................................................         (3)         (8)        (20)
                                                                                            ---------   ---------   ---------

         Net cash (used in) provided by financing activities ............................     (1,430)      4,867      (2,346)
                                                                                            ---------   ---------   ---------

NET INCREASE (DECREASE) IN CASH .........................................................      3,132        (423)        297
CASH, beginning of year .................................................................         50         473         176
                                                                                            ---------   ---------   ---------

CASH, end of year .......................................................................   $  3,182    $     50    $    473
                                                                                            =========   =========   =========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
     Cash paid during the year for interest .............................................   $    743    $    943    $    857
                                                                                            =========   =========   =========
     Cash paid during the year for income taxes .........................................   $    203    $     13    $     18
                                                                                            =========   =========   =========
     Reclassification of accounts payable to long-term payables .........................   $     --    $  1,688    $     --
                                                                                            =========   =========   =========
     Non-cash acquisition of property and equipment .....................................   $     --    $     40    $     --
                                                                                            =========   =========   =========

                                  See accompanying notes to consolidated financial statements
</TABLE>

                                                             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 the terms of the Target
Agreement, Target has 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 includes men's, women's, boy's
and girl's apparel and footwear, cosmetics and other fashion accessories such as
jewelry, watches, handbags, belts, neckwear and gloves.

         Under the Target Agreement the Company and Mossimo Giannulli, its Chief
Executive Officer and principal designer, contribute design services and the
Company has approval rights for product design and marketing and advertising
materials. Target collaborates on design and is responsible for product
development, sourcing, quality control and inventory management with respect to
the Target licensed product line. Target is obligated to pay the Company a
royalty based upon a percentage of its net sales of Mossimo brand products, with
minimum guaranteed royalties of approximately $8.5 million, $9.6 million and
$9.6 million in the contract years ended January 31, 2002, 2003 and 2004,
respectively. Target pays royalties due on net sales achieved based on
percentages defined in the Target Agreement. The Company is obligated to pay 15%
of all royalties received from Target to a third party who assisted the Company
in connection with entering into the Target Agreement. The Target Agreement is
subject to early termination under certain circumstances. If Target is current
in its payments of its obligations under the Target Agreement, Target has the
right to renew the Target Agreement, on the same terms and conditions, for
additional terms of two years each.

         In addition to the Target Agreement, the Company also licenses its
trademarks to third party licensees for use in collections of eyewear and
women's swimwear and bodywear sold in Target stores in the United States.
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 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. In connection with the
Target Agreement, the Company restructured its operations. Currently, the
Company operates as a licensor and contributes design services, primarily to
Target, but it does not manufacture, source or directly market its products.

         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 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.

         CONCENTRATION OF CREDIT RISK - The Company's receivables consist,
primarily, of royalties receivable from Target and its other licensees.
Collateral is not required. Prior to entering into the Target Agreement the
Company assigned a substantial portion of its receivables to a factor, which
assumed the credit risk with respect to collection of nonrecourse receivables.

         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 three to ten-year period for furniture and
fixtures, machinery and equipment and automobiles.


                                      F-7
<PAGE>

                          MOSSIMO, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         DEFERRED FINANCING COSTS - During 2000, $287,000 of deferred financing
costs associated with continuing the line of credit following entering into the
Target Agreement were capitalized. The costs are being amortized over the term
of the credit facility and amortization expense in 2001 and 2000 was $96,000 and
$40,000, respectively.

         REVENUE RECOGNITION - Revenue from sales of apparel and related
products was recognized when merchandise was shipped to a customer. Reserves for
estimated returns and allowances were recorded at the time of shipment based
upon management's estimates and the Company's historical experience.

         Royalty revenues due under the Target Agreement are recognized as
Target achieves sales of the Company's products. Royalty payments are due on a
quarterly basis and range from 1% to 4% of net sales. The Target Agreement is
structured to provide royalty rate reductions for Target after it achieves
certain levels of retail sales of Mossimo branded products during each contract
year (i.e. each twelve month period beginning February 1). As a result, the
Company's royalty revenues from Target as a percentage of Target's retail sales
of Mossimo branded products will be highest at the beginning of each contract
year and decrease throughout each contract year as Target reaches certain retail
sales thresholds contained in the Target Agreement. Therefore, the amount of
royalty revenue received by the Company in any quarter from Target is dependent
not only on retail sales of branded products in such quarter, but also on the
cumulative level of retail sales for the contract year, and the resulting
attainment of royalty rate reductions in any preceding quarters in the same
contract year.

         Royalty revenues from the Company's other licensees are recognized as
those licensees achieve sales of the Company's products. Royalty payments are
due on a quarterly basis and range from 2% to 7% of net sales.

         BONUS - The Company's Chief Executive Officer and principal designer
receives a bonus, under the terms of an employment agreement, equal to 50% of
the Company's royalties due under the Target Agreement, after deduction of 15%
in respect of the Company's obligations to a third party who assisted the
Company with entering into the Target Agreement, in excess of the minimum
guaranteed royalties due under the Target Agreement. The bonus accrues
throughout the year as the Company's cumulative royalties from Target are in
excess of the cumulative minimum guaranteed royalties due under the Target
Agreement. All bonus obligations due to the Company's Chief Executive Officer
and principal designer as of December 31, 2001 had been paid as of that date.

         The Company's employees receive a bonus based on the level of Target's
retail sales of Mossimo branded products during each contract year. The bonus
ranges from 10% to 100% of each employees base salary and the bonus accrues
throughout the year.

         INCOME TAXES - The Company accounts for income taxes under the
provisions of SFAS No. 109, "Accounting for Income Taxes". Deferred taxes result
from temporary differences between the reporting of income and losses 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 accounting principles generally accepted in the United States
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
earnings (loss) per share in the financial statement footnotes. See Note 12 -
Stockholders' (Deficit) Equity.

         EARNINGS (LOSS) 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 earnings (loss) per
share. Basic net earnings (loss) per share is computed by dividing net income
(loss) available to common stockholders by the weighted average number of common
shares outstanding. Diluted net earnings (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, 2000 and 1999 there was
no dilution from outstanding options. Stock options excluded from diluted
weighted average shares outstanding for the years ended December 31, 2001, 2000
and 1999 were approximately 557,000, 1,120,000 and 1,107,000, respectively, as
they were antidilutive.

                                      F-8
<PAGE>

                          MOSSIMO, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         EARNINGS LOSS PER SHARE (CONTINUED) - The reconciliation between net
income (loss) and weighted average shares outstanding for basic and diluted
earnings (loss) per share is as follows (all amounts in thousands, except per
share data):
<TABLE>
<CAPTION>

                                                        2001         2000         1999
                                                     ----------   ----------   ----------
<S>                                                  <C>          <C>          <C>
Net income (loss)..................................  $   9,036    $ (12,288)   $ (12,941)
Weighted average shares outstanding - basic........     15,254       15,080       15,050
Basic earnings (loss) per share....................  $    0.59    $   (0.81)   $   (0.86)

Add: dilutive effect of stock options..............         36            -            -
Weighted average shares outstanding - diluted......     15,290       15,080       15,050
Diluted earnings (loss) per share..................  $    0.59    $   (0.81)   $   (0.86)
</TABLE>

         During 1998, the Company issued stock options to Edwin Lewis, the
Company's then Chief Executive Officer and President, under the Stock Option
Plan for Edwin Lewis (Note 12). The shares of common stock to be issued upon
exercise of these options were to be contributed to the Company by Mossimo
Giannulli, Chairman of the Board, under a Contribution Agreement (Note 12).
Accordingly, these shares are included in basic weighted average shares
outstanding as of December 31, 1999. On March 28, 2000, Edwin Lewis resigned
from his then positions with the Company and 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 delayed the effective date of SFAS No.
133 to fiscal years beginning after June 15, 2000. In June 2000 the FASB issued
SFAS No. 138 "Accounting for Certain Derivative Instruments and Certain Hedging
Activities - an amendment of FASB Statement No. 133". SFAS No. 138 is effective
concurrent with the delayed effective date of SFAS No. 133. SFAS No. 138 amended
the accounting and reporting standards for certain derivative instruments and
certain hedging activities. The Company adopted SFAS Nos. 133, 137 and 138 on
January 1, 2001. The adoption did not have a material impact on the Company as
the Company did not hold any derivative instruments in 2001.

         In June 2001, the FASB issued SFAS No. 141, "Business Combinations",
SFAS No. 142, "Goodwill and Other Intangible Assets", and SFAS No. 143,
"Accounting for Asset Retirement Obligations". SFAS No. 141 addresses financial
accounting and reporting for business combinations and is effective for all
business combinations after June 30, 2001. SFAS No. 142 addresses financial
accounting and reporting for acquired goodwill and other intangible assets and
is effective for fiscal years beginning after December 15, 2001. SFAS No. 143
addresses financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs and is effective for fiscal years beginning after June 15, 2002.

         In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS No. 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived assets and
is effective for fiscal years beginning after December 15, 2001.

         The adoption of these standards is not expected to have a material
impact on the Company's financial position or results of operations.

         MERCHANDISE RISK - The Company's success is largely dependent upon its
ability to gauge the fashion tastes of its licensees' targeted consumers and
provide designs for merchandise that satisfy consumer demand. Any inability to
provide successful designs could have a material adverse effect on the Company's
business, operating results and financial condition.

                                      F-9
<PAGE>

                          MOSSIMO, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         MERCHANDISE RISK (CONTINUED) - Because the amount of the Company's
revenues under the Target Agreement is dependent, in part, on the sales of
Mossimo brand products in Target stores, the Company's revenue potential is
impacted by the number of Target stores and the patronage at these stores.
Termination or non-extension of the Target Agreement, or a material adverse
change in the business of Target stores, could have a material adverse effect on
the Company's financial condition and results of operations.

         RECLASSIFICATIONS - Certain reclassifications have been made in the
audited consolidated 2000 and 1999 financial statements to conform to the 2001
presentation.

2. RESTRUCTURING

         As a result of entering into the Target Agreement on March 28, 2000, a
restructuring of the Company's business was initiated during the first quarter
of 2000. Management implemented several changes to the Company's operations
during the period from March 28, 2000 to the end of 2000. The restructuring
included a work force reduction of approximately 90% of all employees, closure
of the Company's showrooms, signature retail store and outlet store, and
termination of relationships with substantially all existing customers and
suppliers. The work force reduction was as a result of the termination of all
sourcing, production and sales operations. The restructuring was complete at
December 31, 2000.

         The restructuring resulted in a charge during the year ended December
31, 2000 of approximately $3.5 million which is included in operating expenses
in the accompanying Statement of Operations for the year ended December 31,
2000. The charge includes (i) a write-down of approximately $2.3 million
relating to property and equipment disposed of; (ii) an accrual for lease
obligations of $592,000; (iii) terminated employees severance expense of
$531,000; (iv) $93,000 of legal and professional services expenses; (v) a
write-off of security deposits of $61,000 and (vi) a gain on disposal of
property and equipment previously written down of $154,000. All obligations in
respect of lease obligations and employee's severance had been paid by December
31, 2001.

3. DUE TO FACTOR

         Prior to entering into the Target Agreement and pursuant to the
provisions of a factoring agreement, the Company assigned a substantial portion
of its trade accounts receivable to a factor, which assumed the credit risk with
respect to collection of the nonrecourse accounts receivable. The Company
requested advances against a percentage, determined by the factor, of the
qualifying accounts receivable factored at any time before their maturity date.
The factoring charge ranged from 0.5% to 0.8% of the receivables assigned.
Interest at the prime rate plus 0.5% (prime rate plus 1.0% beginning January 1,
2000) per annum was charged on advances received through the Company's credit
facility. Outstanding advances on the credit facility were collateralized by the
Company's receivables, inventories, machinery and equipment and intangibles.


         Due to factor consists of the following at December 31:

                                                               2001       2000
                                                             --------   --------
                                                                (IN THOUSANDS)
           Unmatured accounts receivable:
                Nonrecourse................................  $     -    $     -
                With recourse..............................        -          -
           Allowance for sales returns and markdowns.......      (12)       (31)
                                                             --------   --------

                                                             $   (12)   $   (31)
                                                             ========   ========



                                      F-10
<PAGE>


                          MOSSIMO, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


4. INCOME TAXES

         The (benefit) provision for income taxes consists of the following for
the years ended December 31:
<TABLE>
<CAPTION>

                                                                                  2001       2000       1999
                                                                                --------   --------   --------
                                                                                        (IN THOUSANDS)
<S>                                                                             <C>        <C>        <C>
           Current:
                Federal........................................................ $   391    $     -    $     -
                State..........................................................      53          3         13
                                                                                --------   --------   --------
                                                                                    444          3         13
                                                                                --------   --------   --------

           Deferred:
                Federal........................................................  (3,058)         -          -
                State..........................................................    (539)         -          -
                                                                                --------   --------   --------
                                                                                 (3,597)         -          -
                                                                                --------   --------   --------

                    Total (benefit) provision for income taxes................. $(3,153)   $     3    $    13
                                                                                ========   ========   ========

         The (benefit) provision for income taxes differs from the amount of tax
determined by applying the federal statutory rate to pretax income (loss). The
components of this difference for the years ended December 31, 2001, 2000 and
1999 are summarized as follows:


                                                                                  2001       2000       1999
                                                                                --------   --------   --------
                                                                                        (IN THOUSANDS)
           Provision (benefit) on income (loss) at federal statutory tax rate.. $ 2,000    $(4,301)   $(4,529)
           State tax provision (benefit), net of federal tax effect............     343       (706)      (776)
           (Decrease) increase in valuation allowance..........................  (8,065)     5,729      4,222
           Alternative minimum tax.............................................     441          -          -
           Non-deductible expenses.............................................   1,299          -          -
           Other...............................................................     829       (719)     1,096
                                                                                --------   --------   --------
                     Total (benefit) provision for income taxes................ $(3,153)   $     3    $    13
                                                                                ========   ========   ========

</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, 2001 and
2000 are as follows:

                                                             2001         2000
                                                           ---------   ---------
                                                               (IN THOUSANDS)

           Deferred income tax assets (liabilities):
                Reserves not currently deductible ......   $  2,890    $  3,963
                State income taxes .....................      1,130        (131)
                Net operating loss carryforward ........     10,996      15,992
                Other ..................................        340          --
                                                           ---------   ---------

           Net deferred tax assets .....................     15,356      19,824
           Valuation allowance .........................    (11,759)    (19,824)
                                                           ---------   ---------

           Total net deferred tax asset ................      3,597          --

           Less: current portion .......................      1,776          --
                                                           ---------   ---------

           Long-term portion ...........................   $  1,821    $     --
                                                           =========   =========


                                      F-11
<PAGE>

                          MOSSIMO, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


4. INCOME TAXES (CONTINUED)

         The Company recorded a deferred tax asset at December 31, 2001
following the reevaluation of its forecasted operating results and resultant
taxable income during the remaining life of the initial term of the Target
Agreement, assuming the Company achieves the annual guaranteed minimum royalties
due under the Target Agreement, and the consequent utilization of available net
operating losses during the remaining life of the initial term of the Target
Agreement. At December 31, 2000, the Company had recorded a full valuation
allowance on the Company's deferred tax assets due to the uncertainty regarding
their realization at that time following the Company entering into the Target
Agreement on March 28, 2000 and the first royalty revenues being achieved
thereunder in the fourth quarter of 2000.

         As of December 31, 2001 the Company has approximately $28,400,000 and
$14,900,000 of federal and state net operating loss carryforwards, respectively,
available to offset future taxable income which expire in various years through
2020.

         Under the Tax Reform Act of 1986, the benefits from net operating
losses carried forward may be impaired or limited in certain circumstances.
Events which may cause limitations in the amount of net operating losses that
the Company may utilize in any one year include, but are not limited to,
accumulative ownership change of more than 50% over a three-year period. The
impact of any limitations that may be imposed for future issuances of equity
securities, including issuances with respect to acquisitions, has not been
determined.

         The Company is classified as a "personal holding company" in 2001.
Personal holding company status results from more than 50% of the value of
outstanding stock being owned directly or indirectly by five or fewer
individuals, and more than 60% of the Company's income being derived from
royalties. Personal holding companies are subject to an additional federal tax
at the highest personal income tax rate (39.1% for 2001) on undistributed after
tax earnings. A personal holding company is able to use its net operating loss,
if any, for the immediately preceding year to offset its income subject to the
personal holding company tax. Consequently the Company had no liability for
personal holding company tax in 2001 as a result of its net operating loss for
2000 being in excess of its undistributed after tax earnings in 2001.


5. PROPERTY AND EQUIPMENT

         Property and equipment consists of the following at December 31:
                                                              2001        2000
                                                            --------    --------
                                                               (IN THOUSANDS)

           Furniture and fixtures ......................    $   441     $   403
           Machinery and equipment .....................        782         716
                                                            --------    --------

                                                              1,223       1,119
           Accumulated depreciation and amortization ...       (972)       (773)
                                                            --------    --------

                                                            $   251     $   346
                                                            ========    ========

6. LINE OF CREDIT

         Prior to entering into the Target Agreement, the Company maintained a
$15,000,000 revolving line of credit, collateralized by inventory, receivables,
and machinery and equipment, bearing interest at the prime rate plus 0.5% (9.0%
at December 31, 1999) and prime rate plus 1.0% beginning January 1, 2000 (9.5%
at December 31, 1999). The Company's borrowings under the facility were limited
to 50% of eligible inventory and 85% of eligible receivables. The facility
allowed for up to $6.0 million in letters of credit.

         In July 2000, the Company's credit facility was amended to provide for
a $9.0 million revolving credit line, which is collateralized by inventory,
receivables, machinery and equipment and intangibles. The revolving credit line
is also secured by a $5.0 million personal guaranty given by the Company's
Chairman of the Board and Chief Executive Officer. Advances under the amended
agreement bear interest at the prime rate plus 1.5% (6.5% at December 31, 2001).
The revolving credit line is reduced at the rate of $1.0 million per quarter
beginning on June 1, 2001, and by any amounts received by the Company related to
the settlement of certain legal matters, and terminates on June 1, 2003. The
personal guaranty given by the Company's Chairman of the Board and Chief
Executive Officer is reduced at the rate of $500,000 per quarter beginning on
June 1, 2001 and amounted to $3.5 million at December 31, 2001. At December 31,
2001 the Company's credit facility provided for a $5.5 million revolving credit
line.

                                      F-12
<PAGE>

                          MOSSIMO, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


6. LINE OF CREDIT (CONTINUED)

         Future scheduled line of credit payments are as follows (in thousands):

           Year ending December 31:
                2002.............................................        $4,000
                2003.............................................           817
                                                                         -------
           Total scheduled maturities............................         4,817

                Less: current portion............................         4,000
                                                                         -------
                Long-term portion................................        $  817
                                                                         =======

7. VENDOR DISCOUNTS AND LONG-TERM PAYABLES

         In 2000, due to cash shortages and the anticipated changes resulting
from entering into the Target Agreement, the Company developed a creditor plan
to give certain of its unsecured vendor creditors two repayment options: (i) a
single cash payment of 50 cents on the dollar for the first $10,000 and 35 cents
on the dollar for amounts in excess of $10,000 or (ii) a 10 percent cash payment
with the balance to be paid in 36 equal monthly installments beginning June 15,
2001. The Company recorded vendor discounts of $917,000, offset by related
professional fees of $510,000, during 2000.

         Effective November 1, 2000 the Company terminated its endorsement
agreement with a PGA professional. The termination obligated the Company to pay
to the PGA professional $1,760,993, payable by an initial payment of $325,000
followed by equal monthly installments for principal and interest of $127,586,
from April 2001 through March 2002. Interest commencing April 2001 at the rate
of 12% accrues on the outstanding amount due.

         Future scheduled long-term payables payments are as follows (in
thousands):

           Year ending December 31:
                2002.............................................        $  917
                2003.............................................           550
                2004.............................................           229
                                                                         -------
           Total scheduled maturities............................         1,696

                Less: current portion (included in accounts payable)        917
                                                                         -------
                Long-term portion................................        $  779
                                                                         =======


8. 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, 2001, 2000 and 1999 were, $2,000,
$12,000 and $17,000, 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
2001, no shares were issued to employees through the Employee Plan. A total of
500,000 shares have been reserved under the Employee Plan, and 481,345 are
available for issuance at December 31, 2001.

                                      F-13
<PAGE>

                          MOSSIMO, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


9. COMMITMENTS AND CONTINGENCIES

         OPERATING LEASES - The Company is committed under a noncancelable
operating lease for its corporate and design office which expires August 31,
2003. Prior to entering into the Target Agreement, the Company was committed
under several noncancelable operating leases. Rent expense for the years ended
December 31, 2001, 2000 and 1999 was $105,000, $731,000 and $1,814,000
respectively.

         Future minimum annual rental payments required under the noncancelable
operating lease are as follows (in thousands):

           Year ending December 31:
                2002.............................................      $    108
                2003.............................................            64
                                                                       ---------
                                                                       $    172
                                                                       =========

         LITIGATION - Various state and federal class action complaints were
brought against the Company in 1997, 1998 and 1999. 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.

         The Company was the defendant in an action filed in the Superior Court
of the State of California for the County of Orange on October 20, 2000 by the
lessor of the Company's industrial warehouse space. The plaintiff alleged the
Company breached the lease by failing to pay rent and vacating the leased
premises prior to the lease's expiration in 2007. A settlement agreement was
entered into on January 24, 2001 whereby the Company was obligated to pay to the
plaintiff approximately $235,000 (including interest) in equal monthly
installments commencing February 2001 through July 2001. On receipt of the final
monthly installment the plaintiff dismissed the action against the Company.
Provision was made in the financial statements as of December 31, 2000 for the
amount due under the settlement agreement.

         In February 2001, the Company filed actions in the Superior Court of
the State of California for the County of Los Angeles against Macy's West, Inc.,
Bloomingdale's, Inc., and Federated Department Stores, three former customers of
the Company. As to Macy's West, Inc., the complaint seeks damages of
approximately $857,000 for merchandise sold and delivered and $1,000,000 for
breach of contract related to cancelled orders. As to Bloomingdale's, Inc., the
complaint seeks damages of approximately $62,000 for merchandise sold and
delivered and $75,000 related to cancelled orders. As to Federated Department
Stores, the complaint sought damages for interference with contract of
approximately $3,000,000. In September 2001, the parties entered into an
agreement in principle for the settlement of the litigation and after the
settlement documents were executed in the fourth quarter of 2001 that litigation
was dismissed.

         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.

10. MAJOR CUSTOMERS

         As a result of entering into the Target Agreement, substantially all of
the Company's revenues are now derived from royalties due from Target. Royalties
due from Target represented approximately 92% and 24% of royalty revenues during
the years ended December 31, 2001 and 2000, respectively.

         Prior to entering into the Target Agreement and during the years ended
December 31, 2000 and 1999, sales to one department store customer in its
various regions represented approximately 43% and 38% of net sales of apparel
and related products, respectively. Cumulative sales to various divisions of one
department store group represented approximately 14% and 15% of net sales of
apparel and related products during the years ended December 31, 2000 and 1999,
respectively. Additionally, cumulative sales to various divisions of two
department store groups each represented approximately 13% of net sales of
apparel and related products during the year ended December 31, 2000.

                                      F-14
<PAGE>

                          MOSSIMO, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


11. FAIR VALUE OF FINANCIAL INSTRUMENTS

         The Company's consolidated balance sheets include the following
financial instruments: cash, accounts receivable, amounts due to its factor,
amounts due under the Company's credit facility, accounts payable and long-term
payables. The Company considers the carrying amounts in the financial statements
to approximate fair value for cash, accounts receivable, accounts payable and
amounts due to its factor, because of the relatively short period of time
between origination and their expected realization or settlement. The carrying
value of amounts due under the Company's credit facility approximates fair value
as the related interest rate is comparable to that currently available to the
Company on obligations with similar terms. The carrying value of long-term
payables approximates fair value as it represents the amounts for which certain
of the Company's vendors will settle and release the Company from all claims of
the vendors.

12. STOCKHOLDERS' (DEFICIT) 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 the stockholder for previously earned and
undistributed taxable S Corporation earnings under the S distribution notes was
$255,000 and $215,000 at December 31, 2000 and 1999, respectively. During 2001,
the amount due under the S distribution notes was repaid to the stockholder.

         During 1999, the Company's Chief Executive Officer and principal
stockholder personally purchased excess insurance coverage for the benefit of
the Company. Accordingly, a one-time, non-cash charge of $6.1 million is
included in operating expenses for 1999 with an offsetting credit to
stockholders' (deficit) equity. In 2000, the Company's Chief Executive Officer
and principal stockholder was personally assigned a refund by the Company in
respect of the excess insurance coverage purchased by him in 1999. Accordingly,
one-time, non-cash earnings of $713,000 are included as a reduction of operating
expenses in 2000 with an offsetting debit to stockholders' (deficit) equity.
Neither the earnings nor the charge impact the Company's cash flows or total
stockholders' (deficit) equity position.

         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 to 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. In
April 2000, the Company amended the 1995 Plan so that an optionee's vesting in
such options automatically terminates when the optionee's employment with the
Company is terminated for reasons other than retirement, disability or death. In
May 2000, the Company further amended the 1995 Plan so that employees whose
employment was terminated by the Company, as a result of the implementation of
its restructuring (Note 2), became immediately vested in the options granted
under the 1995 Plan and so that the exercise period of such options was extended
to one year from the date of termination. As of December 31, 2001 there were
711,288 shares of common stock under the 1995 Plan that were available for
future 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. As of
December 31, 2001 there were 104,000 shares of common stock under the Directors
Plan that were available for future grant.



                                      F-15
<PAGE>

                          MOSSIMO, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


12. STOCKHOLDERS' (DEFICIT) EQUITY (CONTINUED)

         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,
                                                                         ------------------------
                                                           2001                      2000                       1999
                                                           ----                      ----                       ----
                                                                WEIGHTED                   WEIGHTED                   WEIGHTED
                                                     SHARES   AVERAGE PRICE    SHARES    AVERAGE PRICE    SHARES    AVERAGE PRICE
                                                 ------------    --------    -----------   --------    -----------     --------
<S>                                                <C>           <C>          <C>          <C>          <C>            <C>
 Outstanding, beginning of year...............     1,119,880     $  3.97      1,107,260    $  4.16      1,207,450      $  5.40
     Granted..................................        79,000        2.58         69,000       1.17        140,450         8.83
     Canceled.................................       325,555        4.26         56,193       4.37        179,440        16.05
     Exercised................................       250,000        2.98            187       4.88         61,200         4.47
                                                 ------------    --------    -----------   --------    -----------     --------

 Outstanding, end of year.....................       623,325     $  4.03      1,119,880    $  3.97      1,107,260      $  4.16
                                                 ------------    --------    ===========   ========    ===========     ========

 Options exercisable, end of year.............       431,494     $  4.54        861,842    $  4.09        377,960      $  4.91
                                                 ------------    --------    ===========   ========    ===========     ========

 Weighted average fair value of
     options granted during the year..........                   $  1.65                   $  0.83                     $  4.68
                                                                 ========                  ========                    ========
</TABLE>

         Outstanding stock options for the Plans at December 31, 2001 consist of
the following:


                          OPTIONS OUTSTANDING            OPTIONS EXERCISABLE
                                WEIGHTED
                                 AVERAGE   WEIGHTED                 WEIGHTED
        RANGE OF                REMAINING  AVERAGE                  AVERAGE
    EXERCISE PRICES    SHARES     LIFE      PRICE        SHARES      PRICE
    ---------------    -------    ----     ---------    --------    --------
    $ 2.00 - $ 5.00    531,000     7.3     $   3.03      349,250    $  3.28
    $ 7.00 - $11.00     82,325     7.3         8.79       72,244       8.74
    $18.00 - $24.00     10,000     4.2        18.00       10,000      18.00
                       -------    ----     ---------    --------    --------
                       623,325     7.3     $   4.03      431,494    $  4.54
                       =======    ====     =========    ========    ========


         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,
2001, 2000 and 1999 assuming risk-free interest rates of approximately 4.90%,
6.55% and 5.75%, respectively; volatility of approximately 125%, 202%, and 99%,
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.

         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 was 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 occurrence 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 price of $3.00 per share, with such options vesting on November
30, 2005, subject to accelerated vesting upon the occurrence of certain events
relating in part to the common stock price (together, the "Stock Option
Agreements").

                                      F-16
<PAGE>

                          MOSSIMO, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


12. STOCKHOLDERS' (DEFICIT) EQUITY (CONTINUED)

         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 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 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.

         On March 28, 2000, as a result of entering into the Target Agreement,
Edwin Lewis resigned from his then positions with the Company and all options
granted under the Lewis Plan were canceled and the Lewis Plan and Contribution
Agreement 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
income (loss) and net earnings (loss) per share would have resulted in the
approximate pro forma amounts indicated below for the years ended December 31,
2001, 2000 and 1999:
<TABLE>
<CAPTION>

                                                            2001         2000           1999
                                                         ----------   -----------   -----------
                                                          (IN THOUSANDS EXCEPT PER SHARE DATA)
<S>                                                      <C>          <C>           <C>
           Actual net income (loss) ..................   $   9,036    $  (12,288)   $  (12,941)
           Pro forma net income (loss) ...............       7,837       (13,466)      (14,352)
           Actual net earnings (loss) per share:
                Basic and diluted ....................   $    0.59    $    (0.81)   $    (0.86)
           Pro forma net earnings (loss) per share:
                Basic and diluted ....................   $    0.51    $    (0.89)   $    (0.95)

</TABLE>

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, 2001, 2000 and 1999, 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, 2001:
    Allowance for doubtful accounts ...........   $   207,000    $        --    $        --    $   207,000
    Allowance for sales returns and markdowns..     7,383,000             --     (1,154,000)     6,229,000

Year ended December 31, 2000:
    Allowance for doubtful accounts ...........   $   587,000    $        --    $  (380,000)   $   207,000
    Allowance for sales returns and markdowns..     9,363,000             --     (1,980,000)     7,383,000

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)            --

</TABLE>

                                      F-17
<PAGE>


                          MOSSIMO, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

14. INTERIM FINANCIAL INFORMATION (UNAUDITED)

         The following tables set forth certain selected interim financial data
for the Company by quarter for the years ended December 31, 2001 and 2000.
<TABLE>
<CAPTION>

                                                               YEAR ENDED DECEMBER 31, 2001
                                                  ---------------------------------------------------------
                                                    FIRST      SECOND       THIRD      FOURTH
                                                   QUARTER     QUARTER     QUARTER     QUARTER      YEAR
                                                  ---------   ---------   ---------   ---------   ---------
                                                             (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                               <C>         <C>         <C>         <C>         <C>
INCOME STATEMENT DATA:
Royalties .....................................   $  5,039    $  5,118    $  3,919    $  2,590    $ 16,666

Income before income taxes ....................      2,323       1,508       1,653         399       5,883

Benefit for income taxes ......................         --          --          --      (3,153)     (3,153)

Net income ....................................      2,323       1,508       1,653       3,552       9,036

Net earnings per share:
     Basic and diluted ........................   $   0.15    $   0.10    $   0.11    $   0.23    $   0.59


                                                               YEAR ENDED DECEMBER 31, 2000
                                                  ---------------------------------------------------------
                                                    FIRST      SECOND       THIRD      FOURTH
                                                   QUARTER     QUARTER     QUARTER     QUARTER      YEAR
                                                  ---------   ---------   ---------   ---------   ---------
                                                             (IN THOUSANDS, EXCEPT PER SHARE DATA)

INCOME STATEMENT DATA:
Net sales of apparel and related products......   $ 18,100    $  6,018    $     32    $      -    $ 24,150

Royalties......................................      1,448         576         299       1,152       3,475

Income (loss) before income taxes..............     (8,952)     (2,888)       (720)        275     (12,285)

Provision for income taxes.....................          -           -           -           3           3

Net income (loss)..............................     (8,952)     (2,888)       (720)        272     (12,288)

Net earnings (loss) per share:
     Basic and diluted.........................   $  (0.59)   $  (0.19)   $  (0.05)   $   0.02    $  (0.81)

</TABLE>

15. SUBSEQUENT EVENT (UNAUDITED)

         On March 20, 2002 Edwin Lewis was appointed Vice Chairman and President
of the Company.

                                      F-18


<PAGE>
<TABLE>
<CAPTION>
<S>                                                                <C>


CORPORATE INFORMATION

BOARD OF DIRECTORS                                                 CORPORATE OFFICERS
Mossimo Giannulli                                                  Mossimo Giannulli
Chairman of the Board and Chief Executive Officer                  Chairman of the Board and Chief Executive Officer

Edwin Lewis                                                        Edwin Lewis
Vice Chairman and President                                        Vice Chairman and President

Robert Martini                                                     Gia Castrogiovanni
Chairman, Bergen Brunswig Corporation                              Chief Operating Officer, Treasurer and Secretary

William Halford
President, Irvine Office Company

Brett White
Chair of the Americas, CB Richard Ellis

INDEPENDENT ACCOUNTANTS                                            INVESTOR RELATIONS COUNSEL
Arthur Andersen LLP                                                Integrated Corporate Relations
18201 Von Karman, Suite 800                                        24 Post Road East
Irvine, CA 92612                                                   Westport, CT 06880
                                                                   (203) 222-9013

LEGAL COUNSEL                                                      TRANSFER AGENT
Latham & Watkins                                                   ChaseMellon Shareholder Services
650 Town Center Drive, Suite 2000                                  85 Challenger Road
Costa Mesa, CA 92626                                               Ridgefield Park, NJ 07660
                                                                   (800) 552-6645

CORPORATE HEADQUARTERS                                             STOCKHOLDER INQUIRIES/FORM 10-K FILING
Mossimo, Inc.                                                      To receive a copy of the Company's
2016 Broadway                                                      Form 10-K, Annual Report or for
Santa Monica, CA 90404                                             other stockholder inquires, please
(310) 460-0040                                                     call our investor reach line at
                                                                   (310) 460-0042

SECURITIES LISTING
Shares of the Company's common
stock are traded on the National
Association of Securities Dealers
Over-the-Counter Bulletin Board
under the symbol MGXO.OB.


</TABLE>


<PAGE>


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