When Cherokee introduced Mossimo to Target in early 2000, they expected to receive a finders fee on royalties paid to the apparel company through its licensing agreement with the discount retailer. A Los Angeles Superior Court judge concurred last Tuesday, upholding the initial arbitration ruling that will have Mossimo pay Cherokee 15% of all royalties payments received by Mossimo through its deal with Target.
Target started selling the Mossimo goods in Q4 2000 and the two companies have recently expended their initial two-year deal for another two-year term.
The arbitration award is for $9.2 million and interest is currently accruing at $5,000 a week. The court’s confirmation now puts the onus on MOSS to either pay the fees it owes CHKE or appeal the ruling. If they choose to appeal, MOSS will have to pay Cherokee or post a bond equal to 1.5 times the judgment.
Manuel Marrero, Mossimo’s CFO, said the company is not ready to comment on the court’s ruling.
Mossimo had $5.9 million in royalty revenues for Q1. This was on top of $19.7 million in royalties for the full year 2002 and $16.7 million in 2001. Year 2000 Q4 royalties were $3.5 million. The total of $43.7 million in royalty payments since the Target deal started does include other licensing agreements, such as the Canadian deal MOSS signed with Hudson Bay in May 2002.
Cherokee said it is exploring alternatives for selling or insuring the new asset to provide greater liquidity.
>>> Mossimo should settle this soon before Cherokee sells the debt off to some guy named Johnny No-Nose. Sounds like the makings of a Sopranos episode
