CHEROKEE INC.

ANNUAL REPORT ON FORM 10-K

FOR THE FISCAL YEAR ENDED FEBRUARY 3, 20182, 2019

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As used in this Annual Report, “Cherokee Global Brands”, the “Company”, “we”, “us” and “our” refer to Cherokee Inc. and its consolidated subsidiaries, unless the context indicates or requires otherwise.  Additionally, as used herein, “Fiscal 2019” refers to our fiscal year ending February 2, 2019; “Fiscal 2018” refers to our fiscal year ended February 3, 2018; and “Fiscal 2017” refers to our fiscal year ended January 28, 2017; and “Fiscal 2016” refers to our fiscal year ended January 30, 2016.2017.

We own the registered trademarks or trademark applications for Cherokee®, Hi-Tec®, Magnum®,50 Peaks®, Interceptor®,Hawk Signature®, Tony Hawk®, Liz Lange®, Completely Me by Liz Lange®, Flip Flop Shops®, Everyday California®, Carole Little®, Saint Tropez-West®, Chorus Line®, All That Jazz®, Sideout®, Sideout Sport®, and others.  Although we do not use the “®”symbol in each instance in which one of our trademarks appears in this Annual Report, this should not be construed as any indication that we will not assert our rights thereto to the fullest extent under applicable law.  All other trademarks, trade names and service marks included in this Annual Report are the property of their respective owners.

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

This Annual Report, our quarterly reports on Form 10‑10‑Q, other filings we make with the Securities and Exchange Commission (the “SEC”), and press releases and other written or oral statements we may make from time to time may contain “forward‑“forward‑looking statements” within the meaning of the Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Forward-looking statements are statements other than historical facts that relate to future events or circumstances or our future performance.  The words “anticipates”, “believes”, “estimates”, “plans”, “expects”, “objectives”, “goals”, “aims”, “hopes”, “may”, “might”, “will”, “likely”, “should” and similar words or expressions are intended to identify forward‑forward‑looking statements, but the absence of these words does not mean that a statement is not forward-looking.

Forward‑Forward‑looking statements in this Annual Report include statements about, among other things:

Forward‑looking statements are based on our current views, expectations and assumptions and involve known and unknown risks, uncertainties and other factors that may cause actual results, performance, achievements or stock prices to be materially different from any future results, performance, achievements or stock prices expressed or implied by the forward‑looking statements.  Such risks, uncertainties and other factors include, among others, those described in Item 1A, “Risk Factors” in this Annual Report.  In addition, we operate in a competitive and rapidly evolving industry in which new risks emerge from time to time, and it is not possible for us to predict all of the risks we may face, nor can we assess the impact of all factors on our business or the extent to which any factor or combination of factors could cause actual results to differ from our expectations.  As a result of these and other potential risks and uncertainties, forward-looking statements should not be relied on or viewed as predictions of future events because some or all of them may turn out to be wrong.  Forward-looking statements speak only as of the date they are made and, except as required by law, we undertake no obligation to update any of the forward‑looking statements we make to reflect future events or developments or changes in our expectations or for any other reason.

We qualify all of our forward-looking statements by this cautionary note.

PART PART I

Overview

Cherokee Global Brands is a global marketer and manager of a portfolio of fashion and lifestyle brands it owns, licensingthat we own, brands that we create, and brands that we develop for others.  Company-owned brands, which are licensed in multiple consumer product categories and retail tiers around the world, include Cherokee, Hi-Tec, Magnum, 50 Peaks, Interceptor, Hawk Signature, Tony Hawk, Liz Lange, Completely Me by Liz Lange, Flip Flop Shops, Everyday California, Carole Little, Sideout and others, which are licensed in multiple consumer product categories and sectors.others.  As part of our business strategy, we also regularly evaluate other brands and trademarks for acquisition into our portfolio.  We believe the strength of our brand portfolio and platform of design, product sourcingdevelopment and marketing capabilities has made us one of the leading global licensors of style-focused lifestyle brands for apparel, footwear, accessories and home products and accessories.products.

We have licensing relationships with recognizable retail partners in their global locations to provide them with the rights to design, manufacture and sell products bearing our brands, and we also have licensing relationships with manufacturers and distributors for the manufacture and sale of products bearing our brands.  In addition, we have relationships with franchisees that operate Flip Flop Shops retail stores located worldwide.  As a brand marketer and manager, we do not directly sell product ourselves.  Rather, we earn royalties when our licensees and franchisees sell licensed products bearing the trademarks that we own.own, or when they sell products that we have designed and developed.

We provide our licensees with access to our proprietary 360-degree platform and believe that our retail responsiveness processbrand marketing and 360-degree value propositionmedia outreach, product design and development capabilities, and growth strategies and tactics have allowed Cherokee Global Brands to address the growing power of the consumer and the present and future needs of the wholesalersour wholesale and retailers that sell our portfolio of lifestyle brands.retail business partners and licensees.  Based on consumer research, retail insights and brand insights that we continually measure, evaluate and incorporate into our 360-degree platform, we believe Cherokee Global Brands has become a key strategic partner to our licensees.  We believe our licensing partners rely on our vision, which defines the growth potential and trajectories of our brands, the agility we afford to them through our 360-degree platform, which is designed to quickly seize opportunities and integrate new innovations, and the opportunity to realize global, multi-channel, multi-category scale through our portfolio of lifestyle brands and our platform capabilities.  As of February 3, 2018,2, 2019, we had 5446 continuing license agreements in approximately 80 countries, 42 of which pertained to brands in our Cherokee Global Brands segment and 12 of which pertained to our recently acquired Hi-Tec portfolio of brands.countries.  These arrangements include relationships with Walmart, Soriana, Comercial Mexicana, TJ Maxx, Tottus, Pick N Pay, Nishimatsuya, Big 5, Academy, JD Sports, Black’s and Lidl.Lidl, in addition to regional distributors.

Licensing and Other Selling Models

Direct to Retail

In Direct to Retail licensing, or “DTR” licensing, we grant retailers a “territory” or “channel-specific” license to use our trademarks on certain categories of merchandise.  We collaborate with our licensees’ product development staff and merchandisers on design direction, packaging, marketing and other aspects pertaining to the products sold with our trademarks, and in some cases our licensees modify or expand the designs or create their own designs to suit their seasonal, regional and category needs.  In several cases, the licensee is responsible for designing and manufacturing the merchandise, although many products are subject to our pre‑approved packaging, graphics and quality control standards and many of our licensees’ marketing campaigns are subject to similar oversight.  We plan to continue to solicit new licensees using our DTR licensing model in new territories and additional product categories as we seek to expand this part of our business.

We believe that the DTR licensing model generally offers each licensee, or retailer, the exclusive right to market multiple categories of products with a recognized brand within their territory, thereby offering licensees the ability to enhance their marketing strategies and achieve a competitive advantage over competing retailers.  This differentiation can also provide the retailer/licensee an opportunity to command a “premium” for our brand offering over private label price points, which can result in increased profit margins for the licensee, even after royalties have been

paid to the licensor.  The licensees generally directly source their own inventory, thereby eliminating the licensor’s exposure to inventory and manufacturing risk while allowing the licensees to benefit from large economies of scale.

Many of the world’s largest retailers have successfully introduced, and continue to introduce, new brands based on the DTR licensing model.  Examples of retailers participating in the DTR licensing model include Walmart, Target, Carrefour, Lidl Kohl’s and C&A, among others.

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Our DTR licensing strategy is premised on the proposition that, for many retailers worldwide, most aspects of the moderately priced apparel, accessory, footwear and home categories, including product development, design, merchandising, sourcing and distribution, can be executed most effectively by these retailers themselves, who typically command significant economies of scale, but also interact daily with their end consumers.  We believe many of these retailers may be able to obtain higher gross margins on sales and increase store traffic by sourcing, stocking and selling licensed products bearing widely recognized brand names (such as our brands) than by carrying only private label goods or by carrying only branded products obtained from third‑party vendors.  We also believe many retailers may be able to achieve enhanced profitability with our DTR licensing model because it allows them to avoid the substantial marketing costs associated with establishing and maintaining an in‑store brand.

Wholesale

We also license our brands to manufacturers and distributors based on wholesale arrangements.  Wholesale licensing arrangements generally involve licensing to manufacturers and distributors that produce and/or import various categories of apparel, accessories, footwear and home products under our trademarks and trademarks owned by third parties and sell the licensed products to retailers, which then resell the products to consumers.

Although our strategy has historically been focused primarily on the DTR licensing model, we have some historical wholesale licensees with respect to some of our brands, and we have recently entered into several new wholesale arrangements for the Cherokee, Hawk Signature and Tony Hawk and Liz Lange brands.  In addition, we are primarily pursuing a wholesale licensing strategy for global sales of our recently acquired Hi-Tec, Magnum, 50 Peaks and Interceptor brands.  We believe these arrangements signal a significant shift in our business strategy, from our historical focus on DTR licensing for all of our brands to a substantially greater focus on wholesale licensing for many of our key brands.  We believe these wholesale licensing arrangements may help to diversify our sources of revenue and licensee or other partner relationships and may provide additional avenues to obtain brand recognition and grow our Company, including an opportunity to further expand the reach of our brands in markets where a DTR licensing model may not be the most effective approach.

FranchiseDesign Services

We provide product design and development services for retailers that prefer to sell brands that they own.  We believe that our 360-degree platform provides the key ingredients for retailers to efficiently produce product ranges that are tailored for their target consumers and the retailers’ specific business needs.  Our franchise business involves licensingretail partners can rely on our Flip Flop Shopsproduct development and design capabilities, which are supported by our retail and brand marketing abilities, focusing their resources instead on retail operations.  We expect that together this will lead to third-party franchisees that operateincreased rates of sale, greater sell-through and improved retail stores under this brand name.  In our franchising operations, we typically specify the products and services that will be offered by the franchisees, and also provide them with an operating system and other operational support.  As part of our growth plan for Flip Flop Shops, we intend to expand the retail concept through a combination of new retail store locations and shop-in-shops.performance.

Brand Portfolio

Cherokee

Cherokee is an iconic, American family‑lifestyle brand, offering classic, casual and comfortable products at affordable prices.  Cherokee, which was initially launched as a footwear line in 1973, seeks to produce timeless classics, inspired by vintage Americana while continually being updated to account for modern trends.  After four decades, the Cherokee brand stands for confident, effortless and relaxed American style.  We believe this heritage positions the Cherokee brand for future growth and further international expansion.  Additional categories of Cherokee branded products are sold internationally, including adult apparel, home décor, textiles, outdoor furnishings and camping gear.

Royalty revenues from global sales of Cherokee branded products were $11.1 million, $23.0 million$9.7 and $25.6$11.1 million in Fiscal 2018, Fiscal 20172019 and Fiscal 2016,2018, respectively, which accounted for 38%, 68%40% and 74%38% of our total royalty revenues in these respective periods.years.  Historically, the Cherokee brand’s most significant licensee was Target Corporation (“Target”), which licensed the Cherokee brand almost two decades ago and had exclusive rights in the United States to its multi‑category product offering that encompassed kid’s apparel, accessories, footwear and school uniforms.  OurWe do not currently have license agreementagreements with Target after our license agreement covering sales of Cherokee branded products in the school uniforms category expired on January 31, 2018, and our license agreement with Target covering sales of all other Cherokee branded products in the United States expired on January 31, 2017.2018.  Beginning in Fiscal 2018, a variety of categories of products bearing the Cherokee brand are being distributed to retailers in the United States by multiple wholesale distributors under new license agreements we have established with these distributors.  The categories cover a wide range of Cherokee products, including casual sportswear, sweaters and outerwear in the men’s and boys’ categories, various products in the infant and toddler categories, active wear, sportswear, dresses, denim and sweaters in the girl’s category, and swimwear and sleepwear.  We also have other licensees for the Cherokee brand in various countries and territories around the world.

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Hi-Tec, Magnum, 50 Peaks and Interceptor

Founded in 1974 and based in the Netherlands, the Hi-Tec footwear brand seeks to produce quality shoes for a fair price that are “comfortable anywhere”.  Hi-Tec is known for its comfortable and lightweight hiking and walking shoes, and also produces technical outdoor footwear and various other types of shoes.  The Hi-Tec brand is one of the world’s leaders in sports and outdoor footwear.  Magnum produces work boot footwear, specific-purpose tactical boots and uniform footwear.  50 Peaks is a high spec, technical outdoor footwear brand that was born out of the accomplishments of adventurer Adrian Crane, who climbed the 50 highest peaks in each of the 50 states in the USA in a record time of 101 days.  Interceptor is a tactical footwear brand sold throughout the world.  These footwear brands are sold predominately in the United Kingdom, continental Europe, the United States, Canada, South Africa, South and Central America and Asia.  The Interceptor brand is currently sold at Walmart U.S. 

We acquired the Hi-Tec, Magnum, 50 Peaks and Interceptor brands in December 2016 in a transaction we refer to as the “Hi-Tec Acquisition”.  Before the acquisition, these brands were owned and operated under a distribution model whereby the products bearing these brands were designed, contracted for manufacture, sold and distributed by the brand owner through retailers, independent distributors, licensees, government contracts and directly to consumers via e-commerce.  We acquired the Hi-Tec brands with the objective of converting these operations to a brand licensing model that aligns with our operations.  To accomplish this objective, we have sold all of the former sales and distribution operations for the Hi-Tec brands to third parties and entered into new wholesale licensing arrangements with these third parties, and we have retained all of the intellectual property for the Hi-Tec brands.  We believe this brand licensing model conversion will allow us to better access the markets we think are best addressed by the Hi-Tec brands, more efficiently leverage cross-selling opportunities with our other brands, and more effectively expand the Hi-Tec brands into other product categories, such as apparel and accessories.

Founded in 1974 and based in the Netherlands, the  Royalty revenues from global sales of Hi-Tec, footwear brand seeks to produce quality shoes for a fair price that are “comfortable anywhere”.  Hi-Tec is known for its comfortable and lightweight hiking and walking shoes, and also produces technical outdoor footwear and various other types of shoes.  The Hi-Tec brand is one of the world’s leaders in sports and outdoor footwear.  Magnum, produces work boot footwear, specific-purpose tactical boots and uniform footwear. 50 Peaks is a high spec, technical outdoor footwear brand that was born outand Interceptor branded products were $11.6 and $9.7 million in Fiscal 2019 and Fiscal 2018, respectively, which accounted for 47% and 33% of the accomplishments of adventurer Adrian Crane, who climbed the 50 highest peaksour total royalty revenues in each of the 50 states in the USA in a record time of 101 days.  Interceptor is a tactical footwear brand sold throughout the world.  These footwear brands are sold predominately in the United Kingdom, continental Europe, the United States, Canada, South Africa, South and Central America and Asia.  The Interceptor brand is currently sold at Walmart U.S.these years.  

Hawk Signature and Tony Hawk

Tony Hawk is among the most well‑known athletes in skateboarding history and is the founder of the Hawk Signature and Tony Hawk apparel lines.  The Tony Hawk brand is designed for comfort, flexibility and durability and it embodies the “skate culture” lifestyle, combining style with performance.  The Hawk Signature and Tony Hawk brands have expanded our presence in the department store and specialty channels of distribution.

Royalty revenues from global sales of Hawk Signature and Tony Hawk branded products were $5.5 million, $5.1$0.6 million and $5.0$5.5 million in Fiscal 2018, Fiscal 20172019 and Fiscal 2016,2018, respectively, which accounted for 19%, 15%3% and 14%19% of our total royalty revenues in these respective periods.those years.  Since our acquisition of these brands in January 2014, their most significant licensee has been Kohl’s Illinois, Inc. (“Kohl’s”), which had exclusive rights to sell apparel bearing these brands in various specified categories of merchandise in the United States through July 2017, after which the rights became non-exclusive until the expiration of our license agreement with Kohl’s covering these brands on January 31, 2018.  Beginning in the third quarter of Fiscal 2018 when Kohl’s rights became non-exclusive, products bearing these brands are being distributed to a variety of retailers in the United States, including specialty, mid-tier,

regional, mass market, off-price and club stores, by several wholesale distributors under new license agreements we have established with these distributors.  In addition, we have separate wholesale and DTR license agreements with others to supply Hawk Signature and Tony Hawk apparel in Canada, Latin America and throughout Europe.

Liz Lange and Completely Me by Liz Lange

Liz Lange has gained wide acceptance as a modern “maternity and beyond” designer brand that brings women versatile, comfortable, affordable and flattering style for every stage of pregnancy.  Liz Lange maternity apparel debuted in over 1,500 Target stores in the United States in 2002 and was sold exclusively in Target stores in the United States until the expiration of our license agreement with Target covering this brand on January 31, 2018.  Beginning in Fiscal 2019, these products have started to be distributed by a wholesale distributor to various retailers in the United States under a master license agreement we have established with the distributor.  During 2010, Completely Me by Liz Lange was launched exclusively on the Home Shopping Network in the United States and The Shopping Channel in Canada.  The Completely Me brand consists

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Table of sophisticated and comfortable casual clothing and sportswear for women.

Flip Flop Shops

Flip Flop Shops is a retail franchise chain devoted to the hottest brands and latest styles of flip flops, casual footwear and accessories.  Flip Flop Shops currently has approximately 56 retail franchise shops in the United States, Canada, the Caribbean, the Middle East and South Africa.  Its locations carry definitive assortments of recognized brands, including OluKai, Sanuk, Cobian, Havaianas, Quiksilver, Roxy, Reef, and many more.  We acquired the Flip Flop Shop brand in October 2015.Contents

Everyday California

Crafted in Southern California, Everyday California is designed to embody the California spirit and celebrate living life to the fullest.  From California’s snowcapped mountains to its sandy shores, Everyday California apparel and accessories for men and women are the perfect match for any journey.  Everyday California was born out of a desire to share the California state of mind and the notion that adventure is just around the corner.We acquired the Everyday California brand in May 2015.

Point Cove

Point Cove was created in-house by Cherokee Global Brands'Brands' design team in close collaboration with Reliance Trends, a chain of retail stores in India.  The brand was launched in September 2015 and brings a combination of playfulness and sophistication to Reliance Trends stores in key categories, including apparel, accessories and footwear, for kids ages 2-14.  The collection features bold colors that bring the California spirit to India.

Carole Little

Carole Little was founded in 1975 by designer Carole Little through her love for contemporary clothing.  The Carole Little brand became recognized for colorful and unusual prints, soft two‑piece outfits and dresses, and has an ageless, independent attitude for the self‑confident woman.

Sideout

Conceived in 1983 by a California volleyball player, the Sideout brand took root at the beach, harnessing the easy spirit of a casual California lifestyle.  Ideal for a game of beach volleyball or a breezy vacation, Sideout products perform in quality, functionality and originality by offering casual, hip and cool clothing, footwear and accessories at affordable prices.

Royalties and Other Revenues

License Royalties

Our rights to receive royalties for sales of products bearing our brands or products we have developed and designed are set forth in the terms of our license agreements with various retailers and wholesalers.  The royalty rates we receive from our licensees vary depending on the terms of each licensing agreement.  Generally, our DTR license agreements include royalty rates based on a percentage of the retailer’s sales of licensed products.  Some of our DTR license agreements provide for fixed royalty rates, and other DTR license agreements provide for royalty rates that may decrease or otherwise fluctuate during a year as the retailer achieves sales volume thresholds.  For wholesale license agreements, royalty rates are generally based on a fixed percentage of wholesale sales from the wholesaler to the retailer or a fixed percentage of manufacturing costs.

In some cases, we require the licensee to guarantee a minimum royalty payment to us each year, although the amount of this minimum payment can vary significantly from licensee to licensee and is typically lower for wholesale licensees than for DTR licensees.  Our largestWe no longer have a significant concentration of fixed minimum annual royalty payment for Fiscal 2018 was $4.6 million from Kohl’s, and our largest such payments for Fiscal 2017 and Fiscal 2016 were $10.5 million each year from Target.in any one licensee.  As of February 3, 2018,2, 2019, we had contractual rights to receive over $64.5$60.7 million forward‑facing minimum royalty revenues over the next ten years, excluding any revenues that may be guaranteed in connection with future contract renewals.

Royalties are generally paid within 30 days after a quarterly selling period as defined in the applicable license agreement.  To ensure our licensees are reporting and calculating the appropriate royalties, all of our license agreements grant us the right to audit our licensees’ royalty reports to validate the amount of sales or purchases reported and royalties paid.

Franchise Fees and Royalties

Each franchisee who operates a Flip Flop Shops retail location in the United States has a franchise agreement with us that generally provides franchise rights for each location for an initial term of 10 years and typically includes a 10-year renewal provision, subject to certain conditions as specified in the franchise agreement.  The agreements provide the franchisee the rights to use the Flip Flop Shops brand name, trademarks and know-how in the operation of a Flip Flop Shops retail store.  Franchisees typically pay us an initial franchise fee and royalties based on a percentage of gross sales at each retail store.

In certain non-U.S. markets, we may grant a master franchisee exclusivity to develop or sub-franchise a territory for a specified number of new Flip Slop Shops locations in the territory based on a negotiated schedule.  In these instances, the master franchisee pays an initial master franchise fee, a per-location opening fee and a royalty fee based on a percentage of gross sales at the retail stores.

Trademarks and Other Intellectual Property Rights

We hold various trademarks, including Cherokee®, Hi-Tec®, Magnum®, 50 Peaks®, Interceptor®, Hawk Signature®, Tony Hawk®, Liz Lange®, Completely Me by Liz Lange®, Flip Flop Shops®, Everyday California®, Carole Little®, Saint Tropez-West®, Chorus Line®, All That Jazz®, Sideout®, Sideout Sport® and others for numerous categories of apparel and other goods.  These trademarks are registered with the United States Patent and Trademark Office, and we also hold trademarks or trademark applications for each of these brand names and others with similar government agencies in a number of other countries.  Our trademark registrations typically expire after seven to ten years depending on the jurisdiction, although we intend, and expect to be able, to renew these trademarks for as long as we continue to use them.  Our business is dependent on our trademarks, and we monitor unauthorized uses of these trademarks on an ongoing basis.  In addition to trademarks, we also rely on know‑how, trade secrets and contractual restrictions to protect our intellectual property rights domestically and internationally.

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Competition

Merchandise bearing our brand names and goods that are carried by Flip Flop Shops retail storeswe have developed and are subject to intense competition.  Competing brands with respect to our Cherokee brand include Polo Ralph Lauren, Tommy Hilfiger, and private label brands (developed by retailers) such as Faded Glory, Arizona and Route 66, and competing brands with respect to the Hi-Tec and Magnum brands include Columbia, Merrell, Keen, North Face, Timberland, Bates, Wolverine and other private label brands.  Our other brands also face competition from these and other numerous brands.  Factors that shape the competitive environment for our brands include quality of garment or accessory construction and design, brand name, style and color selection, price, fashion and other trends, avenue of purchase (including in stores and online), and the manufacturer’s ability to respond quickly to retailer and consumer demand.

Our business plan focuses on creating strategic alliances with major retailers and wholesalers for their sale of products bearing our brands through the licensing ofor products that we have developed and designed.  We license our trademarks directly to retailers, engagingand we engage wholesalers to manufacture and distribute products bearing our brands and sell these products to retailers.  We also develop and design products for retailers and entering into franchise relationships with Flip Flop Shops retail store owners.that prefer to sell products bearing their own brand names.  Therefore, our degree of success is dependent on the strength of our brands, consumer acceptance of our brands, our licensees’ ability to design, manufacture and sell products bearing our brands and our franchisees’licensees’ ability to sell products in their stores,we have developed and designed, all of which is dependent on the ability of us our licensees and our franchiseeslicensees to respond to ever-changing consumer demands.  In addition, we compete with companies that own other brands and trademarks, as these companies could enter into similar licensing arrangements with retailers and wholesalers in the United States and internationally.  These arrangements could be with our existing retail and wholesale partners, thereby competing with us for consumer attention and limited floor or rack space in the same stores in which our branded products are sold, and vying with us for the time and resources of the retailers and wholesale licensees that manufacture and distribute our products.

Seasonality

Historically, ourOur business and performance have been subject to certaindo not reflect significant seasonality trends, particularly due to our former license agreement with Target for the Cherokee brand, which had a royalty rate that, for most product categories, reduced after Target achieved specified cumulative sales volume thresholds during each fiscal year, therefore resulting in higher revenues in the first part of our fiscal year and lower revenues in the latter part of our fiscal year.  With the expiration of the Target license agreement at the end of Fiscal 2017, our business and performance no longer reflect this seasonality trend.  Furthermore, if andtrends.  However, to the extent royalty revenues grow from our new wholesale licensees, we expect our revenues may shift toward the latter half of our fiscal year, which would be consistent with the normal, holiday-based seasonal pattern of retail sales.

Government Regulations

The U.S. Federal Trade Commission (the “FTC”) and various state laws regulate our Flip Flop Shops franchising activities.  For instance, the FTC requires that franchisors make extensive disclosure to prospective franchisees before the execution of a franchise agreement, and several states require registration and disclosure in connection with franchise offerings and sales.  In addition, ourOur business practices in international markets are subject to the requirements of the U.S. Foreign Corrupt Practices Act (the “FCPA”) and any applicable foreign anti-bribery laws.  We are also subject to various laws that are generally applicable to businesses in our industry, such as work safety and labor laws that govern certain of our operations and our employee relations.  Our violation of any of these laws could subject us to significant fines, criminal sanctions and other penalties, which could have a material adverse effect on our business and results of operations.

Employees

As of February 3, 2018,2, 2019, we employed 6043 persons.  None of our employees are represented by labor unions, and we believe that our employee relations are satisfactory.

Financial Information about Segments and Geographic Areas

After the Hi-Tec Acquisition, our reportable segments consist of Cherokee Global BrandsApproximately 75% and Hi-Tec.  The Hi-Tec segment includes our operations associated with our Hi-Tec, Magnum, 50 Peaks and Interceptor  brands, and the Cherokee Global Brands segment includes our operations associated with all of our other owned and represented brands.  Prior to the Hi-Tec Acquisition, our business activities comprised one reportable segment.  See Note 13 to our consolidated financial statements included in this Annual Report for financial information about our reportable segments.

Approximately 55%, 38% and 30% of our revenues were derived from our international licensees and franchisees in Fiscal 2018, Fiscal 20172019 and Fiscal 2016,2018, respectively, and we face risks related to these foreign operations.  See Item 1A, “Risk Factors” for information about these risks, and see Note 1314 to our consolidated financial statements included in this Annual Report for certain financial information by geographic area.

General Information

Cherokee Global Brands was incorporated in Delaware in 1988.  We maintain a website at www.cherokeeglobalbrands.comwww.cherokeeglobalbrands.com., and our Nasdaq trading symbol is “CHKE”.  We make our annual reports on Form 10‑K, quarterly reports on Form 10‑Q, current reports on Form 8‑K, and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act available free of charge on our website as soon as reasonably practicable after we file these materials with, or furnish them to, the SEC.  All references to our website in this Annual Report are inactive textual references, and the contents of our website are not incorporated in or otherwise considered part of this Annual Report.

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Item 1A. RISK FACTORSTable of Contents

The occurrence of any of the risks, uncertainties and other factors described below and elsewhere in this Annual Report and the other documents we file with the SEC could have a material adverse effect on our business, financial condition, results of operations and stock price, and could cause our future business, financial condition, results of operations and stock price to differ materially from our historical results and the results contemplated by any forward-looking statements we may make herein, in any other document we file with the SEC, or in any press release or other written or oral statement we may make.  You should carefully consider all of these risks and the other information in this Annual Report and the other documents we file with the SEC before making any investment decision with respect to our securities.  The risks described below and elsewhere in this Annual Report are not the only ones we face.  Additional risks we are not presently aware of or that we currently believe are immaterial may also impair our business, financial condition and results of operations or cause our stock price to decline.

Risks Related to Our Business

Our business is subject to intense competition.

Merchandise bearing our brand names and goods that are carried by Flip Flop Shops retail storeswe have developed and designed are subject to intense competition.  Competing brands with respect to our Cherokee brand include Polo Ralph Lauren, Tommy Hilfiger, and private label brands (developed by retailers) such as Faded Glory, Arizona and Route 66, and competing brands with respect to the Hi-Tec and Magnum brands include Columbia, Merrell, Keen, North Face, Timberland, Bates, Wolverine and other private label brands.  Our other brands also face competition from these and other numerous brands.  Factors that shape the competitive environment for our brands include quality of garment or accessory construction and design, brand name, style and color selection, price, fashion and other trends, avenue of purchase (including in stores and online), and the manufacturer’s ability to respond quickly to retailer and consumer demand.

Our business plan focuses on creating strategic alliances with major retailers and wholesalers for their sale of products bearing our brands through the licensing of our trademarks directly to retailers, engaging wholesalers to manufacture and distribute products bearing our brands and sell these products to retailers, and entering into franchise relationshipsdesign services agreements with Flip Flop Shops retail store owners.retailers and wholesalers to develop and design products bearing the brands that those retailers and wholesalers own.  Therefore, our degree of success is dependent on the strength of our brands, consumer acceptance of our brands, our licensees’ ability to design, manufacture and sell products bearing

our brands and our franchisees’other licensees’ ability to sell products in their stores that we have developed and designed, all of which is dependent on the ability of us our licensees and our franchiseeslicensees to respond to ever-changing consumer demands.  We cannot control the level of consumer acceptance of our brands and changing preferences and trends may lead customers to purchase other products.  Further, we cannot control the level of resources that our other licensees or franchisees commit to supporting ourtheir brands for which we have developed and ourdesigned product. Our licensees may choose to support products bearing other brands to the detriment of our brands because our agreements generally do not prevent them from licensing or selling other products, including products bearing competing brands. 

In addition, we compete with companies that own other brands and trademarks, as these companies could enter into similar licensing arrangements with retailers and wholesalers in the United States and internationally.  These arrangements could be with our existing retail and wholesale partners, thereby competing with us for consumer attention and limited floor or rack space in the same stores in which our branded products are sold, and vying with us for the time and resources of the retailers and wholesale licensees that manufacture and distribute our products.  These companies may be able to respond more quickly to changes in retailer, wholesaler and consumer preferences and devote greater resources to brand acquisition, development and marketing.  We may not be able to compete effectively against these companies.

If we or our brands are unable to compete successfully against current and future competitors, we may be unable to sustain or increase demand for products bearing our brands, or we may be unable to develop and design products bearing brands owned by our licensees that compete successfully in the retail market place, which could have a material adverse effect on our reputation, prospects, performance and financial condition.

We are subject to the risks of the retail business that apply to retailers selling our products.

There are numerous risks and other factors applicable to the businesses of retailers (including our DTR licensees and franchisees and retailers to which our wholesale licensees distribute products) that can impact the sale of products that bear our brands and, with respect to our franchisees,other licensees, the sale of products bearing otherthat we have developed and designed that bear their brands thatand are sold in their stores.  Any decline in retail sales of our branded products by retailersor products that we have designed for others could adversely affect our revenues.

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Factors that may adversely affect retailers and their sales of products include, among others: (i) consumer preferences regarding fashion trends and styles, which can be region-dependent and subject to rapid and significant fluctuations; (ii) consumer preferences regarding where to shop; (iii) the growth of online shopping and the ability of a retailer to market and sell products through these avenues; (iv) fluctuating retail prices; (v) the reputation of or general consumer perceptions about the retailers that sell our brands; (vi) security breaches or other cybersecurity incidents; (vii) shifts in the seasonality of shopping patterns; (viii) weather, environmental or other conditions that may impact consumer shopping activity; (ix) changes in the availability or cost of capital in light of a retailer’s financial condition, capital requirements and other factors; (x) labor strikes or other interruptions that impact supply chains and transport vendors; (xi) the impact of excesses or shortages of retail or manufacturing capacity; (xii) changes in the cost of accepting various payment methods and changes in the rate of utilization of these payment methods; (xiii) material acquisitions or dispositions; (xiv) investments in new business strategies; (xv) the success or failure of significant new business ventures or technologies; (xvi) general business and operational risks, including, among others, the ability to obtain and maintain desirable store locations, litigation risks, departures of key personnel or other employee matters; (xvii) actions taken or omitted to be taken by legislative, regulatory, judicial and other government authorities and officials; (xviii) natural disasters, the outbreak of war, acts of terrorism or other significant national or international events; and (xviv) the other risks discussed in these risk factors.

We have incurred a significant amount of indebtedness, and our level of indebtedness and restrictions under our indebtedness could adversely affect our operations and liquidity.

WeOn August 3, 2018, we entered into a senior secured credit facility with Cerberus Business Finance, LLC (“Cerberus”) in December 2016.that provided a $40.0 million term loan and issued $13.5 million of subordinated promissory notes. On January 30, 2019, the credit facility was amended to provide an additional $5.3 million term loan.  As of February 3, 2018, $49.52, 2019, $58.6 million in principal amount was outstanding under ourthese financing arrangements.  The term loanloans mature in August 2021 and revolving credit facility with Cerberus.  Principal repaymentsrequire quarterly principal payments and monthly interest payments based on LIBOR plus a margin.  The subordinated promissory notes mature in November 2021.  Interest is payable monthly on the subordinated promissory notes, but no periodic amortization payments are required quarterly under the Cerberus credit facility, and any remaining outstanding indebtedness is due in December 2021.required.

The Cerberussenior secured credit facility imposes various restrictions and covenants regarding the operation of our business, including covenants that require us to obtain Cerberus’sthe lender’s consent before we can, among other things and subject to certain

limited exceptions: (i) incur additional indebtedness or additional liens on our property; (ii) consummate acquisitions, dispositions, mergers or consolidations; (iii) make any change in the nature of our business; (iv) enter into transactions with our affiliates; or (v) repurchase or redeem any outstanding shares of our common stock or pay dividends or other distributions, other than stock dividends, to our stockholders.  The Cerberussenior secured credit facility also imposes financial covenants that set financial standards we are required to maintain.maintain, including the requirement to maintain specified levels of Adjusted EBITDA, as defined in the credit agreement (approximately $9.5 million for the trailing twelve months as of February 1, 2020), and maintain a minimum cash balance of $1.0 million.  We are also required to maintain a borrowing base comprising the value of our trademarks that exceeds the outstanding balance of the term loan.  If the borrowing base is less than the outstanding term loan at any measurement period, then we would be required to repay a portion of the term loan to eliminate such shortfall.  Further, as collateral for the Cerberus credit facility, we have granted a first priority security interest in favor of Cerberusthe lender in substantially all of our assets (including trademarks), and our indebtedness is guaranteed by our subsidiaries.  If we do not comply with these requirements or if there is a change of control of the Company, it would be an event of default.  If an event of default occurs under the credit facility that is not forborne, cured or waived in accordance with the terms of the credit facility, Cerberusthe lender has the right to terminate its obligations under the credit facility, accelerate the payment on any unpaid balance of the credit facility and exercise any other rights it may have, including foreclosing on our assets that serve as collateral for the loan.

As of  Furthermore, a default under our term loan agreement would also trigger a default under our subordinated promissory note agreements, which would give those lenders the end of the first and second quarters of Fiscal 2018, we had failedright to comply with certain of the financial and other covenants in the Cerberus credit facility.  Although Cerberus agreed to forbear from exercising its rights or remediesterminate their obligations under the Cerberus credit facility with respect to these eventssubordinated promissory note agreements and accelerate the payment of default for specified periods and ultimately agreed to waive these events of default, Cerberus may not agree to forbear or waive any future failure by us to fully comply with the terms of the credit facility.  For instance, based on our current forecasts, we anticipate that we will violate certain of our financial covenants in the Cerberus credit facility (specifically, our covenant to maintain certain liquidity levels) within the next twelve months without an infusion of cash or an increase in borrowing capacity under our revolving credit facility, which has caused an explanatory paragraph to be included in the report of our independent registered public accounting firm contained in this Annual Report describing an uncertainty about our ability to continue as a going concern.  The inclusion of this explanatory paragraph itself results in noncompliance with covenants in the Cerberus credit facility, and as a result, we are not in compliance with this credit facility as of the date of this Annual Report.  Additionally, in connection with Cerberus’ agreement to waive our prior events of default, Cerberus required that the credit facility be amended to, among other things, add new financial and other covenants with which we must comply, including maintaining certain liquidity levels, obtaining specified amounts of proceeds from equity financings and arranging for and effecting purchases by one or more third parties of participation interests in the credit facility, and Cerberus could again impose additional or more burdensome covenants or requirements in connection with any amendment or waiver we may be able to obtain related to our current and potential future compliance failures. These failures to comply with the Cerberus credit facility subject us to significant risks, including Cerberus’s ability to exercise any of its rights upon the occurrence of an event of default.  If any of these rights were to be exercised, our financial condition and liquidity would be materially adversely affected and our ability to continue operations could be materially jeopardized.  Further, even if a waiver or amendment with respect to any future event of default could be obtained, we may be required to comply with more new covenants or other requirements as a condition to the waiver or amendment, which could impose burdensome obligations on our operations and financial condition that we may not be able to satisfy.those promissory notes.

We may seek to refinance all or a portion of our outstanding indebtedness in the future.  Any such refinancing would depend on the capital markets and the state of our industry, business and financial condition at the time, which could affect our ability to obtain attractive refinance terms if or when desired or at all.

The amount of our outstanding indebtedness, which is substantial, could have an adverse effect on our operations and liquidity, including by, among other things: (i) making it more difficult for us to pay or refinance our debts as they become due during adverse economic and industry conditions, because we may not have sufficient cash flows to make our scheduled debt payments; (ii) causing us to use a larger portion of our cash flows to fund interest and principal payments, thereby reducing the availability of cash to fund working capital, product development, capital expenditures and other business activities; (iii) making it more difficult for us to take advantage of significant business opportunities, such as acquisition opportunities or other strategic transactions, and to react to changes in market or industry conditions; and (iv) limiting our ability to borrow additional monies in the future to fund the activities and expenditures described above and for other general corporate purposes as and when needed, which could force us to suspend, delay or curtail business prospects, strategies or operations.

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Our future capital needs may be uncertain and we may need to raise additional funds in the future, but such funds may not be available when needed, on acceptable terms or at all.

Our capital requirements in future periods may be uncertain and could depend on many factors, including, among others: (i) acceptance of, and demand for, our brands; (ii) the extent to which we invest in our existing brand portfolio or any new brands; (iii) the number and timing of our acquisitions and other strategic transactions; (iv) the costs of developing new brands; (v) the costs associated with our efforts to expand our business; and (vi) the costs of litigation and enforcement activities to protect and defend our trademarks.  We may need to raise additional funds to meet our capital requirements.  For example, we expect to seek an increase in our borrowing capacity under our revolving credit facility with Cerberus or additional liquidity from other lenders in light of our current and forecasted compliance failures under the credit facility and the substantial doubt about our ability to continue as a going concern.  However, these or any other necessary funds may not be available when needed, on favorable terms or at all.  If we issue equity or convertible debt securities to raise additional funds, as we did with our public offering of our common stock in December 2016, and our private placement equity financing with certain of our directors, officers and large stockholders in August 2017, and our refinancing of our senior secured credit facility in August 2018 and additional borrowings under that facility in January 2019, our existing stockholders would experience dilution and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders.  If we incur additional debt to raise funds, as we did with our Cerberussenior secured credit facility, established into in December 2016, we may become over-leveraged and we may become subject to restrictive financial or operating covenants that could limit our ability to operate our business and expose us to significant risks in the event of any compliance failure.  Moreover, in light of our current level of indebtedness, which is significant, and our current noncompliance with our indebtedness with Cerberus, additional debt or equity capital may not be available on terms we consider advantageous or favorable to us.  In addition, we may seek equity and/or debt financing from sources that expose us to additional risks or negative effects, such as, for example, obtaining funding from related parties in transactions that create conflicts of interest between us and the related party, as we did with our private placement in August 2017 mentioned above and our arrangement of purchases by certain of our directors, officers and large stockholders of participation interests in our Cerberus credit facility in December 2017.2017 and the exchange of those participation interests into junior subordinated notes in our new credit facility in August 2018.  Further, we may incur substantial costs in pursuing future capital-raising transactions, including investment banking, legal and accounting fees, printing and distribution expenses and other costs.

Moreover, our late filing of our annual report for Fiscal 2017 and our quarterly report for the first quarter of Fiscal 2018 renders us ineligible to register the offer and sale of our securities using a registration statement on Form S-3, and we will not regain such eligibility until we have timely filed all of our periodic reports with the SEC for 12 consecutive calendar months.  We do not know when we will meet this requirement, which depends on our ability to file our periodic reports on a timely basis in the future.  If we seek to raise capital through an offering of our securities while we remain ineligible to use Form S-3, our inability to use this form could limit our financing alternatives, reduce our ability to access capital in a timely manner and increase our transaction costs, any of which could make it more difficult to execute any such transaction successfully and could have an adverse effect on our prospects and financial condition.

If we cannot raise funds when needed, on acceptable terms or at all, we may not be able to develop or enhance our brand portfolio or marketing initiatives, execute our business plan, take advantage of future opportunities, or respond to competitive pressures or customer requirements.  Any of these outcomes may materially harm our business, results of operations and financial condition.

Our wholesale licensing arrangements subject us to a number of risks.

We have recently entered into several new wholesale arrangements in connection with a significant shift in our business strategy, from our historical focus on a DTR licensing model for all of our brands to a substantially greater focus on wholesale licensing for many of our key brands.  Although we believe our new wholesale licensing arrangements may have certain benefits, these arrangements are subject to a number of risks and our beliefs could turn out to be wrong.  If any of these risks occur and we do not achieve the intended or expected benefits of our strategy shift toward wholesale arrangements, our results of operations, liquidity and financial condition could be materially adversely affected.  Moreover, we have less experience with the wholesale licensing model than the DTR licensing model and we may find it difficult to develop reliable forecasts and expectations regarding royalty revenues from these arrangements, either of which could harm our business and our operating results.

The terms of our wholesale licensing arrangements differ in certain important ways from the terms of our DTR licensing arrangements.  For instance, the minimum annual royalty obligations under our wholesale licensing arrangements are significantly smaller than the minimum annual royalty obligations in some of our DTR licensing arrangements, including our former license agreements with Target and Kohl’s.  Also, our new wholesale license agreements for the Cherokee brand and the Hi-Tec and Magnum brands are not subject to reducing royalty rates based on cumulative sales levels, as was our former license agreement with Target for the Cherokee brand.  These different terms could have a material impact on our performance.  For example, the consistent royalty rates of these wholesale licensing arrangements could cause our performance and cash flows to be more strongly influenced by the seasonality of the retail business and thus subject to more material fluctuations between periods, and the lower minimum royalty obligations could cause our aggregate annual royalty revenues to decline if retail sales volume for our brands decreases and we become dependent on minimum royalty obligations.  These effects on our performance could become increasingly significant in future periods, to the extent our new wholesale licensees gain traction over time with new retailers and consumer bases and the proportion of our royalty revenues from these licensees increases, or if we pursue similar wholesale arrangements in the future.

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Additionally, in wholesale licensing arrangements, we have limited ability to control various aspects of the manufacturing process, including access to raw materials, the timing of delivery of finished products, the quality of finished products and manufacturing costs.  Our wholesale licensees may not be able to produce finished products of the quality or in the quantities that are sufficient to meet retailer and consumer demand in a timely manner or at all, which could result in an inability to generate revenues from any such products and loss of confidence in our brands.  Interruptions or delays in the manufacturing process can occur at any time and for a variety of reasons, many of which are outside our control, including, among others, unforecasted spikes in demand, shortages of raw materials, labor disputes, backlogs, insufficient devotion of resources to the manufacture of products bearing our brands, or problems that may arise with manufacturing operations or facilities or our wholesale licensees’ businesses generally.  On the other hand, our wholesale licensees may produce inventory in excess of retailer and consumer demand, in which case over-supply may cause retail prices of products bearing our brands to decline.  Further, we compete with other brand owners for the time and resources of our wholesale licensees, which could curtail or limit our ability to engage new or maintain relationships with existing wholesale licensee partners on acceptable terms or at all.  Further, the unplanned loss of any of our wholesale licensees could lead to inadequate market coverage for retail sales of products bearing our brands, create negative impressions of us and our brands with retailers and consumers, and add downward pricing pressure on products bearing our brands as a result of liquidating a former wholesaler’s inventory of such products.  The occurrence of any of these risks could adversely impact our reputation, performance and financial condition.

Our acquisition of the Hi-Tec and Magnum brands and conversion of these brands to a new business model is subject to significant risks.

We recently acquired the Hi-Tec, Magnum and other associated footwear brands in December 2016, and in January 2018, we completed our conversion of these brands from their former distribution model to a brand licensing model that aligns with our operations.  Although we believe the acquisition of these brands and our conversion of their selling model may have certain benefits, the acquisition and conversion of these brands are subject to a number of risks and our beliefs could turn out to be wrong.  If any of these risks occur and we do not achieve the intended or expected benefits of our acquisition and conversion of these brands, we may never generate sufficient revenues from these brands to recoup their costs and our results of operations, liquidity and financial condition could be materially adversely affected.

The Hi-Tec, Magnum and other associated footwear brands have not historically been marketed, distributed or sold under a brand licensing model, and it is uncertain whether this model will be effective for these brands.  As a result, we may not be able to reliably forecast or predict the impact of these brands on our revenues or other aspects of our results of operations until they have been operated under a licensing model for some time.  Further, the roles and responsibilities of the various parties in the distribution chain for these products, including our Company, as the licensor of the brands and overseer of high-level marketing strategies, the wholesalers we engage to manufacture and distribute products bearing these brands, and the retailers to which the wholesalers sell these products for resale to consumers, are different as a result of our conversion of these brands to a brand licensing model.  The wholesalers we have engaged for these brands to date, which consist primarily of former operating partners and distributors of these brands, may not be familiar with or accustomed to a brand licensing model and may not be successful in converting their distribution efforts

to align with this model.  Further, as we make efforts to expand these brands to new geographic and consumer markets, we expect to pursue new arrangements with additional wholesale licensees for these brands.  However, any such efforts are subject to risks, including risks associated with engaging new licensees, which may not be willing or able to operate within a brand licensing model or generate material revenues to us under this model, and risks associated with expanding to new markets, which may consist of retailers and consumers who are unfamiliar with or unwilling to accept our brands.  Any such outcome could result in failures to sell products bearing these brands in volumes and at prices that generate expected revenue levels to us.

We rely on the accuracy of our licensees’ and franchisees’ sales reports for reporting and collecting our royalty revenues, and if these reports are untimely or incorrect, our revenues could be delayed or inaccurately reportedor collected

Most of our royalty revenues are generated from retailers that manufacture and sell products bearing our brands in their stores and on their websites, and from wholesalers that manufacture and distribute products bearing our brands and sell these products to retailers.  In addition, we generate royalty revenues from franchisees of the Flip Flop Shops brand based on sales oflicensees that sell products in their stores.that we have developed and designed.  Under our existing agreements, our licensees and franchisees pay us fees based on their sales of products or, for some of our wholesale licensees, based on their manufacturing costs.  As a result, we rely on our licensees and franchisees to accurately report their sales or costs in collecting our license and franchisedesign fees, preparing our financial reports, projections and budgets and directing our sales and marketing efforts.  Although all of our agreements permit us to audit our licensees, and franchisees, if any of them understate their sales or costs, we may not collect and recognize the royalty revenues to which we are entitled on a timely basis or at all, or we may endure significant expense to obtain compliance.

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We utilize various licensing and selling models in our operations, and our success is dependent on our ability to manage these different models.

In addition to our historical focus on a DTR licensing model, we are shifting our focus for some of our key brands to a wholesale licensing strategy and we use a franchisingproduct development and design model for our Flip Flop Shops brand.brands owned by others.  Although we believe these various licensing and sellingdesign models could have certain benefits, these models could themselves be unsuccessful and our beliefs could turn out to be wrong.  Moreover, our pursuit of these different models could divert management’s attention and other resources, including time and capital, from our historical focus on a DTR licensing strategy.  As a result, our future success depends in part on our ability to successfully manage these multiple licensing and sellingdesign models.  If we are unable to do so, our performance, financial condition and prospects could be materially harmed.

Our business continues to depend in part on the success of our Direct to Retail licensing model.

Our DTR licensing model has been our historical focus and it continues to be an important part of our operations.  We believe the DTR licensing model has become more widely accepted by many retailers worldwide, and our business plan is based in part on the success of this model with our existing retail licensees and with new retailers we may solicit to license our brands under this model in new territories and additional product categories.  However, our beliefs regarding the DTR licensing model may turn out to be wrong, and it may not achieve or sustain increased acceptance or its use by retailers could decline.  If our existing or potential future retail licensees do not perceive the DTR licensing model to be advantageous to them, which could occur for a variety of reasons, they may move away from this model and pursue alternatives, such as purchasing from wholesalers or manufacturing private label products.  In that event, this aspect of our business may prove unsuccessful and our financial condition and performance could suffer material adverse effects.

Our business has historically been largely dependent on royalties from Target and Kohl’s, which no longer sell products bearing any of our brands.

In the past, Target has had exclusive rights to sell Cherokee and Liz Lange branded products for all product categories in the United States, and royalty revenues from Target’s sales of these products accounted for a large portion of our revenues during Fiscal 2017, Fiscal 20162018 and other historical periods.  In addition, Kohl’s has had exclusive rights

to sell Hawk Signature and Tony Hawk branded products in all product categories in the United States, and royalty revenues from Kohl’s’ sales of these products also accounted for a significant portion of our revenues during Fiscal 2018 Fiscal 2017, Fiscal 2016 and other historical periods.  However, our license agreements with Target covering sales of Cherokee branded products in the school uniforms category and Liz Lange products expired on January 31, 2018, our license agreement with Target covering sales of Cherokee branded products in all other categories expired on January 31, 2017, and our license agreement with Kohl’s covering sales of Hawk Signature and Tony Hawk branded products expired on January 31, 2018.  As a result, after January 31, 2018, Target and Kohl’s no longer sell products bearing any of our brands.

Replacing the royalty revenues received from Target and Kohl’s is a significant challenge, due in part to the large size of these former licensees’ businesses and the significant amount of royalty revenues they have historically contributed to our results, as well as the difficulties of establishing relationships with new licensees generally, as they may have no prior experience with us or our brands and they may need to generate demand for our brands among entirely new retailer and consumer bases, which could take many years and involve significant costs.  Even though it is a normal part of our business to replace licensees whose arrangements with us have expired without renewal or have otherwise terminated, and even though we have entered into several new wholesale licensing agreements that are intended to replace, over time, the royalty revenue generated by our former license agreements with Target and Kohl’s, the royalty revenues we receive from the new licensees may not in the near term, or ever, reach or exceed the royalty revenues earned under the previous relationships.    As a result, the expiration of these license agreements has had an adverse effect on our royalty revenues for these brands and our overall business and results in Fiscal 2019 and Fiscal 2018, and this effect could continue or worsen in future periods as the transition to our new licensees for these brands remains ongoing.  Moreover, as with all licensee replacements, the royalty revenues we receive from the new licensees may not in the near term, or ever, reach or exceed the royalty revenues earned under the previous relationships, which could have a material adverse effect on our business and results of operations over the long term.

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The failure of our licensees or franchisees to sell products that generate royalties to us, to pay us royalties pursuant to their license or franchise agreements with us, or to renew these agreements could negatively affect our results of operations and financial condition.

Our revenues are dependent on royalty payments made to us under our license and franchisedesign services agreements.  Although some of our license agreements guarantee a minimum royalty payment to us each year, the failure of our licensees or franchisees to satisfy these or the other obligations under their agreements with us, their decision to not renew their agreements with us or their inability to grow or maintain their sales of products bearing our brands or their businesses generally could cause our revenues to decline.  These events or circumstances could occur for a variety of reasons, many of which are outside our control, including business and operational risks that impact our licensees’ and franchisees’ ability to make payments and sell products generally, such as obtaining and maintaining desirable store locations and consumer acceptance and presence; retaining key personnel, including the specific individuals who work on sales and marketing for products bearing our brands; and liquidity and capital resources risks.  Further, while we historically have been dependent on our relationships with Target and Kohl’s, the failure by any of our other key licensees or franchisees or the concurrent failure by several licensees or franchisees to meet their financial obligations to us or to renew their respective license or franchise agreements with us could materially and adversely impact our results of operations and our financial condition.

Our franchise business exposes us to numerous risks.

In connection with our acquisition of the Flip Flop Shops brand in October 2015, we acquired, and became the franchisor under, a number of franchise agreements with franchisees of this brand.  Many of these franchisees maintain one or more Flip Flop Shops retail stores located across the globe, including in the United States, Canada, the Caribbean, the Middle East and South Africa.  This Flip Flop Shops franchise business exposes us to a variety of risks, including, among others, that: (i) we may not be able to find capable and experienced franchisees who can implement the Flip Flop Shops brand concept and strategies or sell merchandise and operate stores in a manner consistent with our standards and requirements; (ii) even if we are able to attract capable franchise owners, these franchisees may not be able to open new Flip Flop Shops retail stores in a timely manner, due to inabilities to secure desirable site locations, construct and develop new store locations or other factors, or may not be able to manage and maintain the stores once opened, due to

inabilities to obtain adequate financing, attract qualified operating personnel or other factors; (iii) the third-party brands that are sold at Flip Flop Shops stores could decline in popularity or decide to stop selling their merchandise at some or all Flip Flop Shops store locations; (iv) neighborhood or economic conditions or other demographic patterns where existing or new Flip Flop Shops stores are located could decline or otherwise change in a negative way; and (v) our franchise business is subject to complex and varying franchise laws and regulations imposed by the U.S. federal and state and foreign jurisdictions in which we operate, including regulation by the FTC, and we may need to devote significant costs and other resources to comply with these laws and regulations and we may be subject to various penalties, including monetary fines or other sanctions, if we fail to comply with these laws and regulations.  If any of these risks were to materialize, the reputation of the Flip Flop Shops brand and our other brands could suffer, sales volume at one or more Flip Flop Shops store locations could decline, existing store locations may close or new store locations may fail to open at expected rates or at all, or our franchise revenues relating to this brand could be limited, curtailed or reduced, any of which could harm our performance and prospects.

Our business may be negatively impacted by general economic conditions.

Our performance is subject to worldwide economic conditions and the corresponding impact on levels of consumer spending, which may affect our licensees’ and franchisees’ retail sales.  It is difficult to predict future levels of consumer spending, and any such predictions are inherently uncertain.  Many factors affect the level of consumer spending in the industry in which we operate, including, among others, prevailing economic conditions; levels of employment, salaries and wage rates; energy costs; interest rates; the availability of consumer credit; tax rates; and consumer confidence in future economic conditions.  Further, our industry is heavily influenced by general economic cycles, as purchases of apparel, footwear, accessories and home products tend to decline in periods of economic uncertainty, slowdown or recession because disposable income typically declines during these periods.  As a result, the risks associated with our business are generally more acute in these periods.  For instance, general uncertainty in U.S. economic, political, regulatory, and market conditions has increased following the results of the 2016 U.S. presidential election due to the unpredictability of the policies and direction of the current administration, and these uncertainties may result in decreased confidence in the U.S. or global economy and decreased levels of consumer spending.  In addition to decreased consumer spending generally, periods of uncertainty, slowdown or recession may be accompanied by decreased demand for, or additional downward pricing pressure on, the products carrying our brands.  Accordingly, any prolonged economic slowdown, a lengthy or severe recession or any other negative trend in the U.S. or global economy would likely have a material adverse effect on our results of operations, financial condition and business prospects.

We are subject to additional risks associated with the international scope of our operations.

Many of our licensees and franchisees are located outside the United States, and we aim to expand our international revenues. In addition, our business associated with our Hi-Tec family of footwear brands is managedwe have subsidiaries and operated by our Dutch subsidiary.employees in Amsterdam and other countries outside the United States.

We face numerous risks in doing business outside the United States, including, among others: (i) our general lack of experience operating foreign subsidiaries; (ii) unusual, unfamiliar or burdensome foreign laws or regulatory requirements, including tax, labor, contract, intellectual property protection and other laws, and unexpected changes to these laws or requirements; (iii) difficulties complying with the laws of multiple jurisdictions; (iv) uncertainties in some jurisdictions related to developing legal and regulatory systems and standards for economic and business activities, property ownership and the application of contract rights; (v) tariffs, trade protection measures, import or export licensing requirements, trade embargos, and other trade barriers, about which there is increased uncertainty following the results of the 2016 U.S. presidential election and the trade policies of the current administration, including withdrawal from the Trans-Pacific Partnership and proposed revision to the North American Free Trade Agreement; (vi) difficulties attracting and retaining qualified personnel to conduct our foreign operations or manage our foreign licensees and franchisees; (vii) challenges relating to labor and employment matters, including differing employment practices and requirements regarding health, safety and other working conditions in foreign jurisdictions; (viii) competition from foreign companies; (ix) longer accounts receivable collection cycles and difficulties collecting accounts receivable from international licensees and franchisees; (x) less effective and less predictable protection and enforcement of our intellectual property rights in some jurisdictions; (xi) changes in the political or economic condition of a specific country

or region, particularly in emerging markets; (xii) potentially adverse tax consequences from the several U.S. and foreign jurisdictions in which we are subject to taxation; and (xiii) cultural differences in the conduct of business.  Any one or more of these factors could cause our international revenues to decline or could cause us to fail to execute on our business strategy involving international expansion.  In addition, our business practices in international markets are subject to the requirements of the FCPA and applicable foreign anti-bribery laws, any violation of which could subject us to significant fines, criminal sanctions and other penalties.

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Our international royalty revenues are typically denominated in U.S. dollars.  However, because our international licensees and franchisees operate in other currencies, fluctuations in the value of the U.S. dollar relative to these foreign currencies have an impact on our royalty revenues, which could materially affect our results of operations and cash flows.  The primary foreign currencies in which our licensees operate are the Euro, the Great British Pound, the Mexican Peso, the South African Rand, the Japanese Yen, the Chinese Yuan, the Indian Rupee and the Canadian Dollar.  We do not currently engage in currency hedging activities to limit the risk of exchange rate fluctuations.

Some of our licensees have contracts with government entities that are subject to unique risks.

Some of our licensees for our Hi-Tec family of footwear brands have, and expect to maintain, long-term contracts with various foreign government entities.  In addition to normal business risks, including the other risks discussed in these risk factors, our licensees’ contracts with government entities are often subject to unique risks, some of which are beyond our or their control.  For instance, long-term government contracts and related orders are subject to cancellation if adequate appropriations for subsequent performance periods are not made.  As a result, the termination of funding for a government program supporting any of our licensees’ government contracts could result in a loss of anticipated future revenues from that contract, which could have a negative impact on our operations because our royalty revenues from the licensee attributable to the government contract would also cease.  In periods of global or local political tension or unrest or decreased spending, these risks could be amplified.  In addition, government entities are often able to modify, curtail or terminate contracts at their convenience and without prior notice and would only be required to pay for work completed and commitments made at the time of the termination.  Any such modification, curtailment or termination of significant government contracts products bearing our Hi-Tec family of footwear brands could have a material adverse effect on our licensees’ sales of these products, which in turn, could have a material adverse effect on our results of operations and financial condition.

Our business and the success of our products could be harmed if we are unable to maintain the strength of our brands.

Our success is dependent on the strength of our brands.  If we are unable to timely and appropriately respond to changes to consumer preferences and demands, which are subject to significant fluctuations, the strength of our brands may be impaired.  Even if we do react timely and appropriately to these changes, consumers may still consider one or more of our brands to be outdated or associated with styles that are no longer popular.  In the past, many companies in our industry have experienced periods of rapid growth in sales and revenues followed by periods of declining sales and losses.  Our business may be similarly affected.

We are dependent on our intellectual property rights, especially our trademarks, and we may not be able to successfully protect our rights or we may become involved in costly legal proceedings relating to these rights or the intellectual property rights of third parties.

Our trademarks are vital to our business.  We hold various trademarks for our brand names, which are registered with the United States Patent and Trademark Office.  We also hold trademarks or trademark applications for our brand names with similar government agencies in a number of other countries, although the laws of many countries may not protect our intellectual property rights to the same extent as the laws of the United States and, as a result, adequate protection in these jurisdictions may be unavailable or limited in spite of our efforts to safeguard these rights.  In addition, our efforts to establish and protect our trademarks and other proprietary rights might not prevent imitation of our brands or products bearing our brands, other infringement of our rights, challenges to our intellectual property ownership, the loss of license or franchise revenues or other negative effects.  Further, any insufficiency in the protection of our trademarks and other intellectual property rights could reduce the value of our brands, which could limit the

ability of our licensees and franchisees to effectively compete for market share.  If any of these events were to occur, our business, prospects, financial condition, results of operations and liquidity could be materially harmed.

In addition, in the future, we may decide to assert infringement claims against third parties, and one or more parties may assert infringement claims against us.  Any resulting litigation could result in significant expense and divert the efforts of our management and other personnel, whether or not such litigation is determined in our favor.  Further, any adverse ruling in any such matter could reduce the value of our intellectual property assets and our licenses, which could result in limitations on our ability to market and license our brands and have a material adverse effect on our business, financial condition and results of operations.

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We may become involved in other litigation or government or administrative proceedings that may materially affect us.

From time to time, we may become involved in various legal proceedings relating to matters incidental to the ordinary course of our business, including commercial, employment, class action and other litigation and claims.  We may also be the subject of government and other regulatory investigations, audits and proceedings, including in connection with any claim of our violation of the laws, rules and regulations applicable to our business, such as federal, state and foreign franchise laws, anti-bribery laws and work safety and labor laws, among others.  These matters can be time-consuming, divert management’s attention and resources and result in significant legal and other expenses.  Furthermore, because litigation and administrative or government proceedings are inherently unpredictable, any of these proceedings could result in unfavorable outcomes, which could include monetary damages or fines and other sanctions.  Any such result could have a material adverse effect on our business, results of operations or financial condition.

We are dependent on our key management and other personnel.

Our success is highly dependent on the continued services of our key executives, including of Henry Stupp, our Chief Executive Officer and a member of our board of directors.  We have a relatively small number of employees, and the leadership and experience of Mr. Stupp and our other executives and key employees are important to the successful implementation of our business and marketing strategies.  We do not carry key person life insurance covering any of our executives or other employees.  The loss of the services of Mr. Stupp or our other executives or key employees could have a material adverse effect on our business prospects, financial condition, results of operations and liquidity.

We may encounter risks and difficulties in connection with acquisitions or other strategic transactions, and we may not realize the expected benefits of these transactions.

We regularly evaluate opportunities to acquire or represent new brands, and we have completed several such acquisitions during the past several years.  We expect to continue to consider opportunities to acquire or make investments in other brands or to engage in other strategic transactions that could enhance our portfolio or enable us to expand to new markets.  Our experience integrating acquired assets and businesses is limited, and we may not be successful in realizing the expected benefits of any acquisition we may pursue.  Our future success depends, in part, on our ability to manage an expanding portfolio of brands, which could involve significantly increased costs and pose substantial challenges for management.

Acquisitions and other strategic transactions can involve numerous risks and difficulties, including, among others: (i) challenges assimilating new brands or other assets into our business and our brand licensing model; (ii) problems maintaining and enforcing standards, procedures, controls, policies and information systems; (iii) difficulties and costs in combining the operations and personnel of an acquired business with our operations and personnel, including any failure to retain key employees, customers, vendors, manufacturers or other service providers or partners of an acquired business, any failure to convert and integrate acquired assets into our brand licensing business model, and challenges forecasting revenues and expenses for newly acquired brands or businesses; (iv) significant or unanticipated costs associated with an acquisition, including incurrence of contingent liabilities, amortization charges associated with acquired assets, write-offs of goodwill or intangible assets, capital expenditures and accounting, legal and other transaction expenses; (v) any inability to realize the intended or expected synergies or other benefits of an acquisition or transaction, particularly if our assumptions about sales, revenues, operating expenses and costs of acquired

assets or businesses turn out to be wrong; (vi) diversion of management’s attention from our existing brand portfolio; (vii) adverse effects on existing business relationships; (viii) risks associated with foreign acquisitions or otherwise entering new geographic or customer markets, including regional differences in consumer preferences, branding standards and the general conduct of business, less effective and less predictable protection and enforcement of intellectual property rights in some foreign jurisdictions and the other risks related to doing business outside the United States discussed elsewhere in these risk factors; and (ix) risks associated with new types of business arrangements in which we have no or limited prior experience.  Accordingly, our recent acquisitions and any future strategic transactions we pursue may not result in the anticipated benefits and could have a material adverse effect on our business, results of operations, financial condition and prospects.

In addition, future acquisitions may require us to obtain additional equity or debt financing, which may not be available when needed, on favorable terms or at all.  If we seek to finance future acquisitions or other strategic transactions by issuing equity or convertible debt securities or by incurring other types of indebtedness, we may experience the risks associated with these transactions that are described elsewhere in these risk factors.

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Our strategic and marketing initiatives may not be successful.

We have invested significant funds and management time in furtherance of our global strategic and marketing initiatives, which are designed to strengthen our brands, assist our licensees in generating increased sales of products bearing our brands and build value for our stockholders over the long term.  We expect to continue and, in some cases, expand these initiatives in future periods.  While we are hopeful that our efforts in executing these initiatives will grow our business and build stockholder value, we may not be successful in doing so and these initiatives may not result in the intended or expected benefits.  Any failure by us to execute our strategic initiatives, or the failure of these initiatives to cause our revenues to grow, could have a materially adverse impact on our operating results and financial performance.

We rely on ourSignificant disruptions of information technology systems, andbreaches of data security, or unauthorized disclosures of sensitive data or personally identifiable information could adversely affect our business and operations could suffer in the eventsubject us to liability or reputational damage.

Our business is increasingly dependent on critical, complex, and interdependent information technology (“IT”) systems, including Internet-based systems, some of cybersecurity breacheswhich are managed or other system failures.

We,hosted by third parties, to support business processes as well as internal and external communications. The size and complexity of our licenseesIT systems make us potentially vulnerable to IT system breakdowns, malicious intrusion, and franchisees, rely on variouscomputer viruses, which may result in the impairment of our ability to operate our business effectively.

In addition, our systems and the systems of our third-party providers and collaborators are potentially vulnerable to data security breaches which may expose sensitive data to unauthorized persons or to the public. Such data security breaches could lead to the loss of confidential information, technology systemstrade secrets or other intellectual property, or could lead to managethe public exposure of personal information (including personally identifiable information) of our respective operations.  Our reliance on these systems exposes usemployees, customers, business partners, and others. In addition, the increased use of social media by our employees and contractors could result in inadvertent disclosure of sensitive data or personal information, including but not limited to, inherent costsconfidential information, trade secrets and risks, including the time and capital resources required to maintain, upgrade, replaceother intellectual property.

Any such disruption or otherwise change these systems or integrate new systems as and when needed,security breach, as well as any action by us or our employees or contractors that might be inconsistent with the risks associated with any failure of these systems, which could result from computer viruses, unauthorized access, natural disasters, terrorism, warrapidly evolving data privacy and telecommunication or electrical failures.  Despitesecurity laws and regulations applicable within the implementation of security measures, our information technology systemsUnited States and those of our licensees and franchisees are vulnerable to failures or other damage from these or other causes.  Althoughelsewhere where we have not experienced any material cybersecurity or system failure, accident or breach, some of our current and former licensees have experienced such events in the past.  If such an event were to occur to our systems, itconduct business, could result in a material disruptionenforcement actions by U.S. states, the U.S. Federal government or foreign governments, liability or sanctions under data privacy laws that protect personally identifiable information, regulatory penalties, other legal proceedings such as but not limited to private litigation, the incurrence of significant remediation costs, disruptions to our development programs, business operations and internal controlscollaborations, diversion of management efforts and processes; substantial costs to rectify or correct the failure, if correction is possible; significant demands on management time; loss of or damage to our data or applications; inappropriate disclosure of confidential or proprietary information; or the incurrence of other material liabilities.  If such an event were to occur to our licensees’ or franchisees’ systems, our royalty revenuesreputation, which could be reduced or disrupted due to decreased product sales, including sales of our branded products, as a result of reputational damage; diversion of costs and other resources from product sales; or inability of our licensees or franchisees to calculate royalties or generate royalty reports.  If any of these risks were to materialize,harm our business prospects, performance and financial condition couldoperations. Because of the rapidly moving nature of technology and the increasing sophistication of cybersecurity threats, our measures to prevent, respond to and minimize such risks may be materially harmed.unsuccessful.

In addition, the European Parliament and the Council of the European Union adopted a comprehensive general data privacy regulation (“GDPR”) in 2016 to replace the current European Union Data Protection Directive and related country-specific legislation. The GDPR took effect in May 2018 and governs the collection and use of personal data in the European Union. The GDPR, which is wide-ranging in scope, will impose several requirements relating to the consent of the individuals to whom the personal data relates, the information provided to the individuals, the security and confidentiality of the personal data, data breach notification and the use of third-party processors in connection with the processing of the personal data. The GDPR also imposes strict rules on the transfer of personal data out of the European Union to the United States, enhances enforcement authority and imposes large penalties for noncompliance, including the potential for fines of up to €20 million or 4% of the annual global revenues of the infringer, whichever is greater.

Changes in our effective tax rates or tax provisions or adverse outcomes resulting from examination of our income tax returns could adversely affect our financial results.

We are subject to income tax in the United States, California and certain other state jurisdictions.  In addition, following our acquisition of the Hi-Tec family of footwear brands, we are also subject to taxation in several foreign jurisdictions, which may have unusual, unfamiliar or particularly burdensome tax laws.  Our new global tax structure could be negatively impacted by various factors, including changes in the tax rates in jurisdictions in which we earn income or changes in tax laws or interpretations of tax laws in the jurisdictions in which we operate, any of which could impact our future effective income tax rates.  Our effective tax rates could also be affected by changes in the valuation of

our deferred tax assets and liabilities, as has been the case in Fiscal 2018 as a result of significant changes to U.S. federal tax laws.  Any increase in our effective tax rate could adversely affect our reported financial results or the way in which we conduct our business.

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Significant judgment is required in determining our provision for income taxes, as there are many transactions and calculations in the ordinary course of our business that involve uncertain tax determinations.  If we are audited by tax authorities, these authorities could disagree with our judgments about our tax provisions.  Although we believe our tax estimates are reasonable, the final determination of tax authorities in the event of such an audit could be materially different from our historical income tax provisions and accruals.  Any adverse result in such an audit or related litigation could materially negatively affect our income tax provision and results of operations in the period or periods for which the determination is made.  Moreover, any such audits or litigation, regardless of its outcome, could distract management and be expensive to defend, which could negatively affect our results of operations, liquidity and financial condition.

We previously identified material weaknesses in our internal control over financial reporting, which could adversely affect our business and reputation and could, if repeated, result in material misstatements in our financial results.

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.  However, our management previously identified material weaknesses in our internal control over financial reporting as of the last day of Fiscal 2017.  A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our consolidated financial statements will not be prevented or detected on a timely basis.  As a result of these material weaknesses, our management concluded that our internal control over financial reporting was not effective as of January 28, 2017, the last day of Fiscal 2017, and that our disclosure controls and procedures were not effective as of that date or as of the last day of each of our first three fiscal quarters during Fiscal 2018.

Although our management has determined that these material weaknesses have been remediated and that our internal control over financial reporting and disclosure controls and procedures were effective as of the last day of Fiscal 2018, as described in Item 9A of this Annual Report, these previously identified material weaknesses and conclusions of ineffective controls could continue to cause investors to lose confidence in the reliability of our reported financial and other information, adversely affect our reputation with lenders, retailers, investors, securities analysts and others, and result in a decline in the market price of our common stock.  Moreover, these or other material weaknesses or significant deficiencies in our internal control over financial reporting could develop or be discovered in the future, and management could determine that our controls and procedures have again become inadequate.  In that event, we may be required to develop and implement remediation measures to address any weaknesses or deficiencies that are identified, as we did throughout Fiscal 2018 with respect to our previously identified material weaknesses, and any such measures could involve significant time and costs, distract management from our core business operations and ultimately be insufficient to address any weaknesses that are identified.  If any of these risks were to occur, there would be a greater likelihood that our consolidated financial statements may contain material misstatements, in which case we could be required to restate our financial results.  Any such restatement could lead to substantial additional costs for accounting and legal fees, litigation, significant reputational harm and material declines in our stock price.

Compliance with securities laws, regulations and financial reporting standards could increase our costs and pose challenges for our management team, and any compliance failures could materially harm our business.

Existing laws, regulations, listing requirements and other standards relating to corporate governance and public disclosure significantly increase the costs and risks associated with operating as a publicly traded company in the United States.  Our management team devotes significant time and financial resources to try to comply with existing and evolving standards for public companies.  Notwithstanding our efforts, we failed to comply with the SEC’s reporting deadlines applicable to our annual report for Fiscal 2017 and our quarterly report for the first quarter of Fiscal 2018, and we have been forced to incur increased costs and divert time and other resources to hire personnel, engage consultants and change certain of our internal practices and policies in order to regain compliance with our public reporting requirements.  However, this compliance may not be sustained, and it is possible that financial and other public reports

we are obligated to file in the future also may not be considered timely, accurate or complete, in which case we may be forced to devote additional time and capital resources to further improve our public reporting systems and processes.  In addition, any future noncompliance with public reporting requirements could subject us to sanctions or investigation by regulatory authorities, such as the SEC, which could involve fines or other penalties, and could also adversely affect our financial results, result in a loss of investor confidence in the reliability of our financial information and other public disclosures and jeopardize the listing of our common stock on the Nasdaq Global SelectCapital Market, as described elsewhere in these risk factors.  If any of these risks were to occur, our business and reputation could be materially adversely affected, and the market price of our common stock could materially decline.

Further, the SEC has passed, promulgated or proposed new rules on a variety of subjects, including, for example, preparing and filing financial statements, establishing and disclosing clawback and hedging policies and disclosing additional executive compensation information.  The existence of new and proposed laws and regulations relating to financial reporting or other disclosure obligations or that impose additional or more stringent compliance requirements could create uncertainties for public companies, make it more difficult to attract and retain qualified executive officers and members of our board of directors, particularly to serve on our audit and compensation committees, and generate significantly increased costs if we are required to add additional accounting or other staff, engage consultants or change our internal practices in order to comply with the new requirements.  The occurrence of any of these outcomes could significantly harm our business, financial condition and performance.

Risks Related to Our Common Stock

The trading price of our common stock may be volatile, and shares of our common stock are relatively illiquid.

The trading price of our common stock has been, and is likely to continue to be, subject to material fluctuations.  These fluctuations can be caused by various factors, including, among others: (i) our financial results and financial condition, including our liquidity; (ii) our ability to maintain compliance with our obligations, including our credit facility with Cerberus;facility; (iii) the successful completion of any acquisition or strategic transaction, including the integration of the acquired assets or businesses and realization of the intended or expected synergies and other benefits; (iv) any announcements by us, our retail partners or our competitors regarding or affecting the retail environment, the reputation of our brands, our existing or any new license agreements and brand representations, or acquisitions, strategic alliances or other transactions; (v) recruitment or departure of key personnel; (vi) changes in our financial guidance, if any, expectations for our financial results in the investment community, or the recommendations of any securities analysts that elect to follow our common stock; (vii) any material weaknesses in our internal control over financial reporting or any failures to comply with our public reporting requirements; (viii) market conditions in the retail industry and the economy as a whole; and (ix) the other risks described in these risk factors.

Further, as a result of our relatively small public float, our common stock may be less liquid, and the trading price for our common stock may be more affected by relatively small volumes of trading, than is the case for the common stock of companies with broader public ownership.

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We are not currently in compliance with certain Nasdaq listing requirements. If we are not able to maintainregain compliance with Nasdaq’sthese requirements, for continued listing, our common stock may be delisted from trading on the Nasdaq Global SelectStock Market, which could have a material adverse effect on us and our stockholders.

WeOn June 5, 2018, we received twoa deficiency lettersletter from Thethe Nasdaq Stock Market (“Nasdaq”) in Fiscal 2018, eachnotifying us that, because the bid price of which indicated thatour common stock closed below $1.00 per share for 30 consecutive business days, we were notare no longer in compliance with Nasdaq Listing Rule 5250(c)(1)Nasdaq’s minimum bid price rule, which is a requirement for continued listing on the Nasdaq Global Select Market becauseMarket. Nasdaq’s rules require that we failed to file certain of our periodic reports with the SEC in a timely manner.  Although we have since filed these reports and regainedregain compliance with this rule by December 3, 2018.  On December 4, 2018, however, we received a letter from Nasdaq notifying us that our transfer to the Nasdaq Capital Market was approved and that we have been granted an additional 180-day extension period to regain compliance with the minimum bid price rule.  This 180-day period expires June 3, 2019.  If we do not regain compliance with Nasdaq’s minimum bid price rule by the deadline, or if we couldregain compliance but we again fail to comply with this rule or with any other Nasdaq rules or requirements againrequirement in the future, due to failures to file our periodic reports in a timely manner or other matters.  In such a case,then we would receive furtheradditional deficiency letters from Nasdaq and our common stock could be delisted from trading on the Nasdaq Global Select Market.  Any additional deficiency letters or any delistingNasdaq. Such an event could cause our common stock to be classified as a “penny stock,” among other potentially detrimental consequences, and could severely limit the liquidity of our common stock and materially adversely affect the price of our common stock.

which could significantly impact our stockholders’ ability to sell their shares of our common stock or to sell these shares at a price that a stockholder may deem acceptable.

We may fail to meet publicly announced financial guidance or other expectations about our business, which would cause our common stock to decline in value.

From time to time, we may provide forward-looking financial guidance regarding our performance.  Any such guidance would be based on our then-current views, expectations and assumptions and could be materially different than our actual results.  Additionally, securities analysts or others in the investment community may publish expectations for our financial results, which also could be materially different than our actual results.  These differences could occur for a variety of reasons, such as, for instance, changes to the assumptions used to forecast or calculate the financial guidance or expectations, or the occurrence of risks related to our performance and our business, including those discussed in these risk factors, among others.  Any failure to meet any financial guidance or expectations regarding our future performance could harm our reputation and cause our stock price to decline.

We may not pay dividends regularly or at all in the future.

Determinations regarding the payment of dividends are subject to the discretion of our board of directors.  As a result, we may not pay any dividends in future periods, whether or not we generate sufficient cash to do so.  In addition, pursuant to our credit facility, with Cerberus, subject to limited exceptions, we are prohibited from paying dividends or making other distributions to our stockholders without Cerberus’sour lender’s consent.  As a result, any return on an investment in our common stock may be limited to an appreciation in the value of our common stock.

Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.

The sale by our stockholders of substantial amounts of our common stock in the public market, or the perception that such sales could occur upon the expiration of any statutory holding period, such as under Rule 144 under the Securities Act, upon expiration of any lock-up periods applicable to outstanding shares, or upon our issuance of new shares as a result of the exercise of outstanding options or warrants or the vesting of restricted stock units, could cause the market price of our common stock to fall.  The availability for sale of a substantial number of shares of our common stock, whether or not sales have occurred or are occurring, also could make it more difficult for us to raise additional financing through the sale of equity or equity-related securities in the future when needed, on acceptable terms or at all.

Our certificate of incorporation allows our board of directors to issue up to 1,000,000 shares of “blank check” preferred stock.

Our certificate of incorporation allows our board of directors to issue up to 1,000,000 shares of “blank check” preferred stock without any action by our stockholders.  Subject to the restrictions under our new credit facility, with Cerberus, such shares of preferred stock may be issued on terms determined by our board of directors in its discretion, and may have rights, preferences and privileges superior to those of our common stock.  For instance, such shares of preferred stock could have liquidation preferences that are senior to the liquidation rights applicable to our common stock, could have superior voting or conversion rights, which could adversely affect the voting power of the holders of our common stock, or could have other terms that negatively impact the voting control or other rights of our common stockholders.  Additionally, the ownership interest of holders of our common stock would be diluted following the issuance of any shares of our preferred stock. Further, the preferred stock could be utilized, under certain circumstances, as a method for discouraging, delaying or preventing a change in control of our Company, even at a time or under circumstances when you or other stockholders may prefer such a change in control.

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A small number of our stockholders beneficially own a significant portion of our common stock and therefore are able to exert significant influence over our corporate decisions, including the election of directors and a change of control.  The interests of these stockholders may differ from yours.

A small number of stockholders beneficially own a significant portion of our common stock.  As a result, these parties may be able to influence or control matters requiring approval by our stockholders, including the election of directors and mergers, acquisitions or other extraordinary transactions.  These parties may have interests that differ from ours or yours, and they may vote in ways with which you disagree and that may be adverse to your interests.  This

concentration of ownership may also have the effect of delaying, preventing or deterring a change of control of our Company, which could deprive our stockholders of an opportunity to receive a premium for their shares of our common stock as part of a sale of our Company.  Conversely, this concentration of ownership may facilitate a change of control at a time or under circumstances when you and other stockholders may prefer not to sell.  Further, this concentration of ownership could adversely affect the prevailing market price for our common stock.

Item 1B.    UNRESOLVED STAFF COMMENTS

Not applicable.

Item 2.    PROPERTIES

We lease an 11,00011,181 square foot office facility in Sherman Oaks, California, which serves as our corporate headquarters.  The lease for this facility will expire on October 31, 2021,2024, subject to our option to renew the lease for an additional five years thereafter.

We lease a 24,00027,749 square foot office facility in Amsterdam, Netherlands since the completion of the Hi-Tec Acquisition, a portion of which is subleased to one of our licensees.  The lease for this facility expires in December 2026.  We also leased a 112,000 square foot warehouse facility in Modesto, California from the completion of the Hi-Tec Acquisition until the expiration of the lease in December 2017.  This facility was subleased to and used by one of our licensees.

Item 3.    LEGAL PROCEEDINGS

From time to time, we may become involved in various lawsuits and legal proceedings that arise in the ordinary course of our business.  The impact and outcome of litigation, if any, is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that could harm our business.  We are not currently aware of any such legal proceedings or claims to which we are a party or to which our property is subject that we believe will have, individually or in the aggregate, a material effect on our business, financial condition or results of operations.

Item 4.    MINE SAFETY DISCLOSURES

Not applicable.

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Item 5.    MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND  ISSUER PURCHASES OF EQUITY SECURITIES

Market Information, Dividends and Holders

Our common stock trades on the Nasdaq Global SelectCapital Market under the trading symbol “CHKE”.  The table below sets forth, for each of the fiscal quarters during our two most recently completed fiscal years, the range of the high and low sales prices for our common stock.  There were no dividends declared or paid during this two-year period.Fiscal 2019 or Fiscal 2018.

As of April 13, 2018,3, 2019, the approximate number of holders of record of our common stock was 66.54.  This figure does not include an indeterminable number of beneficial holders whose shares may be held of record by brokerage firms and clearing agencies.

From time to time, our board of directors may, in its discretion, declare cash dividends depending on our financial condition, results of operations, cash flow, capital requirements, compliance with our senior secured credit facility with Cerberus and other factors deemed relevant by our board of directors. See the discussion under “Liquidity and Capital Resources” in Item 7, “Management’s Discussion and Analysis” and Note 78 to the consolidated financial statements included in Item 8, “Financial Statements and Supplementary Data” for information about the restrictions on dividends contained in our credit facility with Cerberus.facility.

Common Stock Performance

The table and graph below shall not be deemed to be “soliciting material” or "filed" with the SEC or subject to Regulation 14A or 14C, other than as provided by applicable SEC rules, or to the liabilities of Section 18 of the Exchange Act or incorporated by reference into any filing under the Securities Act or the Exchange Act,  except to the extent we specifically request that it be treated as soliciting material or specifically incorporate it by reference in a filing under the Securities Act or the Exchange Act.  The information is required by applicable SEC rules, and it is not intended to forecast or be indicative of possible future performance of our common stock.

Due to the nature of our business, we do not believe a published industry or line-of-business index or a comparable peer group of publicly‑traded licensing companies exists.  As a result, we have compared the return on investment in our common stock to the Nasdaq Composite Index and the S&P 100 Stock Index.

The table and graph below compare the cumulative total stockholder return on our common stock with the cumulative total return of the Nasdaq Composite Index and the S&P 100 Stock Index for the period commencing on February 2, 2013 and ending on February 3, 2018.  The data set forth below assumes a $100 investment in our common stock and each such index on February 2, 2013 and the reinvestment of all dividends.

Item 6.    SELECTED FINANCIAL DATA

The following financial information has been derived from our consolidated financial statements.  Our consolidated financial statements for Fiscal 20182019 and Fiscal 20172018 and for each of the threetwo years ended February 3, 20182, 2019 are included in this Annual Report and have been audited by our independent registered public accounting firms.firm.  You should read this information together with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 8, “Consolidated Financial Statements and Supplementary Data”.

Item 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF  OPERATIONS

As used in this discussion and analysis, “Cherokee Global Brands”, the “Company”, “we”, “us” and “our” refer to Cherokee Inc. and its consolidated subsidiaries, unless the context indicates or requires otherwise.  Additionally, “Fiscal 2019” refers to our fiscal year ending February 2, 2019; “Fiscal 2018” refers to our fiscal year ended February 3, 2018; and “Fiscal 2017” refers to our fiscal year ended January 28, 2017; and “Fiscal 2016” refers to our fiscal year ended January 30, 2016.2017.  We have a 52‑ or 53‑week fiscal year ending on the Saturday nearest to January 31.  This results in a 53‑week fiscal year approximately every four or five years.  Fiscal 2018 was a 53-week fiscal year, while each of Fiscal 2019 and Fiscal 2017, Fiscal 2016 and Fiscal 2015 were 52‑week fiscal years.  This discussion and analysis should be read together with the consolidated financial statements and related notes included in this annual report on Form 10‑K.

Forward-Looking Statements

In addition to historical information, this discussion and analysis contains “forward‑looking statements” within the meaning of the Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  Forward-looking statements are statements other than historical facts that relate to future events or circumstances or our future performance.  The words “anticipates”, “believes”, “estimates”, “plans”, “expects”, “objectives”, “goals”, “aims”, “hopes”, “may”, “might”, “will”, “likely”, “should” and similar words or expressions are intended to identify forward‑looking statements, but the absence of these words does not mean that a statement is not forward-looking.  Forward‑looking statements in this discussion and analysis include statements about, among other things, our future financial and operating performance, our future liquidity and capital resources, our business and growth strategies and anticipated trends in our business and our industry.  Forward-looking statements are based on our current views, expectations and assumptions and involve known and unknown risks, uncertainties and other factors that may cause actual results, performance, achievements or stock prices to be materially different from any future results, performance, achievements or stock prices expressed or implied by the forward‑looking statements.  Such risks, uncertainties and other factors include, among others, those described in Item 1A, “Risk Factors” in this Annual Report.  In addition, we operate in a competitive and rapidly evolving industry in which new risks emerge from time to time, and it is not possible for us to predict all of the risks we may face, nor can we assess the impact of all factors on our business or the extent to which any factor or combination of factors could cause actual results to differ from our expectations.  As a result of these and other potential risks and uncertainties, forward-looking statements should not be relied on or viewed as predictions of future events because some or all of them may turn out to be wrong.  Forward-looking statements speak only as of the date they are made and, except as required by law, we undertake no obligation to update any of the forward‑looking statements we make in this discussion and analysis to reflect future events or developments or changes in our expectations or for any other reason.

Overview

Cherokee Global Brands is a global marketer and manager of a portfolio of fashion and lifestyle brands it owns, includingthat we own, brands that we create, and brands that we develop for others.  Company-owned brands, which are licensed in multiple consumer product categories and retail channels around the world, include Cherokee, Hi-Tec, Magnum, 50 Peaks, Interceptor, Hawk Signature, Tony Hawk, Liz Lange, Completely Me by Liz Lange, Flip Flop Shops, Everyday California, Carole Little, Sideout and others, which are licensed in multiple consumer product categories and sectors.others.  As part of our business strategy, we also regularly evaluate other brands and trademarks for acquisition into our portfolio.  We believe the strength of our brand portfolio and platform of design, product sourcingdevelopment and marketing capabilities has made us one of the leading global licensors of style-focused lifestyle brands for apparel, footwear, accessories and home products and accessories.products.

We have licensing relationships with recognizable retail partners in their global locations to provide them with the rights to design, manufacture and sell products bearing our brands.  We refer to this strategy as our “Direct to Retail” or “DTR” licensing model.  We also have license agreements with manufacturers and distributors for the manufacture and sale of products bearing our brands, which we refer to as “wholesale” licensing.  In addition, we have relationships with franchiseesother retailers that operate Flip Flop Shops retail stores located worldwide.sell products we have developed and designed.  As a brand marketer and manager, we do not directly sell product ourselves.  Rather, we earn royalties when our licensees and franchisees sell licensed products bearing the trademarks that we own.

own or that we have designed and developed.

For certain of our key legacy brands, including Cherokee, Hawk Signature and Tony Hawk and Liz Lange, we are shifting our strategy for U.S. sales from DTR licensing to wholesale licensing.  In addition, we are primarily pursuing a wholesale licensing strategy for global sales of our recently acquired Hi-Tec, Magnum, Interceptor and 50 Peaks brands.  We believe these arrangements signal a significant shift in our business strategy, from our historical focus on DTR licensing for all of our brands to a substantially greater focus on wholesale licensing for many of our key brands.  Although we believe these new wholesale licensing arrangements may help to diversify our sources of revenue and licensee or other partner relationships, and may provide additional avenues to obtain brand recognition and grow our Company, this shift in our strategy also exposes us to a number of risks, and it has had a negative effect on our results of operations in Fiscal 2019 and Fiscal 2018 as we transition to our new licensees.  This effect could continue or worsen, particularly in the near-term.

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We derive revenues primarily from licensing our trademarks to retailers and wholesalers all over the world, and we are continually pursuing relationships with new retailers, wholesalers and others in order to expand the reach of our existing brands into new geographic and customer markets and new types of stores and other selling mediums.  As of February 3, 2018,2, 2019, we had 5446 continuing license agreements in approximately 80 countries, 42 of which pertained to brands in our Cherokee Global Brands reportable segment and 12 of which pertained to our recently acquired Hi-Tec portfolio of brands, which are included in our Hi-Tec reportable segment.  countries.  These arrangements include relationships with Walmart, Soriana, Comercial Mexicana, TJ Maxx, Tottus, Pick N Pay, Nishimatsuya, Big 5, Academy, JD Sports, Black’s and Lidl.  As of February 3, 2018,2, 2019, we had contractual rights to receive over $64.5$60.7 million forward‑facing minimum royalty revenues over the next ten years, excluding any revenues that may be guaranteed in connection with contract renewals.  

The terms of our royalty arrangements vary for each of our licensees.  We receive quarterly royalty statements and periodic sales and purchasing information from our licensees and franchisees.  However, our licensees and franchisees are generally not required to provide, and typically do not provide, information that would enable us to determine the specific reasons for period‑to‑period fluctuations in sales or purchases.  As a result, we do not typically have sufficient information to determine the effects on our operations of changes in price, volume or mix of products sold.

Our independent registered public accounting firm has included an explanatory paragraph describing the uncertainty about our ability to continue as a going concern in its report contained in this Annual Report.  See “Liquidity and Capital Resources” below for more information.

Business Developments

Acquisition of Hi-Tec

In the fourth quarter of Fiscal 2017, we acquired Hi-Tec Sports International Holdings BV and subsidiaries (“Hi-Tec”) and simultaneously sold certain sales and distribution operations of Hi-Tec to third parties along with the related assets and liabilities (the “Hi-Tec Acquisition”).  These third parties became our licensees at that time and include Carolina Footwear Group, LLC (“Carolina”), Batra Limited (“Batra”) and Sunningdale (“South Africa”).  In the fourth quarter of Fiscal 2018, we sold the remaining Hi-Tec sales and distribution operations to International Brands Group (“IBG”).  The business sold to IBG is reflected in our financial statements as discontinued operations.  We do not have any ownership interests in Carolina, Batra, South Africa or IBG.  After these transactions and consistent with our planned conversion of Hi-Tec, we continue to own the intellectual property of Hi-Tec.  We can now access markets addressed by Hi-Tec with its Hi-Tec, Magnum, Interceptor and 50 Peaks brands, and we have multiple cross-selling opportunities with our other brands.  In addition, we have various opportunities to expand Hi-Tec into other product categories, such as apparel and accessories.

Hi-Tec was a Dutch footwear business that designed, marketed and sold footwear globally through major retailers, independent distributors, licensees, government contracts and directly to consumers via ecommerce.  Prior to our acquisition, Hi-Tec operated under a distribution model whereby they designed, contracted for the manufacture of, sold and distributed their products.  Effective as of the end of Fiscal 2018, we have converted the Hi-Tec business to a

branded licensing model.  Our acquisition of the Hi-Tec and conversion of these brands to a new business model is subject to significant risks.  See Item 1A, “Risk Factors,” for additional information.

We funded the purchase price of the Hi-Tec Acquisition through (i) cash on hand, (ii) proceeds from simultaneously selling certain Hi-Tec operating assets to Carolina, Batra and South Africa, (iii) the prepayment of certain guaranteed minimum royalties under license agreements with Carolina, Batra and South Africa, (iv) the net proceeds from a public offering of our common stock, (v) proceeds from a new credit facility and (vi) proceeds from a receivables funding loan extended by one of our directors.

Expiration of Target and Kohl’s License Agreements in the United States

Our license agreement with Target covering sales of most Cherokee branded products in the United States expired on January 31, 2017, and our license agreement with Target covering sales of Cherokee branded products in the school uniforms category expired on January 31, 2018.  Our license agreement with Kohl’s covering sales of Tony Hawk branded products in the United States expired on January 31, 2018, and our license agreement with Target covering sales of Liz Lange branded products in the United States also expired on January 31, 2018.  Replacing terminated licensees is a normal part of our business, and we have entered into new wholesale licensing agreements that are intended to replace over time the royalty revenue related to our former relationships with Target and Kohl’s.  However, replacing these revenues is a significant challenge due to the size of these businesses, and the expiration of these license agreements may have a material adverse effect on our business.  See Item 1A, “Risk Factors,” for additional information.

Revenue Overview

We typically enter into license agreements with retailers, manufacturers and distributors for a certain brand in specific product categories over explicit territories, which can include one country or groups of countries and territories.  Over the last three years, our revenue mix has changed from 71% in the U.S. and Canada in Fiscal 2016 down to 47% in the U.S. and Canada in Fiscal 2018.  This change is a result of the expiration and transition of our license agreements with Target in the United States and our Hi-Tec Acquisition in the fourth quarter of Fiscal 2017, which generates a higher portion of its revenues in Europe in comparison to our other brands.  Our revenues byby geographic territory are as follows:

United States and Canada.Our largest licensees in the United States have historically been Target and Kohl’s, which together contributed 22%, 53% and 66% of our revenues for Fiscal 2018, Fiscal 2017 and Fiscal 2016, respectively.  One of ourKohl’s.  Our license agreements with Target expired atfor Cherokee branded products in the end of Fiscal 2017,school uniforms category and the rest of our license agreements with TargetLiz Lange brand products, and our license agreement with Kohl’s, expired at the end of Fiscal 2018.

Target.  Target had the exclusive rights to sell Cherokee branded products for all product categories in the United States through Fiscal 2017, and in the school uniforms category through Fiscal 2018.  Under the terms of our former license agreement with Target for the Cherokee brand, Target was obligated to pay us a minimum annual royalty of $10.5 million, which applied to all sales of Cherokee branded products made by Target in the United States other than sales of Cherokee branded products in the school uniforms category, which were subject to a separate minimum annual

royalty payment of $0.8 million.  Royalty  These licensees contributed no revenues from our Cherokee brand at Target in the United States were $0.9 million, $11.3 million and $15.8 million in Fiscal 2018, Fiscal 2017 and Fiscal 2016, respectively, which accounted for 3%2019 while contributing 22%, 33% and 46% of our revenues for these respective periods.  The decrease in royalties over this period was due to a decline in retail sales of Cherokee branded products and the expirations of the Target license agreements as Target began to transition away from selling these products as the end of the license agreements approached.  Under a separate license agreement that terminated on January 31, 2018, Target paid us a fixed percentage of sales of products bearing our Liz Lange brand in the United States.  Royalty revenues from our Liz Lange brand at Target in the United States were $1.0 million, $2.1 million and $2.4 million in Fiscal 2018, Fiscal 2017 and Fiscal 2016, respectively, which accounted for 3%, 6% and 7% of our revenues for these respective periods.2018.  We are replacing our Target license with various other licensees for the sale of Cherokee branded products in the United States, and we have entered into a master license agreement with a third party for Liz Lange branded maternity products beginning in Fiscal 2019.  Similarly, we are replacing our Kohl’s license with various other licensees for the sale of Hawk Signature and Tony Hawk branded products in the United States.  Our ability to generate royalty revenues from other licensees sufficient to replace our historical royalty revenues from Target and Kohl’s is yet to be determined, particularly in the near term as our wholesale arrangements intended to replace our license agreement with Target for the Cherokee and Liz Lange brands begin to gain traction with new retailers and their customers.  Our

EMEIA.  Revenues from our licensees in the United Kingdom, Europe and other countries in this region have grown as a component of our total revenues since our acquisition of the Hi-Tec and Magnum brands in the fourth quarter of Fiscal 2017. Royalties from our Cherokee brand also contributed to growth in this region in Fiscal 2019 as Cherokee products are now being produced and distributed by a pan-European retail chain.

Asia/Pacific.  The growth in our royalty revenues from Target are expected to decline further in Fiscal 2019, but tothe Asia/Pacific region came primarily from our new product development and design services agreement with a lesser extent than the decline in Fiscal 2018 due to the expiration of these licenses with Target.

Kohl’s.  Kohl’s had exclusive rights to sell Hawk Signature and Tony Hawk branded products for all product categoriesmajor retailer in the United States through Fiscal 2018.  Kohl’s is obligated to pay royalties to us based onPeople’s Republic of China.  We are providing our product design and development expertise for a percentage ofbrand that they own, which we believe will efficiently enhance their sales of Hawk Signature and Tony Hawk branded products.  However, because retail sales did not exceed the contractual minimum guarantees in any of the periods presented, we earned the minimum royalties of $4.6 million, $4.8 million and $4.8 million for Fiscal 2018, Fiscal 2017 and Fiscal 2016, respectively, which accounted for 15%, 14% and 14% of our revenues for these respective periods.  While we have entered into agreements with new licensees for the sale of Hawk Signature and Tony Hawk branded products, our ability to generate royalty revenues from other licensees sufficient to replace Kohl’s historical royalty payments to us is yet to be determined, and we may experience decreased revenue levels result from the expiration of this relationship, particularly in the near term as our wholesale arrangements intended to replace our license agreement with Kohl’s begin to gain traction with new retailers and their customers.  Our royalty revenues from Kohl’s are expected to decline significantly in Fiscal 2019 due to the expiration of this license with Kohl’s at the end of Fiscal 2018.operations.

Asia and Latin America.  Our royalty revenues from Asia and Latin America primarily resulted from licensees in Japan, China, Mexico, Peru Chile and India.Chile.  Royalty revenues from our Cherokee brand grew in these territories, totaled $6.7 million in Fiscal 2018, compared to $7.3 million in Fiscal 2017 and $6.4 million in Fiscal 2016.  Revenues from our Japanese licensees grew in Fiscal 2017, but was partially offset by a decline in revenues during Fiscal 2018 from our Chinese licensee.

United Kingdom, Europe and Others.  Revenues from our licensees in Europe and other territories were generally consistent from Fiscal 2016 to Fiscal 2017, but grew significantly in Fiscal 2018 as the impact of Hi-Tec and Magnum licensee increased its portfolio of brands is included since its acquisitionmarket share in the fourth quarter of Fiscal 2017.these territories. 

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Results of Operations

The table below contains certain information about our continuing operations from our consolidated statements of operations along with other data and percentages.  Historical results are not necessarily indicative of results to be expected in future periods.  These results include the operations of Hi-Tec since its acquisition on December 7, 2016.