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Company Business and Summary of Significant Accounting Policies (Policies)
 12 Months Ended
Feb. 02, 2019
Accounting Policies [Abstract]  
Principles of Consolidation and Basis of Presentation

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of Cherokee Inc., Hi-Tec and its other subsidiaries.  Intercompany accounts and transactions have been eliminated in consolidation.  The Company’s fiscal year comprises a 52- or 53-week period ending on the Saturday nearest to January 31.  The fiscal year ended February 2, 2019 (“Fiscal 2019”) is a 52-week period, while the fiscal year ended February 3, 2018 (“Fiscal 2018”) is a 53-week period.

The Company’s functional currency is the U.S. dollar.  Substantially all of the Company’s revenues are denominated in U.S. dollars, even though they may be generated from agreements with licensee in foreign countries. A large majority of the Company’s operating expenses are also denominated in U.S dollars and any expenses that are not denominated in U.S. dollars are recorded using the average exchange rate during the period.  Monetary foreign currency assets and liabilities are reported using the exchange rate at the end of the reporting period.  Any gains or losses from exchange rate fluctuations are included in other income (expense) in the consolidated statements of operations. 
Liquidity and Going Concern

Liquidity and Going Concern

The accompanying consolidated financial statements have been prepared on the going concern basis of accounting, which assumes the Company will continue to operate as a going concern and which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. Under the Company’s new senior secured credit facility, the Company was required to raise $2.0 million of additional liquidity before May 4, 2019, and because raising additional capital was not certain, there was substantial doubt about the Company’s ability to continue as a going concern. However, this additional liquidity requirement was satisfied on January 20, 2019 when the credit facility was amended and an additional term loan was entered into. (See Note 8.)

The senior secured credit facility also requires the Company to maintain specified levels of adjusted EBITDA as defined (approximately $9.5 million for the trailing twelve months as of February 1, 2020) and maintain a minimum cash balance of $1.0 million. The Company’s financial projections currently indicate that the Company will remain in compliance with these covenants for a period of at least one year from the issuance date of the financial statements.

There is an inherent risk that the Company may not achieve such projections and that our licensees may report lower than expected royalties, or the timing of cash receipts may not be in line with management’s projections. Should any of these scenarios occur, there is a risk that the Company may violate the Adjusted EBITDA covenant or the minimum cash balance covenant.

Should actual revenues during the upcoming year be lower than the projections by an amount that may potentially result in a violation of the Adjusted EBITDA covenant or the minimum cash balance covenant, or if timing of cash receipts is materially different than management’s expectations, management believe that there are various cash saving measures that could be quickly implemented during this time period, including reductions in discretionary expenses related to marketing programs, product development, and general and administrative expenses, including reducing personnel and personnel related costs if necessary. Although these measures are not expected to be used, and such actions could potentially harm the business, management believe that if necessary, the cash savings from these actions would allow the Company to maintain compliance with the Adjusted EBITDA covenant and the minimum cash balance covenant.
Cash and Cash Equivalents

Cash and Cash Equivalents

Money market funds and highly liquid debt instruments purchased with original maturities of three months or less are considered cash equivalents.  Carrying values approximate fair value.
Property and Equipment

Property and Equipment

Furniture and fixtures, computer equipment and software are recorded at cost and depreciated on a straight-line basis over their estimated useful lives, ranging from three to seven years.  Leasehold improvements are recorded at cost and amortized on a straight-line basis over their estimated useful lives or related lease term, whichever is shorter.
Intangible Assets, Goodwill and Other Long-Lived Assets

Intangible Assets, Goodwill and Other Long-Lived Assets

The Company holds various trademarks that are registered with the United States Patent and Trademark Office and similar government agencies in a number of other countries.  Acquired trademarks are either capitalized and amortized on a straight-line basis over their estimated useful lives, or classified as indefinite-lived assets and not amortized if no legal, regulatory, contractual, competitive, economic, or other factors limit their useful lives.  The Company routinely evaluates the remaining useful life of trademarks that are not being amortized to determine whether events or circumstances continue to support an indefinite useful life.  Trademark registration and renewal costs are capitalized and amortized on a straight-line basis over their estimated useful lives.  Goodwill represents the excess of purchase price over the fair value of assets acquired in business combinations and is not amortized.  Indefinite lived trademarks and goodwill are evaluated annually for impairment or when events or circumstances indicate a potential impairment, and an impairment loss is recognized to the extent that the asset’s carrying amount exceeds its fair value.  The Company estimates these fair values based on discounted cash flow models and market place multiples that include assumptions determined by the Company’s management regarding projected revenues, operating costs and discount rates.  Management’s expectations regarding license agreement renewals are also considered, along with forecasts of revenues from replacement licensees for agreements that have terminated.  Amortizing trademarks and other long-lived assets are tested for recoverability using undiscounted cash flow models.
Deferred Financing Costs and Debt Discount

Deferred Financing Costs and Debt Discounts

Deferred financing costs and debt discounts are reflected in the balance sheets as a reduction of long-term debt and are amortized into interest expense over the life of the debt using the effective interest method.
Revenue Recognition and Deferred Revenue

Revenue Recognition and Deferred Revenue

In May 2014, the Financial Accounting Standards Board (“FASB”) issued a comprehensive new revenue recognition standard (“ASC 606”) that superseded previous existing revenue recognition guidance and was adopted by the Company using the modified retrospective method as of February 4, 2018, the beginning of the first quarter of its fiscal year ended February 2, 2019.  The adoption of the new guidance primarily affected the recognition of minimum guaranteed royalties under the Company’s agreements with its licensees that have historically been recognized as earned in accordance with the underlying license agreements.  Under this new standard, such royalties are generally recognized on a straight-line basis over the term of the license agreement.  Accordingly, for license agreements with escalating minimum guaranteed royalties, revenues will generally be higher during the early years of the license agreement than they would have been under the previous guidance.  Royalties are typically earned based on the licensees’ retail or wholesale sales of licensed products, or based on the cost of producing the licensed goods.  Revenues from license fees, up-front payments and milestone payments, which are received in connection with other rights and services that represent continuing obligations of the Company, are deferred and recognized in accordance with the license agreements.  The cumulative effect on adoption of ASC 606 totaled $0.3 million, resulting in a charge to accrued revenue and an adjustment to deferred revenue with a corresponding credit to accumulated deficit for all contracts not completed as of the adoption date.  In the fiscal year ended February 2, 2019, the Company recognized additional revenue of $1.1 million as a result of applying ASC 606.  The comparative information for the prior fiscal year has not been restated.  

The Company recognizes contract liabilities as deferred revenue when licensees prepay royalties, or from license fees, up-front payments and milestone payments that have not yet been earned.  Deferred revenue is classified as current or noncurrent depending on when it is anticipated to be recognized.  Deferred revenue totaled $2.2 million and $5.1 million at February 2, 2019 and February 3, 2018, respectively.  Revenue recognized in the fiscal year ended February 2, 2019 that was included in deferred revenue at February 3, 2018 was $2.7 million.  The Company recognizes contract assets as accrued revenue when minimum guaranteed royalties are recognized that have not yet been earned under the license agreements.  The Company typically bills and receives payments from customers on a quarterly basis for royalties earned or for minimum guaranteed royalties that have historically been recognized as earned in accordance with the underlying license agreements.  Accrued revenue is classified as current or noncurrent depending on when the asset is anticipated to be charged to revenue.  Accrued revenue totaled $1.4 million and $0.4 million at February 2, 2019 and February 3, 2018, respectively.     

The Company’s remaining performance obligation is to maintain the licensed intellectual property, or in some cases, to provide product development and design services.  As of February 2, 2019, the Company had a contractual right to receive approximately $60.7 million of aggregate minimum licensing revenue through the remaining terms of the current licenses, excluding any renewals, which is primarily expected to be recognized approximately over the next 9 years.
Marketing and Advertising

Marketing and Advertising

Generally, the Company’s licensees and franchisees fund their own advertising programs.  Marketing, advertising and promotional costs incurred by the Company are charged to selling, general and administrative expense as incurred and were approximately $1.0 million and $2.7 million during Fiscal 2019 and Fiscal 2018, respectively.
Rent Expenses and Tenant Improvement Allowances

Rent Expense and Tenant Improvement Allowances

Rent expense is recognized on a straight‑line basis over the term of the lease.  Tenant improvements allowances are recorded as a deferred lease credit in the balance sheets and amortized as a reduction of rent expense over the term of the lease.
Stock-Based Compensation

Stock-Based Compensation

Stock option grants and restricted stock awards to employees and directors are measured and recognized as compensation expense based on estimated fair values, which are determined using option valuation models.  These models are based on assumptions about stock price volatility, interest rates, dividend rates and other factors.  The estimated fair value is amortized over the vesting period of the award using the graded amortization method.
Restructuring Charges

Restructuring Charges

Restructuring charges consist of severance, lease termination, contract termination and other restructuring-related costs.  A liability for severance costs is recognized when the plan of termination has been communicated to the affected employees and is measured at its fair value at the communication date.  Lease and contract termination costs are recognized at the date the Company ceases using the rights conveyed by the lease or contract and are measured at fair value, which is determined based on the remaining contractual lease obligations reduced by estimated sublease rentals, if any.
Income Taxes

Income Taxes

The Company uses the asset and liability method of accounting for income taxes.  Deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred taxes of a change in tax rates is recognized in income during the period that includes the enactment date.  Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.  In assessing the need for a valuation allowance, the Company considers estimates of future taxable income and ongoing prudent and feasible tax planning strategies.  The Company records the tax effect of equity issuances within the income statement.

The Company accounts for uncertainty in income taxes based on financial statement recognition and measurement of tax positions taken or expected to be taken on a tax return.  A tax position is initially recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities.  Such tax positions are measured as the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority, assuming full knowledge of the position and all relevant facts.
Earnings (Loss) Per Share

Earnings (Loss) Per Share

Basic earnings (loss) per share (“EPS”) is computed by dividing the net (loss) income attributable to common stockholders by the weighted-average number of common shares outstanding during the period, while diluted EPS additionally includes the dilutive effect of outstanding stock options and warrants as if such securities had been exercised at the beginning of the period.   The computation of diluted common shares outstanding excludes outstanding stock options and warrants that are antidilutive.
Warrants

Warrants

The Company has issued warrants to purchase shares of its common stock to one of its Hi-Tec licensees and to certain of its lenders and investors.  Because the warrants are assessed to be equity in nature, they are measured at fair value at inception. The warrants issued to the Company’s licensee are recognized as additional paid-in capital and contra revenue over the period the revenue from the license is expected to be recognized in accordance with Accounting Standards Codification (“ASC”) 605-60-25 and ASC 505-50-S99-1.  The warrants issued to the Company’s lenders and investors are recognized as additional paid-in capital and, if issued related to a modification of existing debt, are charged directly to operating expenses in the Company’s statements of operations.  Alternatively, the fair value of warrants issued in connection with new borrowings or the extinguishment of existing borrowings is capitalized and amortized into interest expense over the life of the new debt using the effective interest method.
Fair Value of Financial Instruments

Fair Value of Financial Instruments

The carrying value of accounts receivable and accounts payable approximates fair value due to their short‑term nature.  The carrying value of the Company’s long‑term debt approximates fair value as these borrowings bear interest at floating rates.
Use of Estimates

Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and disclosures of contingent assets and liabilities.  While management bases its estimates on assumptions it believes are reasonable under the circumstances, these estimates by their nature are subject to an inherent degree of uncertainty.  Actual results could differ materially from these estimates.
Recent Accounting Pronouncements

Recent Accounting Pronouncements

In March 2016, the FASB issued authoritative guidance which modifies existing guidance for off-balance sheet treatment of a lessee’s operating leases. The standard requires a lessee to recognize assets and liabilities related to long-term leases that were classified as operating leases under previous guidance. An asset would be recognized related to the right to use the underlying asset, and a liability would be recognized related to the obligation to make lease payments over the term of the lease. The standard also requires expanded disclosures about leases. This guidance is effective for the Company’s fiscal year ending February 1, 2020 (“Fiscal 2020”).  We expect the adoption of this standard to result in the recognition of total right-of-use assets of approximately $4 million and total lease liabilities of approximately $4 million. We do not anticipate that the adoption of this standard will have a material impact on our consolidated statements of comprehensive income (loss) and our consolidated statements of cash flows since the expense recognition under this new standard will be similar to current practice.

In May 2017, the FASB issued authoritative guidance related to stock-based compensation.  Under this new guidance, the Company would not account for the effects of a modification of a share-based payment award if the fair value of the award does not change, the vesting conditions remain the same and the classification of the award as an equity or a liability instrument does not change.  This standard was adopted by the Company in Fiscal 2019 and did not have a material impact on the Company’s financial position or results of operations.