10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended November 2, 2019.

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number 0-18640

APEX GLOBAL BRANDS INC.

(Exact name of registrant as specified in its charter)

Delaware	95-4182437
(State or other jurisdiction of Incorporation or organization)	(IRS employer identification number)
5990 Sepulveda Boulevard, Sherman Oaks, CA	91411
(Address of principal executive offices)	Zip Code

Registrant’s telephone number, including area code  (818) 908-9868 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.06 per share	APEX	The Nasdaq Capital Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer                  ☐
Non-accelerated filer   ☒	Smaller reporting company ☒
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐  No ☒

As of December 13, 2019, there were approximately 5,570,530 million shares of the Registrant’s Common Stock outstanding.

APEX GLOBAL BRANDS INC.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION	3
ITEM 1. Financial Statements (unaudited):	3
Condensed Consolidated Balance Sheets November 2, 2019 and February 2, 2019	3
Condensed Consolidated Statements of Operations Three and nine months ended November 2, 2019 and November 3, 2018	4
Condensed Consolidated Statements of Stockholders’ Equity Three and nine months ended November 2, 2019 and November 3, 2018	5
Condensed Consolidated Statements of Cash Flows Nine months ended November 2, 2019 and November 3, 2018	6
Notes to Condensed Consolidated Financial Statements	7
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
ITEM 4. Controls and Procedures	20
PART II. OTHER INFORMATION	21
ITEM 1. Legal Proceedings	21
ITEM 1A. Risk Factors	21
ITEM 5. Other Information	23
ITEM 6. Exhibits	23
SIGNATURES	25

2

PART 1. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

APEX GLOBAL BRANDS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share amounts)

	November 2, 2019			February 2, 2019
Assets
Current assets:
Cash and cash equivalents	$	1,448		$	4,284
Accounts receivable, net		5,352			4,363
Other receivables		290			339
Prepaid expenses and other current assets		650			857
Total current assets		7,740			9,843
Property and equipment, net		511			620
Intangible assets, net		59,312			64,751
Goodwill		16,252			16,252
Accrued revenue and other assets		6,391			1,645
Total assets	$	90,206		$	93,111
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,794		$	3,120
Other current liabilities		3,785			4,714
Current portion of long-term debt		55,219			1,300
Deferred revenue—current		3,869			1,626
Total current liabilities		65,667			10,760
Long-term liabilities:
Long-term debt		—			53,154
Deferred income taxes		13,218			12,055
Long-term lease liabilities		3,616			—
Other liabilities		2,162			2,807
Total liabilities		84,663			78,776
Commitments and Contingencies (Note 7)
Stockholders’ Equity:
Preferred stock, $.02 par value, 1,000,000 shares authorized, none issued		—			—
Common stock, $.06 par value, 10,000,000 shares authorized, shares issued    5,570,530 (November 2, 2019) and 4,900,318 (February 2, 2019)		334			294
Additional paid-in capital		78,154			76,633
Accumulated deficit		(72,945	)		(62,592	)
Total stockholders’ equity		5,543			14,335
Total liabilities and stockholders’ equity	$	90,206		$	93,111

See notes to condensed consolidated financial statements.

3

APEX GLOBAL BRANDS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share amounts)

	Three Months Ended						Nine Months Ended
	November 2, 2019			November 3, 2018			November 2, 2019			November 3, 2018
Revenues	$	4,894		$	5,842		$	15,549		$	18,317
Operating expenses:
Selling, general and administrative expenses		3,193			3,234			10,117			11,577
Stock-based compensation		153			241			876			666
Business acquisition and integration costs		73			—			284			307
Restructuring charges		138			—			180			5,615
Intangible asset impairment charge		5,000			—			5,000			—
Loss (gain) on sale of assets		—			25			—			(546	)
Depreciation and amortization		232			292			743			1,223
Total operating expenses		8,789			3,792			17,200			18,842
Operating income (loss)		(3,895	)		2,050			(1,651	)		(525	)
Other income (expense):
Interest expense		(2,182	)		(1,910	)		(6,678	)		(6,007	)
Other income (expense), net		(59	)		14			2			(3,219	)
Total other expense, net		(2,241	)		(1,896	)		(6,676	)		(9,226	)
Income (loss) before income taxes		(6,136	)		154			(8,327	)		(9,751	)
Provision for income taxes		692			91			2,026			1,980
Net income (loss)	$	(6,828	)	$	63		$	(10,353	)	$	(11,731	)
Net loss per share:
Basic earnings (loss) per share	$	(1.23	)	$	0.01		$	(1.93	)	$	(2.50	)
Diluted earnings (loss) per share	$	(1.23	)	$	0.01		$	(1.93	)	$	(2.50	)
Weighted average common shares outstanding:
Basic		5,534			4,716			5,359			4,686
Diluted		5,534			4,716			5,359			4,686

See notes to condensed consolidated financial statements.

4

APEX GLOBAL BRANDS INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands)

	Common Stock
	Shares		Par Value		Additional Paid-in Capital			Retained Earnings (Accumulated Deficit)			Total
Balance, February 2, 2019		4,900	$	294	$	76,633		$	(62,592	)	$	14,335
Stock-based compensation		—		—		208			—			208
Equity issuances, net of tax		415		25		598			—			623
Stock Warrants		—		—		28			—			28
Net Loss		—		—		—			(2,258	)		(2,258	)
Balance, May 4, 2019		5,315	$	319	$	77,467		$	(64,850	)	$	12,936
Stock-based compensation		—		—		515			—			515
Equity issuances, net of tax		207		12		(12	)		—			—
Stock Warrants		—		—		28			—			28
Net Loss		—		—		—			(1,267	)		(1,267	)
Balance, August 3, 2019		5,522	$	331	$	77,998		$	(66,117	)	$	12,212
Stock-based compensation		—		—		153			—			153
Equity issuances, net of tax		49		3		(24	)		—			(21	)
Stock Warrants		—		—		27			—			27
Net Loss		—		—		—			(6,828	)		(6,828	)
Balance, November 2, 2019		5,571	$	334	$	78,154		$	(72,945	)	$	5,543

	Common Stock
	Shares		Par Value		Additional Paid-in Capital			Retained Earnings (Accumulated Deficit)			Total
Balance, February 3, 2018		4,666	$	280	$	74,377		$	(50,542	)	$	24,115
Adoption of ASC 606		—		—		—			275			275
Stock-based compensation		—		—		300			—			300
Stock Warrants		—		—		23			—			23
Net Loss		—		—		—			(2,741	)		(2,741	)
Balance, May 5, 2018		4,666	$	280	$	74,700		$	(53,008	)	$	21,972
Stock-based compensation		—		—		125			—			125
Equity issuances, net of tax		16		1		776			—			777
Stock Warrants		—		—		21			—			21
Net Loss		—		—		—			(9,053	)		(9,053	)
Balance, August 4, 2018		4,682	$	281	$	75,622		$	(62,061	)	$	13,842
Stock-based compensation		—		—		241			—			241
Equity issuances, net of tax		59		3		(3	)		—			—
Stock Warrants		—		—		22			—			22
Net Income		—		—		—			63			63
Balance, November 3, 2018		4,741	$	284	$	75,882		$	(61,998	)	$	14,168

5

APEX GLOBAL BRANDS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Nine Months Ended
	November 2, 2019			November 3, 2018
Cash flows from operating activities:
Net loss	$	(10,353	)	$	(11,731	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		743			1,223
Restructuring charges		180			5,615
Intangible asset impairment charge		5,000			—
Amortization of deferred financing costs		1,755			3,750
Deferred income taxes and noncurrent provisions		1,163			1,079
Stock-based compensation and stock warrant charges		958			729
Loss (gain) on sale of assets		—			(546	)
Changes in operating assets and liabilities, net of effects from business    combinations:
Accounts receivable		(989	)		3,764
Other receivables		49			66
Prepaid expenses and other current assets		207			314
Other assets		(569	)		(980	)
Accounts payable		(323	)		(507	)
Other current liabilities		(2,317	)		(7,180	)
Deferred revenue		2,243			(1,692	)
Net cash used in operating activities		(2,253	)		(6,096	)
Net cash used in operating activities from    discontinued operations		(—	)		(1,380	)
Cash flows from investing activities:
Capital investments		(195	)		(184	)
Proceeds from business disposition and sale of assets		—			5,643
Net cash provided by (used in) investing activities		(195	)		5,459
Cash flows from financing activities:
Proceeds from term loan, subordinated promissory notes and line of credit		—			42,000
Payments on term loan and line of credit		(950	)		(38,100	)
Debt issuance costs		(39	)		(3,016	)
Issuance of common stock		601			4
Net cash (used in) provided by financing activities		(388	)		888
Decrease in cash and cash equivalents		(2,836	)		(1,129	)
Cash and cash equivalents, beginning of period		4,284			3,174
Cash and cash equivalents, end of period	$	1,448		$	2,045
Cash paid for:
Income taxes	$	790		$	837
Interest	$	4,923		$	5,238
Noncash investing and financing activities:
Conversion of junior participation interests to subordinated promissory notes	$	—		$	11,500

See notes to condensed consolidated financial statements.

6

APEX GLOBAL BRANDS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statement presentation.  Cherokee Inc. changed its name to Apex Global Brands Inc. effective June 27, 2019.  These financial statements include the accounts of Apex Global Brands Inc. and its consolidated subsidiaries (the “Company”) and include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the Company’s financial condition and the results of operations for the periods presented.  The condensed consolidated financial statements and notes thereto should be read in conjunction with the audited financial statements and notes thereto for the year ended February 2, 2019 included in the Company’s Annual Report on Form 10-K.  Interim results are not necessarily indicative of results to be expected for the full year.

Liquidity and Going Concern

The accompanying condensed 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 senior secured credit facility, the Company is required to maintain specified levels of Adjusted EBITDA as defined ($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 operating results for the twelve months ended November 2, 2019 resulted in a violation of this minimum Adjusted EBITDA covenant, which is an event of default.  However, the Company’s senior lender has agreed to forbear from enforcing its rights under the senior secured credit facility through February 28, 2020. Revenues for the three months ended November 2, 2019 were lower than the Company’s previous forecasts due to lower than expected royalties reported by the Company’s licensees, which have been negatively impacted by the economic uncertainty surrounding Brexit, global trade wars and increasing tariffs on footwear and apparel, and the weakening of the British pound sterling and euro in relation to the United States dollar.  In response, management has enacted certain cash savings measures, but such actions were not adequate to maintain compliance with the Adjusted EBITDA covenant.  The Company has classified its debt as current as financial projections indicate that there is a significant risk of further violations of the minimum Adjusted EBITDA covenant or minimum cash covenant beyond the forbearance period agreed to with the Company’s senior lender.  Future compliance failures would subject the Company to significant risks, including the right of its senior lender to terminate its obligation under the Credit Facility, declare all or any portion of the borrowed amounts then outstanding to be accelerated and due and payable, and/or exercise any other right or remedies it may have under applicable law, including foreclosing on the Company’s and/or its subsidiaries’ assets that serve as collateral for the borrowed amounts.  If any of these rights were to be exercised, the Company’s financial condition and ability to continue operations would be materially jeopardized.  If the Company is unable to meet obligations to lenders and other creditors, the Company may have to significantly curtail or even cease operations.  Because of this uncertainty, there is substantial doubt about the Company’s ability to continue as a going concern.  The Company is in negotiations for new and amended licenses that would increase its working capital and Adjusted EBITDA and is evaluating other potential sources of working capital, including the disposition of certain assets.  Management’s plans also include further negotiations with its lenders and other potential sources of capital, and the Company’s management and board of directors have engaged an advisory firm to advise the Company regarding its business plans, risks and opportunities.  There is no assurance that the Company will be able to execute these plans or continue to operate as a going concern.

7

Reverse Stock Split

On September 27, 2019, the Company effected a one-for-three reverse stock split (the “Reverse Stock Split”) of its common stock.  The Reverse Stock Split reduced the number of the Company’s outstanding shares of common stock from approximately 16.6 million shares to approximately 5.5 million shares and reduces the number of authorized shares of common stock from 30.0 million shares to 10.0 million shares.  Unless the context otherwise requires, all share and per share amounts in these condensed consolidated financial statements have been revised to reflect the Reverse Stock Split.

2. New Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments-Credit Losses (“Topic 326”).  For trade receivables, the Company will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable.  This new standard is effective for the Company’s fiscal year ending January 30, 2021 (‘‘Fiscal 2021’’).  The Company is currently evaluating the impact of the adoption of this standard on our condensed consolidated financial statements. Management does not expect the impact of adoption to be material.

In March 2016, the FASB issued authoritative guidance which modified existing guidance for off-balance sheet treatment of a lessee’s operating leases (“Topic 842”).  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 is recognized related to the right to use the underlying asset, and a liability is recognized related to the obligation to make lease payments over the term of the lease.  These amounts are determined based on the present value of the lease payments over the lease term.  The standard also requires expanded disclosures about leases.  The Company adopted this standard as of the beginning of its fiscal year ending February 1, 2020, electing the transition option that allowed it not to restate the comparative periods in its financial statements in the year of adoption and to carry forward its historical assessment of whether contracts are, or contain, leases, along with its historical assessment of lease classifications and initial direct costs.

The Company’s leases obligations comprise primarily individual leases for office space without multiple components.  The Company determines if an arrangement is or contains a lease at inception by evaluating various factors, including whether a vendor’s right to substitute an identified asset is substantive. Lease classification is determined at the lease commencement date when the leased assets are made available for use.  For the Company’s long-term leases, operating leases obligations are included in other current liabilities and long-term lease liabilities, and right-of-use assets are included in accrued revenue and other assets. The Company does not have any material finance leases.  The operating lease obligations and right-of-use assets recognized on adoption of Topic 842 were $4.7 million and $4.6 million, respectively.  The difference between the total right-of-use assets and total lease liabilities recorded on adoption is primarily due to the derecognition of prepaid rent expenses.

The Company uses estimates of its incremental borrowing rate (IBR) based on the information available at the lease commencement date in determining the present value of lease payments.  In determining the appropriate IBR, the Company considers information including, but not limited to, its credit rating, the lease term, and the currency in which the arrangement is denominated.  For leases which commenced prior to our adoption of Topic 842, we used the estimated IBR on the date of adoption. When the Company has the sole option to either renew or terminate a lease, the present value of the right-of-use asset and lease obligation includes the extension period when it is reasonably certain that the Company will exercise the option. Lease expense is recognized on a straight-line basis over the lease term.

8

3. Intangible Assets

Intangible assets consists of the following:

	November 2, 2019							February 2, 2019
(In thousands)	Gross Amount		Accumulated Amortization			Net Book Value		Gross Amount		Accumulated Amortization			Net Book Value
Amortizable trademarks	$	28,004		(20,379	)	$	7,625	$	27,899		(19,835	)	$	8,064
Indefinite lived trademarks		51,687		—			51,687		56,687		—			56,687
	$	79,691	$	(20,379	)	$	59,312	$	84,586	$	(19,835	)	$	64,751

The Hi-Tec Acquisition during Fiscal 2017 resulted in trademarks valued at $52.4  million that are classified as indefinite lived and not subjected to amortization.  Other indefinite lived trademarks include certain Cherokee brand trademarks that were acquired in historical transactions.  The Company's revenues from its Hi-Tec, Magnum and Interceptor brands, which were acquired in the Hi-Tec Acquisition, were significantly below previous forecasts for the three months ended November 2, 2019.  (See Note 1 for further discussion.)  This was identified as an interim impairment indicator for the related indefinite lived trademarks during the preparation of the Company’s interim financial statements, and management performed an interim impairment test based on updated cash flow projections and discounted cash flows based on estimated weighted average costs of capital (income approach).   The Company determined that the fair values of its Hi-Tec and Magnum trademarks were not in excess of their carrying values, and as a result, an impairment charge of $5.0 million was recorded during the three months ended November 2, 2019 to adjust these trademarks to their estimated fair value.  The fair value of the Company’s Interceptor brand was in excess of its carrying value, so no impairment charge was necessary based on the interim test.  However, the Company believes that increased tariffs and global trade wars have negatively impacted the competitive and economic environment in which Interceptor operates, and an indefinite life is no longer supported.  Accordingly, the Interceptor trademark will be amortized prospectively over its estimated remaining useful life.  The recorded impairment charge is based on the preliminary valuation and is management’s best estimate as of the filing date of these condensed consolidated financial statements.  The Company is in the process of completing its evaluation of the key inputs used to estimate the fair value of its indefinite lived trademarks.  The impairment charge is therefore subject to revision as management’s valuation is performed and completed during the fourth quarter.  The Company has acquired other trademarks that are being amortized over their estimated useful lives, which average 10.0 years with no residual values.  Amortization of intangible assets was $0.2 million and $0.2 million for the three months ended November 2, 2019 and November 3, 2018, respectively, and $0.5 million and $0.7 million for the nine months ended November 2, 2019 and November 3, 2018, respectively.

Goodwill arose from historical acquisitions and the Hi-Tec Acquisition that occurred during Fiscal 2017.  Goodwill is tested at least annually for impairment but was tested this quarter as a result of the revenue shortfall referred to above and the sustained drop in the trading price of the Company’s stock. Because the Company has one reporting unit, its impairment test is based primarily on the relationship between its market capitalization and the book value of its equity adjusted for an estimated control premium.  The goodwill impairment test this quarter indicated that the Company’s goodwill is not impaired.

9

4. Other Current Liabilities

Other current liabilities consist of the following:

(In thousands)	November 2, 2019		February 2, 2019
Accrued employee compensation and benefits	$	363	$	376
Restructuring plan liabilities		1,602		3,003
Income taxes payable		486		473
Current lease obligations		564		—
Other liabilities		770		862
	$	3,785	$	4,714

5. Restructuring Plans

The Company incurred restructuring charges in Fiscal 2018 and Fiscal 2017 related to the Hi-Tec Acquisition and its integration into the Company’s ongoing operations (the “Hi-Tec Plan”). Restructuring charges were also incurred in the fourth quarter of Fiscal 2018 as the Company’s staff was realigned to appropriately support its then current business (the “FY18 Plan”).  Furthermore, during Fiscal 2019, the Company took additional steps designed to improve its organizational efficiencies by eliminating redundant positions and unneeded facilities, and by terminating various consulting and marketing contracts (the “FY19 Plan”).  

Charges and payments against the restructuring plan obligations were as follows:

(In thousands)	FY19 Plan			FY18 Plan			Hi-Tec Plan			Total
Balance, February 2, 2019		2,760			44			199			3,003
Restructuring charges		180			—			—			180
Payments during the period		(1,372	)		(44	)		(165	)		(1,581	)
Balance, November 2, 2019	$	1,568		$	—		$	34		$	1,602

6. Debt

On August 3, 2018, the Company entered into a senior secured credit facility, which provided a $40.0 term loan, and $13.5 million of subordinated promissory notes (the “Junior Notes”). The credit facility was amended on January 30, 2019 to provide an additional term loan of $5.3 million. The term loans mature in August 2021 and require quarterly principal payments and monthly interest payments based on LIBOR plus a margin.  The additional $5.3 million term loan also requires interest of 3.0% payable in kind with such interest being added to the principal balance of the loan.  The term loans are secured by substantially all the assets of the Company and are guaranteed by the Company’s subsidiaries.  The Junior Notes mature in November 2021, and they are secured by a second priority lien on substantially all of the assets of Company and guaranteed by the Company’s subsidiaries.  Interest is payable monthly on the Junior Notes, but no periodic amortization payments are required.  The Junior Notes are subordinated in rights of payment and priority to the term loans but otherwise have economic terms substantially similar to the term loans.  Excluding the interest payable in kind, the weighted-average interest rate on both the term loans and Junior Notes at November 2, 2019 was 11.1%.

The term loans are subject to a borrowing base and include financial covenants and obligations regarding the operation of the Company’s business that are customary in facilities of this type, including limitations on the payment of dividends.  Financial covenants include the requirement to maintain specified levels of Adjusted EBITDA, as defined in the agreement, and maintain a specified level of cash on hand. The Company is required to maintain a borrowing base comprising the value of the Company’s trademarks that exceeds the outstanding balance of the term loans.  If the borrowing base is less than the outstanding term loans at any measurement period, then the Company would be required to repay a portion of the term loans to eliminate such shortfall.  Events of default include, among other things, the occurrence of a change of control of the Company, and a default under the term loans agreement would also trigger a default under the Junior Notes agreements. The Company’s operating results for the twelve months ended November 2, 2019 resulted in a violation of the minimum Adjusted EBITDA covenant, which is an event of default.  However, the

10

Company’s lender has agreed to forbear from enforcing its rights under the senior secured credit facility through February 28, 2020.(See Note 1, Liquidity and Going Concern.)

Outstanding borrowings under the term loans were $44.1 million at November 2, 2019 with associated unamortized debt issuance costs of $2.0 million.  Outstanding Junior Notes were $13.5 million at November 2, 2019 with associated unamortized debt issuance costs of $0.4 million. As a result of the covenant violation referred to above, the total amount of the Company’s long-term debt is reflected as a current obligation in the Company’s November 2, 2019 consolidated balance sheet.

7. Commitments and Contingencies

The Company indemnifies certain customers against liability arising from third‑party claims of intellectual property rights infringement related to the Company’s trademarks.  These indemnities appear in the licensing agreements with the Company’s customers, are not limited in amount or duration and generally survive the expiration of the contracts.  The Company is unable to determine a range of estimated losses that it could incur related to such indemnities since the amount of any potential liabilities cannot be determined until an infringement claim has been made.

The Company is involved from time to time in various claims and other matters incidental to the Company’s business, the resolution of which is not presently expected to have a material adverse effect on the Company’s financial position, results of operations or liquidity.  Estimated reserves for contingent liabilities, including threatened or pending litigation, are recorded as liabilities in the financial statements when the outcome of these matters is deemed probable and the liability is reasonably estimable.

The Company has non-cancelable operating lease agreements with various expiration dates through December 31, 2026 for office space and equipment.  Certain lease agreements include options to renew, which are not reasonably certain to be exercised and therefore are not factored into our determination of the present value of lease obligations.

Operating lease costs are included as a component of selling, general and administrative expense and were $0.1 million and $0.4 million, excluding variable lease costs and sublease income, for the three and nine months ended November 2, 2019, respectively.  Cash paid for operating lease obligations is consistent with operating lease costs for the period.  Total lease expense recognized prior to our adoption of Topic 842 was $0.2 million and $0.6 million for the three and nine months ended November 3, 2018, respectively.

As of November 2, 2019, the weighted-average remaining lease term is 6.2 years, and the weighted-average IBR is 8.8%.  The right-of-use assets as of November 2, 2019 was $4.2 million.  Future minimum commitments under non-cancelable operating leases as of November 2, 2019 are as follows:

(In thousands)	Operating Leases
Remainder of Fiscal 2020	$	193
Fiscal 2021		890
Fiscal 2022		902
Fiscal 2023		884
Fiscal 2024		893
Thereafter		1,597
Total future minimum lease payments		5,359
Less imputed interest		(1,178	)
Present value of operating lease liabilities	$	4,181

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Future minimum lease payments as of February 2, 2019 were as follows:

(In thousands)	Operating Leases
Fiscal 2020	$	854
Fiscal 2021		865
Fiscal 2022		876
Fiscal 2023		857
Fiscal 2024		863
Thereafter		1,673
Total future minimum lease payments	$	5,988

8. Revenues and Concentrations of Risk

Revenues by geographic area based upon the licensees’ country of domicile comprise the following:

	Three Months Ended				Nine Months Ended
(In thousands)	November 2, 2019		November 3, 2018		November 2, 2019		November 3, 2018
U.S. and Canada	$	1,327	$	1,505	$	4,049	$	4,908
Europe		851		1,136		2,798		4,358
Middle East, India and Africa		636		926		2,107		3,107
Asia/Pacific		1,402		1,431		4,345		3,260
Latin America		678		844		2,250		2,684
Total	$	4,894	$	5,842	$	15,549	$	18,317

Long‑lived assets located in the United States and outside the United States amount to $0.2 million and $0.3 million, respectively, at November 2, 2019 and $0.2 million and $0.4 million, respectively, at February 2, 2019.

Deferred revenue totaled $3.9 million and $2.2 million at November 2, 2019 and February 2, 2019, respectively.  Revenue recognized in the three and nine months ended November 2, 2019 that was previously included in deferred revenue was $0.1 million and $1.5 million, respectively.  Revenue recognized in the three and nine months ended November 3, 2018 that was previously included in deferred revenue was $0.2 million and $2.1 million.  

Three licensees accounted for approximately 37% of accounts receivable at November 2, 2019, and two licensees accounted for approximately 29% and 27% of revenues for the three and nine months ended November 2, 2019, respectively.  Two licensees accounted for approximately 29% of accounts receivable at February 2, 2019.  Three licensees accounted for approximately 32% of revenues for the three months ended November 3, 2018, and two licensees for approximately 20% of revenues for the nine months ended November 3, 2018.

9. 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 anti‑dilutive.  

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10. Taxes on Income

Each reporting period, the Company evaluates the realizability of its deferred tax assets.  As of November 2, 2019, the Company continued to maintain a full valuation allowance against its deferred tax assets in the United States and the foreign subsidiaries acquired in the Hi-Tec Acquisition.  These valuation allowances will be maintained until there is sufficient positive evidence to conclude that it is more likely than not that these deferred tax assets will be realized.   

As of November 2, 2019, the reserve for uncertain tax positions resulting from unrecognized tax benefits related to the Company’s Hi-Tec subsidiaries was $3.3 million.  There was no change in the three months ended November 2, 2019 and a decrease of $0.1 million in the nine months ended November 2, 2019, in the Company’s liability for uncertain tax positions.      

11. Subsequent Events

In November 2019, the Company entered into a lease termination agreement for its office building in Amsterdam.  The lease will terminate as of December 31, 2019 rather than continue through December 2026. The compensation for early termination is a payment of $0.6 million and a subordinated note of $0.3 million, excluding VAT, reducing the Company’s lease obligation by $2.4 million.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

As used in this discussion and analysis, “Apex Global Brands”, the “Company”, “we”, “us” and “our” refer to Apex Global Brands Inc. and its consolidated subsidiaries, unless the context indicates or requires otherwise.  Additionally, “Fiscal 2020” refers to our fiscal year ending February 1, 2020 and “Fiscal 2019” refers to our fiscal year ended February 2, 2019.  The following discussion and analysis should be read together with the unaudited condensed consolidated financial statements and the related notes included in this report.  The information contained in this quarterly report on Form 10‑Q is not a complete description of our business or the risks associated with an investment in our securities.  For additional context with which to understand our financial condition and results of operations, refer to management’s discussion and analysis of financial condition and results of operations (“MD&A”) contained in our Annual Report on Form 10‑K, for the fiscal year ended February 2, 2019, which was filed with the Securities and Exchange Commission (“SEC”) on April 23, 2019, as well as the consolidated financial statements and notes contained therein (collectively, our “Annual Report”).  In preparing this MD&A, we presume that readers have access to and have read the MD&A in our Annual Report pursuant to Instruction 2 to paragraph (b) of Item 303 of Regulation S‑K.  The section entitled “Risk Factors” set forth in Item 1A of our Annual Report and similar disclosures in our other SEC filings discuss some of the important risk factors that may affect our business, results of operations and financial condition.  

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 report and in our 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

Apex Global Brands is a global marketer and manager of a portfolio of fashion and lifestyle brands that we own, brands that we create, and brands that we elevate 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, Everyday California, Carole Little, Sideout and 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 development and marketing capabilities has made us one of the leading global licensors of style-focused lifestyle brands for apparel, footwear, accessories and home products.

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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 other retailers that 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 sell licensed products bearing the trademarks that we own or that we have designed and developed.

For certain of our key legacy brands, including Cherokee, Hawk Signature, 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 as we transition to our new licensees.

We derive revenues primarily from licensing our trademarks to retailers, manufacturers and distributors all over the world, and we are continually pursuing relationships with new retailers, manufacturers and distributors 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 November 2, 2019, we had 45 continuing license agreements in approximately 140 countries. These arrangements include relationships with Walmart, Soriana, Comercial Mexicana, TJ Maxx, Tottus, Nishimatsuya, Big 5, Academy, JD Sports, Black’s and Lidl. As of November 2, 2019, we had contractual rights to receive over $50.0 million of minimum royalty revenues over the next nine 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.  However, our licensees 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.

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.  Our revenues by geographic territory are as follows:

	Three Months Ended								Nine Months Ended
(In thousands, except percentages)	November 2, 2019				November 3, 2018				November 2, 2019				November 3, 2018
United States and Canada	$	1,327	27.1	%	$	1,505	25.8	%	$	4,049	26.0	%	$	4,908	26.7	%
Europe		851	17.4	%		1,136	19.4	%		2,798	18.0	%		4,358	23.8	%
Middle East, India and Africa		636	13.0	%		926	15.9	%		2,107	13.6	%		3,107	17.0	%
Asia/Pacific		1,402	28.6	%		1,431	24.5	%		4,345	27.9	%		3,260	17.8	%
Latin America		678	13.9	%		844	14.4	%		2,250	14.5	%		2,684	14.7	%
Revenues	$	4,894	100.0	%	$	5,842	100.0	%	$	15,549	100.0	%	$	18,317	100.0	%

Revenues in United States and Canada no longer include revenues from our Flip Flop Shops franchise business, which the Company sold in June 2018.  Flip Flop Shops royalties contributed $0.3 million in the nine months ended November 3, 2018. Our Europe royalties declined in the three and nine months ended November 2, 2019 primarily as a result of our European licensees being negatively affected by Brexit, and from a large initial order of Cherokee products by a large retailer in Europe that did not repeat in the current year.  Our revenues in the Middle East, India and Africa include revenues from our Cherokee licensee in South Africa that expired at the end of Fiscal 2019 and has yet to be replaced.  Our royalty revenues in Asia grew as a result of our new product development and design services agreement with a major retailer in the People’s Republic of China.  We are providing our product design and development expertise for a brand that they own, which we believe will efficiently enhance their retail operations.

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Sales of products by certain of our licensees that operate in Europe are being negatively affected by the economic uncertainty surrounding Brexit. We believe this had a negative effect on these licensees’ businesses during the three and nine months ended November 2, 2019 and a corresponding negative impact on our royalty revenues for that same period. This trend may continue into future quarters.  Furthermore, the United States has increased tariff rates on apparel and footwear.  We believe our licensees who use manufacturing facilities in countries subject to increased tariffs are taking proactive steps to offset the potential impact of higher tariffs, including moving production to countries not subject to higher tariffs and negotiating lower costs with existing suppliers.  Nonetheless, these higher tariffs may result in higher prices and a corresponding slow-down in retail sales of products bearing our trademarks, which in turn could result in lower royalty revenues.

Results of Operations

The table below contains certain information about our continuing operations from our condensed consolidated statements of operations along with other data and percentages.  Historical results are not necessarily indicative of results to be expected in future periods.  

	Three Months Ended										Nine Months Ended
(In thousands, except percentages)	November 2, 2019					November 3, 2018					November 2, 2019					November 3, 2018
Revenues:
Cherokee	$	1,485		30.3	%	$	1,956		33.5	%	$	4,918		31.7	%	$	7,559		41.3	%
Hi-Tec, Magnum, Interceptor and    50 Peaks		2,481		50.7	%		2,986		51.1	%		7,760		49.9	%		8,568		46.7	%
Hawk		68		1.4	%		145		2.5	%		241		1.5	%		471		2.6	%
Other brands		860		17.6	%		755		12.9	%		2,630		16.9	%		1,719		9.4	%
Total revenues		4,894		100.0	%		5,842		100.0	%		15,549		100.0	%		18,317		100.0	%
Operating expenses:
Selling, general and, administrative    expenses		3,193		65.2	%		3,234		55.4	%		10,117		65.1	%		11,577		63.2	%
Stock-based compensation		153		3.1	%		241		4.1	%		876		5.6	%		666		3.6	%
Business acquisition and    integration costs		73		1.5	%		—		-	%		284		1.8	%		307		1.7	%
Restructuring charges		138		2.8	%		—		-	%		180		1.2	%		5,615		30.7	%
Intangible asset impairment charge		5,000		102.2	%		—		-	%		5,000		32.2	%		—		-	%
Loss (gain) on sale of assets		—		-	%		25		0.4	%		—		-	%		(546	)	-3.0	%
Depreciation and amortization		232		4.7	%		292		5.0	%		743		4.8	%		1,223		6.7	%
Total operating expenses		8,789		179.5	%		3,792		64.9	%		17,200		110.6	%		18,842		102.9	%
Operating income (loss)		(3,895	)	-79.6	%		2,050		35.1	%		(1,651	)	-10.6	%		(525	)	-2.9	%
Interest expense and other expense		(2,241	)	-45.8	%		(1,896	)	-32.5	%		(6,676	)	-42.9	%		(9,226	)	-50.3	%
Loss before income taxes		(6,136	)	-125.4	%		154		2.6	%		(8,327	)	-53.6	%		(9,751	)	-53.2	%
Provision for income taxes		692		14.2	%		91		1.6	%		2,026		13.0	%		1,980		10.8	%
Net loss	$	(6,828	)	-139.5	%	$	63		1.1	%	$	(10,353	)	-66.6	%	$	(11,731	)	-64.0	%
Non-GAAP data:
Adjusted EBITDA(1)	$	1,701				$	2,608				$	5,432				$	6,740

⁽¹⁾ We define Adjusted EBITDA as net income before (i) interest expense, (ii) other (income) expense, net, (iii) provision for income taxes, (iv) depreciation and amortization, (v) gain on sale of assets, (vi) intangible assets impairment charge (vii) restructuring charges, (viii) business acquisition and integration costs and (ix) stock-based compensation and stock warrant charges.  Adjusted EBITDA is not defined under generally accepted accounting principles (“GAAP”) and it may not be comparable to similarly titled measures reported by other companies.  We use Adjusted EBITDA, along with GAAP measures, as a measure of profitability, because Adjusted EBITDA helps us compare our performance on a consistent basis by removing from our operating results the impact of our capital structure, the effect of operating in different tax jurisdictions, the impact of our asset base, which can differ depending on the book value of assets and the accounting methods used to compute depreciation, amortization and impairments, and the cost of acquiring or disposing of businesses and restructuring our operations.  We believe it is useful to investors for the same reasons.  Adjusted EBITDA has limitations as a profitability measure in that it does not include the interest expense on our long-term debt, non-operating income or expense items, our provision for income taxes, the effect of our expenditures for capital assets and certain intangible assets, or the costs of acquiring or disposing of businesses and restructuring our operations, or our non-cash charges for stock-based compensation and stock warrants.  A reconciliation from net loss from continuing operations as reported in our condensed consolidated statement of operations to Adjusted EBITDA is as follows:

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	Three Months Ended						Nine Months Ended
(In thousands)	November 2, 2019			November 3, 2018			November 2, 2019			November 3, 2018
Net loss	$	(6,828	)	$	63		$	(10,353	)	$	(11,731	)
Provision for income taxes		692			91			2,026			1,980
Interest expense		2,182			1,910			6,678			6,007
Other (income) expense, net		59			(14	)		(2	)		3,219
Depreciation and amortization		232			292			743			1,223
Intangible asset impairment charge		5,000			—			5,000			—
Loss (gain) on sale of assets		—			25			—			(546	)
Restructuring charges		138			—			180			5,615
Business acquisition and integration costs		73			—			284			307
Stock-based compensation		153			241			876			666
Adjusted EBITDA	$	1,701		$	2,608		$	5,432		$	6,740

Three and Nine months Ended November 2, 2019 Compared to Three and Nine months Ended November 3, 2018

The decrease in royalty revenues in the three months and nine months ended November 2, 2019 compared to the three and nine months ended November 3, 2018 was primarily due to the decrease in Cherokee and Hi-Tec royalties from our European Licensees, the expiration of our Cherokee license in South Africa at the end of Fiscal 2019, the impact of higher tariffs and the sale of our Flip Flop Shops franchise business in June 2018.  These decreases were partially offset by revenues from our new design services agreement with a retailer in China.

Selling, general and administrative expenses were $3.2 million in the three months ended November 2, 2019, which was consistent with the three months ended November 3, 2018, and decreased 13% to $10.1 million in the nine months ended November 2, 2019 from $11.6 million in the nine months ended November 3, 2018.  These expenses include payroll, employee benefits, marketing, sales, legal, rent, information systems and other administrative costs that are part of our ongoing operations.  The decrease in selling, general and administrative expenses for the nine-month periods was primarily due to reduced spending for payroll and administrative expenses that resulted from our restructuring plan that we implemented during the nine months ended November 3, 2018 to improve our organizational efficiencies.  We also reduced the size of our board of directors, and board members received more of their compensation in shares of our common stock.

Stock-based compensation in the three months ended November 2, 2019 was $0.2 million compared to $0.2 million in the three months ended November 3, 2018, and was $0.9 million in the nine months ended November 2, 2019 compared to $0.7 million in the nine months ended November 3, 2018, and comprises charges related to stock options and restricted stock grants.  We incurred $0.1 million of costs in the three months ended November 2, 2019 and $0.3 million of costs in the nine months ended November 2, 2019 for legal and other costs related to business acquisitions and integration.

We own various trademarks that are considered to have indefinite lives, while others are being amortized over their estimated useful lives.  We also have furniture, fixtures and other equipment that is being amortized over their useful lives.  Depreciation and amortization decreased in the three and nine months ended November 2, 2019 compared to the three and six ended November 3, 2018 primarily due to the disposition of our Flip Flop Shops franchise business. Our royalty revenues from Hi-Tec, Magnum and Interceptor were significantly below previous forecasts for the three months ended November 2, 2019, which affected our revenue projections in the near term for these brands.  As these trademarks have indefinite lives and are not being amortized, we updated our projected cash flows for these brands and determined that the fair values of these trademarks were not in excess of their carrying values.  As a result, an impairment charge of $5.0 million was recorded during the three months ended November 2, 2019 to adjust these trademarks to their estimated fair value.

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Interest expense was $2.2 million in the three months ended November 2, 2019 compared to $1.9 million in the three months ended November 3, 2018, and $6.7 million in the nine months ended November 2, 2019 compared to $6.0 million in the nine months ended November 3, 2018.This nine-monthincrease was primarily due to our increased debt level, along with higher non-cash interest charges related to our new term loans.We incurred approximately $0.8 million in the three and nine-months ended November 3, 2018 related to refinancing our former credit facility, which did not repeat in the current year.  Last year’s refinancing also resulted in a $3.2 million noncash charge to other expense to write off the then remaining unamortized debt issuance costs.

The provision for income taxes was $0.7 million and $2.0 million in the three and nine months ended November 2, 2019 compared to a $0.1 million and $2.0 million in the three and nine months ended November 3, 2018.  Even though we generated an operating loss in these periods, we reported tax expense because no tax benefits were recognized for tax losses in the United States and certain foreign jurisdictions due to previously established valuation allowances.  

Our net loss was $6.8 million and $10.4 million in the three and nine months ended November 2, 2019 compared to net income of $0.1 million and a net loss of $11.7 million in the three and nine months ended November 3, 2018, respectively. Our Adjusted EBITDA decreased 35% to $1.7 million in the three months ended November 2, 2019, from $2.6 million in the three months ended November 3, 2018, and decreased 19% to $5.4 million in the nine months ended November 2, 2019 from $6.7 million in the nine months ended November 3, 2018.

Liquidity and Capital Resources

We generally finance our working capital needs and capital investments with operating cash flows, term loans, subordinated promissory notes and lines of credit. In December 2016, we entered into a $50.0 million credit facility that was used to partially fund the Hi-Tec Acquisition. On August 3, 2018, we replaced that credit facility with a $40.0 million term loan and $13.5 million of subordinated promissory notes, and on January 30, 2019, we entered into an incremental $5.3 million term loan.

Cash Flows

We used $2.3 million of cash in our operating activities in the nine months ended November 2, 2019, compared to $6.1 million used in the nine months ended November 3, 2018.  This $3.8 million decrease in cash used in operations resulted primarily from collecting less cash from our licensees during the nine months ended November 2, 2019 compared to the nine months ended November 3, 2018 when we collected cash from our sales and distribution business that was sold to International Brands Group during the fourth quarter of Fiscal 2018.  This decrease in cash collections was partially offset by using less cash to fund our restructuring obligations.

Our investing activities of $0.2 million relate to investments in our trademarks in the nine months ended November 2, 2019.  We generated $5.5 million of cash from investing activities in the nine months ended November 3, 2018 primarily as a result of selling the remaining sales and distribution operations of Hi-Tec to International Brands Group in the fourth quarter of Fiscal 2018 and the sale of our Flip Flop Shops franchise business in June 2018.  

The principal payments of $1.0 million on our term loan in the nine months ended November 2, 2019 were partially offset by $0.6 million cash received on the exercise of stock warrants.  Financing activities in the nine months ended November 3, 2018 includes the refinancing our of former credit facility.

Credit Facilities

On August 3, 2018, we replaced our previous credit facility with a combination of a senior secured credit facility, which provided a $40.0 million term loan, and $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. The term loans mature in August 2021 and require quarterly principal payments and monthly interest payments based on LIBOR plus a margin. The additional $5.3 million term loan also requires interest of 3.0% payable in kind with such interest being added to the principal balance of the loan.  The term loans are secured by substantially all of our assets and are guaranteed by our subsidiaries. The $13.5 million of subordinated promissory notes mature in November 2021, and they are secured by a second priority lien on substantially all of our assets and guaranteed by our subsidiaries. Interest is payable monthly on the subordinated

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promissory notes, but no periodic amortization payments are required. The subordinated promissory notes are subordinated in rights of payment and priority to the term loan but otherwise have economic terms substantially similar to the term loan. Excluding the interest payable in kind, the weighted-average interest rate on both the term loans and subordinated promissory notes at November 2, 2019 was 11.1%. Outstanding borrowings under the senior secured credit facility were $44.1 million at November 2, 2019, and outstanding subordinated promissory notes were $13.5 million.

The term loans are subject to a borrowing base and include financial covenants and obligations regarding the operation of our business that are customary in facilities of this type, including limitations on the payment of dividends.  Financial covenants include the requirement to maintain specified levels of Adjusted EBITDA, as defined in the credit agreement ($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 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.

Our operating results for the twelve months ended November 2, 2019 resulted in a violation of this minimum Adjusted EBITDA covenant, which is an event of default.  However, our senior lender has agreed to forbear from enforcing its rights under the senior secured credit facility through February 28, 2020. Revenues for the three months ended November 2, 2019 were lower than our previous forecasts due to lower than expected royalties reported by our licensees, which have been negatively impacted by the economic uncertainty surrounding Brexit, global trade wars and increasing tariffs on footwear and apparel, and the weakening of the British pound sterling and euro in relation to the United States dollar.  In response, we have enacted certain cash savings measures, but such actions were not adequate to maintain compliance with the Adjusted EBITDA covenant.  Our current projections indicate that there is a significant risk of further violations of the minimum Adjusted EBITDA covenant or minimum cash covenant beyond the forbearance period agreed to with our senior lender.  Because of this uncertainty, there is substantial doubt about our ability to continue as a going concern.  Future compliance failures would subject us to significant risks, including the right of our lender to terminate its obligation under the Credit Facility, declare all or any portion of the borrowed amounts then outstanding to be accelerated and due and payable, and/or exercise any other right or remedies it may have under applicable law, including foreclosing on our assets that serve as collateral for the loans.  If any of these rights were to be exercised, our financial condition and ability to continue operations would be materially jeopardized.  If we are unable to meet our obligations to our lenders and other creditors, we may have to significantly curtail or even cease operations.  We are in negotiations for new and amended licenses that would increase our working capital and Adjusted EBITDA, and we are evaluating other potential sources of working capital, including the disposition of certain assets.  Our plans also include further negotiations with our lenders and other potential sources of capital, and we have engaged an advisory firm to advise us regarding our business plans, risks and opportunities.  There is no assurance that we will be able to execute these plans or continue to operate as a going concern.

In connection with the refinancing on August 3, 2018, we issued warrants to purchase shares of our common stock to our term loan lenders and to certain holders of our subordinated promissory notes. In the nine months ended November 2, 2019, 415,000 stock warrant shares (adjusted for the reverse stock split described in Note 1 to our condensed consolidated financial statements) were exercised and converted into our common stock for a cash exercise price of $0.6 million.

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Lease Obligation

In November 2019, we entered into a lease termination agreement for our office building in Amsterdam.  The lease will terminate as of December 31, 2019 rather than continue through December 2026. The compensation for early termination is a payment of $0.6 million and a subordinated note of $0.3 million, excluding VAT, reducing our lease obligation by $2.4 million.

Critical Accounting Policies and Estimates

This MD&A is based upon our condensed consolidated financial statements, which are included in this report.  The preparation of these condensed financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.  Refer to Note 3 of our condensed consolidated financial statements regarding our indefinite lived trademarks filed herewith and our Annual Report on Form 10-K for a discussion of our critical accounting policies and recent accounting pronouncements.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined under Rules 13a‑15(e) and 15d‑15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), that are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management carried out an evaluation of the effectiveness of our disclosure controls and procedures.  Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of November 2, 2019.

Changes in Internal Control over Financial Reporting

During the most recently completed fiscal quarter, no changes in our internal control over financial reporting materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations of Disclosure Controls and Procedures and Internal Control Over Financial Reporting

In designing our disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well-designed and operated, can provide only reasonable assurance of achieving the desired control objectives.  In addition, the design of our controls and procedures must reflect that resource constraints exist, and management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs.  Because of these inherent limitations, our disclosure and internal controls may not prevent or detect all instances of fraud, misstatements or other control issues.  In addition, projections of any evaluation of the effectiveness of disclosure or internal controls to future periods are subject to risks, including, among others, that controls may become inadequate because of changes in conditions or that compliance with policies or procedures may deteriorate.

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PART II—OTHER INFORMATION

ITEM 1. 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 1A. RISK FACTORS

The occurrence of any of the risks, uncertainties and other factors described in this report, our 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 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 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.The following disclosure, as well as the risks described in Item 1A. “Risk Factors” in our Quarterly Report on Form 10‑Q, for the quarter ended August 3, 2019, which was filed with the SEC on September 17, 2019 (the “Q2 10-Q”), and our Quarterly Report on Form 10‑Q, for the quarter ended May 4, 2019, which was filed with the SEC on June 18, 2019 (the “Q1 10-Q”), only describes our material risks that have undergone material changes since the date on which our Annual Report was filed with the SEC. As a result, you should carefully review Item 1A. “Risk Factors” in our Annual Report, our Q2 10-Q and our Q1 10-Q for descriptions of additional material risks and uncertainties to which our business and our common stock are subject.

The Nasdaq Hearings Panel has imposed on us a Panel Monitor until December 2, 2020.   If we fail to continue to comply with the Nasdaq minimum bid price rule or with any other Nasdaq listing requirement, our common stock may be delisted from trading on the Nasdaq Stock Market, which could have a material adverse effect on us and our stockholders.

On June 5, 2018, we received a deficiency letter from the Nasdaq notifying us that, because the bid price of our common stock closed below $1.00 per share for 30 consecutive business days, we were no longer in compliance with Nasdaq’s minimum bid price rule, which is a requirement for continued listing on the Nasdaq Global Market. Nasdaq’s rules require that we would need to regain 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 had been granted an additional 180-day extension period to regain compliance with the minimum bid price rule.  This 180-day period expired on June 3, 2019.  We received another letter from Nasdaq on June 4, 2019 indicating their intent to delist our securities from the Nasdaq Capital Market on June 13, 2019 because we had not achieved the required minimum bid price unless we request an appeal of this determination.  We filed our appeal on June 6, 2019 and met with the Nasdaq Hearings Panel in August 2019. The Nasdaq Hearings Panel accepted our compliance plan, which resulted in the September 2019 one-for-three reverse stock split described in Note 1 to our condensed consolidated financial statements included in this report.  On October 30, 2019, The Nasdaq Hearings Panel granted our continued listing on Nasdaq subject to further review after December 2, 2019.  On December 11, 2019, we received a letter from Nasdaq informing us that the Nasdaq Hearings Panel determined that we had regained compliance with the minimum bid price rule.  As a result, the Nasdaq Hearings Panel determined that we are in compliance with all applicable listing standards required for listing on The Nasdaq Capital Market.  However, based on our recent bid price history, the Nasdaq Hearings Panel has imposed a “Panel Monitor” as that term is defined under Nasdaq Listing Rule 5815(d)(4)(A), through December 2, 2020.  We are also required to notify the Panel Monitor if our bid price falls below $1.00 per share for any reason during the monitor period.

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If we fail to continue to comply with the minimum bid price rule or with any other Nasdaq requirement in the future, then we would receive additional deficiency letters from Nasdaq and our common stock could be delisted from trading on Nasdaq.  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, any of 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 have incurred a significant amount of indebtedness, our level of indebtedness and restrictions under our indebtedness could adversely affect our operations and liquidity, and we are currently in violation of certain financial covenants under our credit facility.

On August 3, 2018, we entered into a senior secured credit facility that provided a $40.0 million term loan, and $13.5 million of subordinated promissory notes.  The credit facility was amended on January 30, 2019 to provide an additional term loan of $5.3 million.  As of November 2, 2019, outstanding borrowings under the term loans were $44.1 million, with associated unamortized debt issuance costs of $2.0 million.  Outstanding subordinated promissory notes were $13.5 million at November 2, 2019, with associated unamortized debt issuance costs of $0.4 million.  The term loans mature in August 2021 and require 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.

The senior secured credit facility imposes various restrictions and covenants regarding the operation of our business, including covenants that require us to obtain the 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 senior secured credit facility also imposes financial covenants that set financial standards we are required to maintain, including the requirement to maintain specified levels of Adjusted EBITDA, as defined in the credit agreement ($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 credit facility, we have granted a first priority security interest in favor of the 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.

Our operating results for the twelve months ended November 2, 2019 resulted in a violation of the minimum Adjusted EBITDA covenant, which is an event of default. However, our senior lender has agreed to forbear from enforcing its rights under the senior secured credit facility through February 28, 2020.  Our financial projections indicate that there is a significant risk of further violations of the minimum Adjusted EBITDA covenant or minimum cash covenant beyond the forbearance period agreed to with our senior lender.  If any such future violation or other event of default occurs under the credit facility that is not forborne, cured or waived in accordance with the terms of the credit facility, we would be subject to significant risks, including the right of our lender to terminate its obligations under the credit facility, declare all or any portion of the borrowed amounts then outstanding to be accelerated and due and payable, and/or exercise any other right or remedies it may have under applicable law, including foreclosing on our and/or our subsidiaries’ assets that serve as collateral for the borrowed amounts.  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 right to terminate their obligations under the subordinated promissory note agreements and accelerate the payment of those promissory notes.  If any of these rights were to be exercised, our financial condition and ability to continue operations would be materially jeopardized.  If we are unable to meet obligations to lenders and other creditors, we may have to significantly curtail or even cease operations.  We are in negotiations for new and amended licenses that would increase our working capital and Adjusted EBITDA, and we are evaluating other potential sources of working capital, including the disposition of certain assets and further negotiations with our lenders and other potential sources of capital.  We have also engaged an advisory firm to advise us regarding our business plans, risks and opportunities.  However, there is no assurance that we will be able to execute these plans or continue to operate as a going concern.

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Additionally, even if we are able to avoid a further event of default under the credit facility, 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.

ITEM 5.  OTHER INFORMATION

We reported Adjusted EBITDA for the 12 months ended November 2, 2019 that was below the required minimum in our senior secured credit facility.  In response, on December 20, 2019, we entered into a third amendment to financing agreement and forbearance agreement with Gordon Brothers Finance Company and Gordon Brothers Brands, our senior lenders (the “Forbearance Agreement”), whereby the senior lenders have agreed not to enforce their rights to declare an event of default and accelerate the payment of all amounts due under our senior secured credit facility through February 28, 2020 resulting from our failure to meet the Adjusted EBITDA threshold.  Under the Forbearance Agreement, we are required to deliver enhanced cash budget reporting, maintain minimum cash balances ranging from $1.0 million to $0.7 million, comply with the other terms of our senior secured credit facility and engage an advisory firm to provide certain advisory services.  Any failure by us to satisfy the requirements of the Forbearance Agreement or any other breach under the senior secured credit facility during the forbearance period would give the senior lenders the right to terminate the Forbearance Agreement, to declare an event of default under the senior credit facility and accelerate the amounts due thereunder.

ITEM 6.  EXHIBITS

The information required by this Item 6 is set forth on the Exhibit Index that immediately precedes the signature page to this report and is incorporated herein by reference.

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EXHIBIT INDEX

Exhibit Number	Description of Exhibit
3.1	Certificate of Amendment to Amended and Restated Certificate of Incorporation of Apex Global Brands Inc. (formerly known as Cherokee Inc.) dated September 24, 2019 (incorporated by reference to Exhibit 3.1 of the registrant’s Current Report on Form 8-K filed September 26, 2019).
10.1*	Amended and Restated 2013 Stock Incentive Plan.
10.2*	Third Amendment to Financing Agreement and Forbearance Agreement dated December 20, 2019, by and among the Company, Gordon Brothers Finance Company and additional parties named therein.
31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended November 2, 2019, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at November 2, 2019 and February 2, 2019; (ii) Condensed Consolidated Statements of Operations for the three and nine months ended November 2, 2019 and November 3, 2018; (iii) Condensed Consolidated Statement of Stockholders ‘Equity for the three and nine months ended November 2, 2019 and November 3, 2018; (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended November 2, 2019 and November 3, 2018; and (v) Notes to Condensed Consolidated Financial Statements.

* Filed herewith.

** Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: December 20, 2019

APEX GLOBAL BRANDS INC.
By:	/s/ Henry Stupp
	Henry Stupp
	Chief Executive Officer
	(Principal Executive Officer)
By:	/s/ Steven L. Brink
	Steven L. Brink
	Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer)

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EX-10.1

Exhibit 10.1

APEX GLOBAL BRANDS INC.

AMENDED AND RESTATED 2013 STOCK INCENTIVE PLAN

(as amended and restated June 10, 2019)

(updated to give effect to a 1-for-3 reverse stock split that occurred on September 27, 2019)

1.Purposes of the Plan.  The purposes of this Plan are to attract and retain the best available personnel, to provide additional incentives to Employees, Directors and Consultants and to promote the success of the Company’s business.  

2.Definitions.  The following definitions shall apply as used herein and in the individual Award Agreements except as defined otherwise in an individual Award Agreement.  In the event a term is separately defined in an individual Award Agreement, such definition shall supersede the definition contained in this Section 2.  

(a)“Administrator” means the Board or any of the Committees appointed to administer the Plan.  

(b)“Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act.  

(c)“Applicable Laws” means the legal requirements relating to the Plan and the Awards under applicable provisions of federal securities laws, state corporate and securities laws, the Code, the rules of any applicable stock exchange or national market system, and the rules of any non-U.S.  jurisdiction applicable to Awards granted to residents therein.  

(d)“Assumed” means that pursuant to a Corporate Transaction either (i) the Award is expressly affirmed by the Company or (ii) the contractual obligations represented by the Award are expressly assumed (and not simply by operation of law) by the successor entity or its Parent in connection with the Corporate Transaction with appropriate adjustments to the number and type of securities of the successor entity or its Parent subject to the Award and the exercise or purchase price thereof which at least preserves the compensation element of the Award existing at the time of the Corporate Transaction as determined in accordance with the instruments evidencing the agreement to assume the Award.  

(e)“Award” means the grant of an Option, SAR, Dividend Equivalent Right, Restricted Stock, Restricted Stock Unit, Cash-Based Award or other right or benefit under the Plan.  

(f)“Award Agreement” means the written agreement evidencing the grant of an Award executed by the Company and the Grantee, including any amendments thereto.  

(g)“Board” means the Board of Directors of the Company.  

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(h)“Cash-BasedAward” means an award entitling the Grantee to Shares that may or may not be subject to restrictions upon issuance or cash compensation, as established by the Administrator.  

(i)“Code” means the Internal Revenue Code of 1986, as amended.  

(j)“Committee” means any committee composed of members of the Board appointed by the Board to administer the Plan.  

(k)“Common Stock” means the common stock of the Company.  

(l)“Company” means Apex Global Brands Inc., a Delaware corporation, or any successor entity that adopts the Plan in connection with a Corporate Transaction.  

(m)“Consultant” means any person (other than an Employee or a Director, solely with respect to rendering services in such person’s capacity as a Director) who is engaged by the Company or any Related Entity to render consulting or advisory services to the Company or such Related Entity.  

(n)“Continuous Service” means that the provision of services to the Company or a Related Entity in any capacity of Employee, Director or Consultant is not interrupted or terminated.  In jurisdictions requiring notice in advance of an effective termination as an Employee, Director or Consultant, Continuous Service shall be deemed terminated upon the actual cessation of providing services to the Company or a Related Entity notwithstanding any required notice period that must be fulfilled before a termination as an Employee, Director or Consultant can be effective under Applicable Laws.  A Grantee’s Continuous Service shall be deemed to have terminated either upon an actual termination of Continuous Service or upon the entity for which the Grantee provides services ceasing to be a Related Entity.  Continuous Service shall not be considered interrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company, any Related Entity, or any successor, in any capacity of Employee, Director or Consultant, or (iii) any change in status as long as the individual remains in the service of the Company or a Related Entity in any capacity of Employee, Director or Consultant (except as otherwise provided in the Award Agreement).  Notwithstanding the foregoing, except as otherwise determined by the Administrator, in the event of any spin-off of a Related Entity, service as an Employee, Director or Consultant for such Related Entity following such spin-off shall be deemed to be Continuous Service for purposes of the Plan and any Award under the Plan.  An approved leave of absence shall include sick leave, military leave, or any other authorized personal leave.  For purposes of each Incentive Stock Option granted under the Plan, if such leave exceeds three (3) months, and reemployment upon expiration of such leave is not guaranteed by statute or contract, then the Incentive Stock Option shall be treated as a Non-Qualified Stock Option on the day three (3) months and one (1) day following the expiration of such three (3) month period.  

(o)“Corporate Transaction” means any of the following transactions:

(i)A transaction or series of transactions whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, any of its Subsidiaries, an employee benefit plan

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maintained by the Company or any of its Subsidiaries or a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than 50% of the total combined voting power of the Company’s securities outstanding immediately after such acquisition; or

(ii)During any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board together with any new Director(s) (other than a Director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in clause (i) hereof or clause (iii) hereof) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the Directors then still in office who either were Directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or

(iii)The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization or business combination or (y) a sale or other disposition of all or substantially all of the Company’s assets in any single transaction or series of related transactions or (z) the acquisition of assets or stock of another entity, in each case other than a transaction:

(A)Which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and

(B)After which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this clause (iii) as beneficially owning 50% or more of the combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction; or

(iv)The Company’s stockholders approve a liquidation or dissolution of the Company.  

(p)“Covered Employee” means an Employee who is a “covered employee” under Section 162(m)(3) of the Code.  

(q)“Director” means a member of the Board or the board of directors of any Related Entity.  

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(r)“Disability” means as defined under the long-term disability policy of the Company or the Related Entity to which the Grantee provides services regardless of whether the Grantee is covered by such policy.  If the Company or the Related Entity to which the Grantee provides service does not have a long-term disability plan in place, “Disability” means that a Grantee is unable to carry out the responsibilities and functions of the position held by the Grantee by reason of any medically determinable physical or mental impairment for a period of not less than ninety (90) consecutive days.  A Grantee will not be considered to have incurred a Disability unless he or she furnishes proof of such impairment sufficient to satisfy the Administrator in its discretion.  

(s)“Dividend Equivalent Right” means a right entitling the Grantee to compensation measured by dividends paid with respect to Common Stock.  Dividend Equivalent Rights granted in connection with Restricted Stock or Restricted Stock Units that vest based on achievement of performance objectives shall be held subject to the vesting of the underlying Restricted Stock or Restricted Stock Units.  

(t)“Employee” means any person, including an Officer or Director, who is in the employ of the Company or any Related Entity, subject to the control and direction of the Company or any Related Entity as to both the work to be performed and the manner and method of performance.  The payment of a director’s fee by the Company or a Related Entity shall not be sufficient to constitute “employment” by the Company.  

(u)“Exchange Act” means the Securities Exchange Act of 1934, as amended.  

(v)“Fair Market Value” means, as of any date, the value of Common Stock determined as follows:

(i)If the Common Stock is listed on one or more established stock exchanges or national market systems, including without limitation The NASDAQ Global Select Market, The NASDAQ Global Market or The NASDAQ Capital Market of The NASDAQ Stock Market LLC, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on the principal exchange or system on which the Common Stock is listed (as determined by the Administrator) on the date of determination (or, if no closing sales price or closing bid was reported on that date, as applicable, on the last trading date such closing sales price or closing bid was reported), as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

(ii)If the Common Stock is regularly quoted on an automated quotation system (including the OTC Bulletin Board) or by a recognized securities dealer, its Fair Market Value shall be the closing sales price for such stock as quoted on such system or by such securities dealer on the date of determination, but if selling prices are not reported, the Fair Market Value of a share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the date of determination (or, if no such prices were reported on that date, on the last date such prices were reported), as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or

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(iii)In the absence of an established market for the Common Stock of the type described in (i)and (ii), above, the Fair Market Value thereof shall be determined by the Administrator in good faith.  

(w)“Grantee” means an Employee, Director or Consultant who receives an Award under the Plan.  

(x)“Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.  

(y)“Non-Qualified Stock Option” means an Option not intended to qualify as an Incentive Stock Option.  

(z)“Officer” means a person who is an officer of the Company or a Related Entity within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.  

(aa)“Option” means an option to purchase Shares pursuant to an Award Agreement granted under the Plan.  

(bb)“Parent” means a “parent corporation”, whether now or hereafter existing, as defined in Section 424(e) of the Code.  

(cc)“Performance-Based Compensation” means compensation qualifying as “performance-based compensation” under Section 162(m) of the Code.  

(dd)“Performance Period” means the period of time during which the performance goals must be met in order to determine the degree of payout and/or vesting with respect to, or the amount or entitlement to, an Award.  With respect to Awards hereunder intended to qualify as Performance-Based Compensation, the Performance Period shall be any period of time that does not exceed sixty (60) months.  

(ee)“Plan” means this Amended and Restated 2013 Stock Incentive Plan.  

(ff)“Related Entity” means any Parent or Subsidiary of the Company.  

(gg)“Replaced” means that pursuant to a Corporate Transaction the Award is replaced with a comparable stock award or a cash incentive program of the Company, the successor entity (if applicable) or Parent of either of them which preserves the compensation element of such Award existing at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same (or a more favorable) vesting schedule applicable to such Award.  The determination of Award comparability shall be made by the Administrator and its determination shall be final, binding and conclusive.  

(hh)“Restricted Stock” means Shares issued under the Plan to the Grantee for such consideration, if any, and subject to such restrictions on transfer, rights of first refusal, repurchase provisions, forfeiture provisions, and other terms and conditions as established by the Administrator.  Dividends payable with respect to Restricted Stock that vest based on achievement of performance objectives shall be held subject to the vesting of the underlying Shares.  

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(ii)“RestrictedStockUnits” means an Award which may be earned in whole or in part upon the passage of time or the attainment of performance criteria established by the Administrator and which may be settled for cash, Shares or other securities or a combination of cash, Shares or other securities as established by the Administrator.  

(jj)“Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor thereto.  

(kk)“SAR” means a stock appreciation right entitling the Grantee to Shares or cash compensation, as established by the Administrator, measured by appreciation in the value of Common Stock.  

(ll)“Share” means a share of the Common Stock.  

(mm)“Subsidiary” means a “subsidiary corporation”, whether now or hereafter existing, as defined in Section 424(f) of the Code.  

3.Stock Subject to the Plan.  

(a)Subject to the provisions of Section 10, below, the maximum aggregate number of Shares which may be issued pursuant to all Awards is six hundred thousand (600,000) Shares, plus the number of Shares that was available for grants of awards under the Company’s 2006 Incentive Award Plan as of the date the Plan was first approved by the Company’s stockholders, plus any Shares that would otherwise return to the Company’s 2006 Incentive Award Plan as a result of forfeiture, termination or expiration of awards previously granted under the Company’s 2006 Incentive Award Plan (ignoring the termination or expiration of the Company’s 2006 Incentive Award Plan for the purpose of determining the number of Shares available under the Plan); provided, however, that the maximum aggregate number of Shares that may be issued pursuant to Incentive Stock Options is six hundred thousand (600,000) Shares.  The Shares to be issued pursuant to Awards may be authorized, but unissued, or reacquired Common Stock.

(b)Any Shares covered by an Award (or portion of an Award) which is forfeited, canceled or expires (whether voluntarily or involuntarily) shall be deemed not to have been issued for purposes of determining the maximum aggregate number of Shares which may be issued under the Plan.  Shares that actually have been issued under the Plan pursuant to an Award shall not be returned to the Plan and shall not become available for future issuance under the Plan, except that if unvested Shares are forfeited, or repurchased by the Company at the lower of their original purchase price or their Fair Market Value at the time of repurchase, such Shares shall become available for future grant under the Plan.  Notwithstanding anything to the contrary contained herein: (i) Shares tendered or withheld in payment of an Option exercise price shall not be returned to the Plan and shall not become available for future issuance under the Plan; [(ii) Shares purchased in the open market with proceeds of an Option exercise price shall not be returned to the Plan and shall not become available for future issuance under the Plan;] (iii) Shares withheld by the Company to satisfy any tax withholding obligation shall not be returned to the Plan and shall not become available for future issuance under the Plan; and (iv) all Shares covered by the portion of an SAR that is exercised (whether or not Shares are actually issued to the Grantee upon exercise of the SAR) shall be considered issued pursuant to the Plan.  

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4.Administration of the Plan.  

(a)Plan Administrator.  

(i)Administration with Respect to Directors and Officers.  With respect to grants of Awards to Directors or Employees who are also Officers or Directors of the Company, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in such a manner as to satisfy the Applicable Laws and to permit such grants and related transactions under the Plan to be exempt from Section 16(b) of the Exchange Act in accordance with Rule 16b-3.  Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board.  

(ii)Administration With Respect to Consultants and Other Employees.  With respect to grants of Awards to Employees or Consultants who are neither Directors nor Officers of the Company, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in such a manner as to satisfy the Applicable Laws.  Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board.  The Board may authorize one or more Officers to grant such Awards and may limit such authority as the Board determines from time to time.  

(iii)Administration With Respect to Covered Employees.  Notwithstanding the foregoing, grants of Awards to any Covered Employee intended to qualify as Performance-Based Compensation shall be made only by a Committee (or subcommittee of a Committee) which is comprised solely of two or more Directors eligible to serve on a committee making Awards qualifying as Performance-Based Compensation.  In the case of such Awards granted to Covered Employees, references to the “Administrator” or to a “Committee” shall be deemed to be references to such Committee or subcommittee.  

(iv)Administration Errors.  In the event an Award is granted in a manner inconsistent with the provisions of this subsection (a), such Award shall be presumptively valid as of its grant date to the extent permitted by the Applicable Laws.  

(b)Powers of the Administrator.  Subject to Applicable Laws and the provisions of the Plan (including any other powers given to the Administrator hereunder), and except as otherwise provided by the Board, the Administrator shall have the authority, in its discretion:

(i)to select the Employees, Directors and Consultants to whom Awards may be granted from time to time hereunder;

(ii)to determine whether and to what extent Awards are granted hereunder;

(iii)to determine the number of Shares or the amount of cash or other consideration to be covered by each Award granted hereunder;

(iv)to approve forms of Award Agreements for use under the Plan;

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(v)to determine the terms and conditions of any Award granted hereunder;

(vi)to amend the terms of any outstanding Award granted under the Plan, provided that (A) any amendment that would adversely affect the Grantee’s rights under an outstanding Award shall not be made without the Grantee’s written consent, provided, however, that an amendment or modification that may cause an Incentive Stock Option to become a Non-Qualified Stock Option shall not be treated as adversely affecting the rights of the Grantee (B) the reduction of the exercise price of any Option awarded under the Plan and the base appreciation amount of any SAR awarded under the Plan shall be subject to stockholder approval and (C) canceling an Option or SAR at a time when its exercise price or base appreciation amount (as applicable) exceeds the Fair Market Value of the underlying Shares, in exchange for another Option, SAR, Restricted Stock, or other Award or for cash shall be subject to stockholder approval, unless the cancellation and exchange occurs in connection with a Corporate Transaction.  Notwithstanding the foregoing, canceling an Option or SAR in exchange for another Option, SAR, Restricted Stock, or other Award or for cash with an exercise price, purchase price or base appreciation amount (as applicable) that is equal to or greater than the exercise price or base appreciation amount (as applicable) of the original Option or SAR shall not be subject to stockholder approval;

(vii)to construe and interpret the terms of the Plan and Awards, including without limitation, any notice of award or Award Agreement, granted pursuant to the Plan;

(viii)to grant Awards to Employees, Directors and Consultants employed outside the United States on such terms and conditions different from those specified in the Plan as may, in the judgment of the Administrator, be necessary or desirable to further the purpose of the Plan; and

(ix)to take such other action, not inconsistent with the terms of the Plan, as the Administrator deems appropriate.  

The express grant in the Plan of any specific power to the Administrator shall not be construed as limiting any power or authority of the Administrator; provided that the Administrator may not exercise any right or power reserved to the Board.  Any decision made, or action taken, by the Administrator or in connection with the administration of this Plan shall be final, conclusive and binding on all persons having an interest in the Plan.  

(c)Indemnification.  In addition to such other rights of indemnification as they may have as members of the Board or as Officers or Employees of the Company or a Related Entity, members of the Board and any Officers or Employees of the Company or a Related Entity to whom authority to act for the Board, the Administrator or the Company is delegated shall be defended and indemnified by the Company to the extent permitted by law on an after-tax basis against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any claim, investigation, action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any

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Award granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by the Company) or paid by them in satisfaction of a judgment in any such claim, investigation, action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such claim, investigation, action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct; provided, however, that within thirty (30) days after the institution of such claim, investigation, action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at the Company’s expense to defend the same.  

5.Eligibility.  Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants.  Incentive Stock Options may be granted only to Employees of the Company or a Parent or a Subsidiary of the Company.  An Employee, Director or Consultant who has been granted an Award may, if otherwise eligible, be granted additional Awards.  Awards may be granted to such Employees, Directors or Consultants who are residing in non-U.S.  jurisdictions as the Administrator may determine from time to time.  

6.Terms and Conditions of Awards.

(a)Types of Awards.  The Administrator is authorized under the Plan to award any type of arrangement to an Employee, Director or Consultant that is not inconsistent with the provisions of the Plan and that by its terms involves or might involve the issuance of (i) Shares, (ii) cash or (iii) an Option, a SAR, or similar right with a fixed or variable price related to the Fair Market Value of the Shares and with an exercise or conversion privilege related to the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions.  Such awards include, without limitation, Options, SARs, sales or bonuses of Restricted Stock, Restricted Stock Units, Cash-Based Awards or Dividend Equivalent Rights, and an Award may consist of one such security or benefit, or two (2) or more of them in any combination or alternative.  

(b)Designation of Award.  Each Award shall be designated in the Award Agreement.  In the case of an Option, the Option shall be designated as either an Incentive Stock Option or a Non-Qualified Stock Option.  However, notwithstanding such designation, an Option will qualify as an Incentive Stock Option under the Code only to the extent the $100,000 limitation of Section 422(d) of the Code is not exceeded.  The $100,000 limitation of Section 422(d) of the Code is calculated based on the aggregate Fair Market Value of the Shares subject to Options designated as Incentive Stock Options which become exercisable for the first time by a Grantee during any calendar year (under all plans of the Company or any Parent or Subsidiary of the Company).  For purposes of this calculation, Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares shall be determined as of the grant date of the relevant Option.  In the event that the Code or the regulations promulgated thereunder are amended after the date the Plan becomes effective to provide for a different limit on the Fair Market Value of Shares permitted to be subject to Incentive Stock Options, then such different limit will be automatically incorporated herein and will apply to any Options granted after the effective date of such amendment.  

(c)Conditions of Award.  Subject to the terms of the Plan, the Administrator shall determine the provisions, terms, and conditions of each Award including, but not limited to,

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the Award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, form of payment (cash, Shares, or other consideration) upon settlement of the Award, payment contingencies, and satisfaction of any performance criteria.  The performance criteria established by the Administrator may be based on any one of, or combination of, the following with respect to the Company, any Subsidiary, any division or operating unit or any Company brands, groups of brands or specific brands: (a) net income, (b) pre-tax income, (c) operating income, (d) cash flow, (e) earnings per share, (f) return on equity, (g) return on invested capital or assets, (h) cost reductions or savings, (i) funds from operations, (j) appreciation in the Fair Market Value of Common Stock, (k) earnings before any one or more of the following items: interest, taxes, depreciation or amortization or (l) achievement of strategic initiatives.  The performance criteria may be applicable to the Company, Related Entities and/or any individual business units of the Company or any Related Entity.  Partial achievement of the specified criteria may result in a payment or vesting corresponding to the degree of achievement as specified in the Award Agreement.  In addition, the performance criteria shall be calculated in accordance with generally accepted accounting principles, but excluding the effect (whether positive or negative) of any change in accounting standards and any item that is either unusual or infrequent in nature, pursuant to Accounting Standards Codification Topic 225-20 “Extraordinary and Unusual Items,” as determined by the Administrator, occurring after the establishment of the performance criteria applicable to the Award intended to be Performance-Based Compensation.  Each such adjustment, if any, shall be made solely for the purpose of providing a consistent basis from period to period for the calculation of performance criteria in order to prevent the dilution or enlargement of the Grantee’s rights with respect to an Award intended to be Performance-Based Compensation.  

(d)Acquisitions and Other Transactions.  The Administrator may issue Awards under the Plan in settlement, assumption or substitution for, outstanding awards or obligations to grant future awards in connection with the Company or a Related Entity acquiring another entity, an interest in another entity or an additional interest in a Related Entity whether by merger, stock purchase, asset purchase or other form of transaction.  

(e)Deferral of Award Payment.  The Administrator may establish one or more programs under the Plan to permit selected Grantees the opportunity to elect to defer receipt of consideration upon exercise of an Award, satisfaction of performance criteria, or other event that absent the election would entitle the Grantee to payment or receipt of Shares, cash or other consideration under an Award.  The Administrator may establish the election procedures, the timing of such elections, the mechanisms for payments of, and accrual of interest or other earnings, if any, on amounts, Shares or other consideration so deferred, and such other terms, conditions, rules and procedures that the Administrator deems advisable for the administration of any such deferral program.  

(f)Separate Programs.  The Administrator may establish one or more separate programs under the Plan for the purpose of issuing particular forms of Awards to one or more classes of Grantees on such terms and conditions as determined by the Administrator from time to time.  

(g)Individual Limitations on Awards.  

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(i)Individual Limit for Options and SARs.  The maximum number of Shares with respect to which Options and SARs may be granted to any Grantee in any calendar year shall be one hundred thousand (100,000) Shares.  The foregoing limitation shall be adjusted proportionately in connection with any change in the Company’s capitalization pursuant to Section 10, below.  To the extent required by Section 162(m) of the Code or the regulations thereunder, in applying the foregoing limitation with respect to a Grantee, if any Option or SAR is canceled, the canceled Option or SAR shall continue to count against the maximum number of Shares with respect to which Options and SARs may be granted to the Grantee.  For this purpose, the repricing of an Option (or in the case of a SAR, the base amount on which the stock appreciation is calculated is reduced to reflect a reduction in the Fair Market Value of the Common Stock) shall be treated as the cancellation of the existing Option or SAR and the grant of a new Option or SAR.  

(ii)Individual Limit for Restricted Stock and Restricted Stock Units.  For awards of Restricted Stock and Restricted Stock Units that are intended to be Performance-Based Compensation, the maximum number of Shares with respect to which such Awards may be granted to any Grantee in any calendar year shall be one hundred thousand (100,000) Shares.  The foregoing limitation shall be adjusted proportionately in connection with any change in the Company’s capitalization pursuant to Section 10, below.  

(iii)Individual Limit for Cash-Based Awards.  For Cash-Based Awards that are intended to be Performance-Based Compensation, with respect to each twelve (12) month period that constitutes or is part of each Performance Period, the maximum amount that may be paid to a Grantee pursuant to such Awards shall be $250,000.  The foregoing limitation shall be adjusted proportionately in connection with any change in the Company’s capitalization pursuant to Section 10, below.  In addition, the foregoing limitation shall be prorated for any Performance Period consisting of fewer than twelve (12) months by multiplying such limitation by a fraction, the numerator of which is the number of months in the Performance Period and the denominator of which is twelve (12).  

(h)Deferral.  If the vesting or receipt of Shares or cash under an Award is deferred to a later date, any amount (whether denominated in Shares or cash) paid in addition to the original number of Shares or amount of cash subject to such Award will not be treated as an increase in the number of Shares or amount of cash subject to the Award if the additional amount is based either on a reasonable rate of interest or on one or more predetermined actual investments such that the amount payable by the Company at the later date will be based on the actual rate of return of a specific investment (including any decrease as well as any increase in the value of an investment).  

(i)Early Exercise.  The Award Agreement may, but need not, include a provision whereby the Grantee may elect at any time while an Employee, Director or Consultant to exercise any part or all of the Award prior to full vesting of the Award.  Any unvested Shares received pursuant to such exercise may be subject to a repurchase right in favor of the Company or a Related Entity or to any other restriction the Administrator determines to be appropriate.  

(j)Term of Award.  The term of each Award shall be no more than ten (10) years from the date of grant thereof.  However, in the case of an Incentive Stock Option

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granted to a Grantee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company, the term of the Incentive Stock Option shall be five (5) years from the date of grant thereof or such shorter term as may be provided in the Award Agreement.  Notwithstanding the foregoing, the specified term of any Award shall not include any period for which the Grantee has elected to defer the receipt of the Shares or cash issuable pursuant to the Award.  

(k)Transferability of Awards.  Incentive Stock Options may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Grantee, only by the Grantee.  Other Awards shall be transferable (i) by will and by the laws of descent and distribution and (ii) during the lifetime of the Grantee, to the extent and in the manner authorized by the Administrator but only to the extent such transfers are made to family members, to family trusts, to family controlled entities, to charitable organizations, and pursuant to domestic relations orders or agreements, in all cases without payment for such transfers to the Grantee.  Notwithstanding the foregoing, the Grantee may designate one or more beneficiaries of the Grantee’s Award in the event of the Grantee’s death on a beneficiary designation form provided by the Administrator.  

(l)Time of Granting Awards.  The date of grant of an Award shall for all purposes be the date on which the Administrator makes the determination to grant such Award, or such other later date as is determined by the Administrator.  

7.Award Exercise or Purchase Price, Consideration and Taxes.

(a)Exercise or Purchase Price.  The exercise or purchase price, if any, for an Award shall be as follows:

(i)In the case of an Incentive Stock Option:

(A)granted to an Employee who, at the time of the grant of such Incentive Stock Option owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company, the per Share exercise price shall be not less than one hundred ten percent (110%) of the Fair Market Value per Share on the date of grant; or

(B)granted to any Employee other than an Employee described in the preceding paragraph, the per Share exercise price shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.  

(ii)In the case of a Non-Qualified Stock Option, the per Share exercise price shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.  

(iii)In the case of Awards intended to qualify as Performance-Based Compensation, the exercise or purchase price, if any, shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.  

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(iv)In the case of SARs, the base appreciation amount shall not be less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.  

(v)In the case of other Awards, such price as is determined by the Administrator.  

(vi)Notwithstanding the foregoing provisions of this Section 7(a), in the case of an Award issued pursuant to Section 6(d), above, the exercise or purchase price for the Award shall be determined in accordance with the provisions of the relevant instrument evidencing the agreement to issue such Award.  

(b)Consideration.  Subject to Applicable Laws, the consideration to be paid for the Shares to be issued upon exercise or purchase of an Award including the method of payment, shall be determined by the Administrator.  In addition to any other types of consideration the Administrator may determine, the Administrator is authorized to accept as consideration for Shares issued under the Plan the following, provided that the portion of the consideration equal to the par value of the Shares must be paid in cash or other legal consideration permitted by the Delaware General Corporation Law:

(i)cash;

(ii)check;

(iii)surrender of Shares or delivery of a properly executed form of attestation of ownership of Shares as the Administrator may require which have a Fair Market Value on the date of surrender or attestation equal to the aggregate exercise price of the Shares as to which said Award shall be exercised;

(iv)with respect to Options, payment through a broker-dealer sale and remittance procedure pursuant to which the Grantee (A) shall provide written instructions to a Company designated brokerage firm to effect the immediate sale of some or all of the purchased Shares and remit to the Company sufficient funds to cover the aggregate exercise price payable for the purchased Shares and (B) shall provide written directives to the Company to deliver the certificates for the purchased Shares directly to such brokerage firm in order to complete the sale transaction;

(v)with respect to Options, payment through a “net exercise” such that, without the payment of any funds, the Grantee may exercise the Option and receive the net number of Shares equal to (i) the number of Shares as to which the Option is being exercised, multiplied by (ii) a fraction, the numerator of which is the Fair Market Value per Share (on such date as is determined by the Administrator) less the exercise price per Share, and the denominator of which is such Fair Market Value per Share (the number of net Shares to be received shall be rounded down to the nearest whole number of Shares); or

(vi)any combination of the foregoing methods of payment.  

The Administrator may at any time or from time to time, by adoption of or by amendment to the standard forms of Award Agreement described in Section 4(b)(iv), or by other means, grant Awards which do not permit all of the foregoing forms of consideration to be used in payment for the Shares or which otherwise restrict one or more forms of consideration.  

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(c)Taxes.  No Shares or cash shall be delivered under the Plan to any Grantee or other person until such Grantee or other person has made arrangements acceptable to the Administrator for the satisfaction of any non-U.S., federal, state, or local income and employment tax withholding obligations, including, without limitation, obligations incident to the receipt of Shares or cash.  Upon exercise or vesting of an Award the Company shall withhold or collect from the Grantee an amount sufficient to satisfy such tax obligations, including, but not limited to, by surrender of the whole number of Shares covered by the Award, if applicable, sufficient to satisfy the minimum applicable tax withholding obligations incident to the exercise or vesting of an Award (reduced to the lowest whole number of Shares if such number of Shares withheld would result in withholding a fractional Share with any remaining tax withholding settled in cash).  

8.Exercise of Award.

(a)Procedure for Exercise; Rights as a Stockholder.  

(i)Any Award granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator under the terms of the Plan and specified in the Award Agreement.  

(ii)An Award shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Award by the person entitled to exercise the Award and full payment for the Shares with respect to which the Award is exercised has been made, including, to the extent selected, use of the broker-dealer sale and remittance procedure to pay the purchase price as provided in Section 7(b)(iv).  

(b)Exercise of Award Following Termination of Continuous Service.  

(i)An Award may not be exercised after the termination date of such Award set forth in the Award Agreement and may be exercised following the termination of a Grantee’s Continuous Service only to the extent provided in the Award Agreement.  

(ii)Where the Award Agreement permits a Grantee to exercise an Award following the termination of the Grantee’s Continuous Service for a specified period, the Award shall terminate to the extent not exercised on the last day of the specified period or the last day of the original term of the Award, whichever occurs first.  

(iii)Any Award designated as an Incentive Stock Option to the extent not exercised within the time permitted by law for the exercise of Incentive Stock Options following the termination of a Grantee’s Continuous Service shall convert automatically to a Non-Qualified Stock Option and thereafter shall be exercisable as such to the extent exercisable by its terms for the period specified in the Award Agreement.  

9.Conditions Upon Issuance of Shares.  

(a)If at any time the Administrator determines that the delivery of Shares pursuant to the exercise, vesting or any other provision of an Award is or may be unlawful under Applicable Laws, the vesting or right to exercise an Award or to otherwise receive Shares

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pursuant to the terms of an Award shall be suspended until the Administrator determines that such delivery is lawful and shall be further subject to the approval of counsel for the Company with respect to such compliance.  The Company shall have no obligation to effect any registration or qualification of the Shares under federal or state laws.  

(b)As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any Applicable Laws.  

10.Adjustments Upon Changes in Capitalization.  Subject to any required action by the stockholders of the Company and Section 11 hereof, the number of Shares covered by each outstanding Award, and the number of Shares which have been authorized for issuance under the Plan but as to which no Awards have yet been granted or which have been returned to the Plan, the exercise or purchase price of each such outstanding Award, the numerical limits set forth in Section 6(g), as well as any other terms that the Administrator determines require adjustment shall be proportionately adjusted for (i) any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, recapitalization, combination or reclassification of the Shares, or similar transaction affecting the Shares, (ii) any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company, or (iii) any other transaction with respect to Common Stock including a corporate merger, consolidation, acquisition of property or stock, separation (including a spin-off or other distribution of stock or property), reorganization, liquidation (whether partial or complete) or any similar transaction; provided, however that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” In the event of any distribution of cash or other assets to stockholders other than a normal cash dividend, the Administrator shall also make such adjustments as provided in this Section 10 or substitute, exchange or grant Awards to effect such adjustments (collectively “adjustments”).  Any such adjustments to outstanding Awards will be effected in a manner that precludes the enlargement of rights and benefits under such Awards.  In connection with the foregoing adjustments, the Administrator may, in its discretion, prohibit the exercise of Awards or other issuance of Shares, cash or other consideration pursuant to Awards during certain periods of time.  Except as the Administrator determines, no issuance by the Company of shares of any class, or securities convertible into shares of any class, shall affect, and no adjustment by reason hereof shall be made with respect to, the number or price of Shares subject to an Award.  

11.Corporate Transactions.  

(a)Termination of Award to Extent Not Assumed in Corporate Transaction.  Effective upon the consummation of a Corporate Transaction, all outstanding Awards under the Plan shall terminate.  However, all such Awards shall not terminate to the extent they are Assumed in connection with the Corporate Transaction.  

(b)Acceleration of Award Upon Corporate Transaction.  Except as provided otherwise in an individual Award Agreement, in the event of a Corporate Transaction, for the portion of each Award that is neither Assumed nor Replaced, such portion of the Award shall automatically become fully vested and exercisable and be released from any repurchase or forfeiture rights (other than repurchase rights exercisable at Fair Market Value) for all of the

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Shares (or other consideration) at the time represented by such portion of the Award, immediately prior to the specified effective date of such Corporate Transaction, provided that the Grantee’s Continuous Service has not terminated prior to such date.  

(c)Effect of Acceleration on Incentive Stock Options.  Any Incentive Stock Option accelerated under this Section 11 in connection with a Corporate Transaction shall remain exercisable as an Incentive Stock Option under the Code only to the extent the $100,000 dollar limitation of Section 422(d) of the Code is not exceeded.  

12.Effective Date and Term of Plan.  The Plan shall become effective upon the earlier to occur of its adoption by the Board or its approval by the stockholders of the Company.  It shall continue in effect for a term of ten (10) years unless sooner terminated.  Subject to Section 17, below, and Applicable Laws, Awards may be granted under the Plan upon its becoming effective.  

13.Amendment, Suspension or Termination of the Plan.  

(a)The Board may at any time amend, suspend or terminate the Plan; provided, however, that no such amendment shall be made without the approval of the Company’s stockholders to the extent such approval is required by Applicable Laws, or if such amendment would lessen the stockholder approval requirements of Section 4(b)(vi) or this Section 13(a).  

(b)No Award may be granted during any suspension of the Plan or after termination of the Plan.  

(c)No suspension or termination of the Plan (including termination of the Plan under Section 11, above) shall adversely affect any rights under Awards already granted to a Grantee.  

14.Reservation of Shares.  

(a)The Company, during the term of the Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.  

(b)The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.  

15.No Effect on Terms of Employment/Consulting Relationship.  The Plan shall not confer upon any Grantee any right with respect to the Grantee’s Continuous Service, nor shall it interfere in any way with his or her right or the right of the Company or any Related Entity to terminate the Grantee’s Continuous Service at any time, with or without cause, and with or without notice.  The ability of the Company or any Related Entity to terminate the employment of a Grantee who is employed at will is in no way affected by its determination that the Grantee’s Continuous Service has been terminated for Cause for the purposes of this Plan.  

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16.No Effect on Retirement and Other Benefit Plans.  Except as specifically provided in a retirement or other benefit plan of the Company or a Related Entity, Awards shall not be deemed compensation for purposes of computing benefits or contributions under any retirement plan of the Company or a Related Entity, and shall not affect any benefits under any other benefit plan of any kind or any benefit plan subsequently instituted under which the availability or amount of benefits is related to level of compensation.  The Plan is not a “Pension Plan” or “Welfare Plan” under the Employee Retirement Income Security Act of 1974, as amended.  

17.Stockholder Approval.  The grant of Incentive Stock Options under the Plan shall be subject to approval by the stockholders of the Company within twelve (12) months before or after the date the Plan is adopted excluding Incentive Stock Options issued in substitution for outstanding Incentive Stock Options pursuant to Section 424(a) of the Code.  Such stockholder approval shall be obtained in the degree and manner required under Applicable Laws.  The Administrator may grant Incentive Stock Options under the Plan prior to approval by the stockholders, but until such approval is obtained, no such Incentive Stock Option shall be exercisable.  In the event that stockholder approval is not obtained within the twelve (12) above, all Incentive Stock Options previously granted under the Plan shall be exercisable as Non-Qualified Stock Options.  

18.Unfunded Obligation.  Grantees shall have the status of general unsecured creditors of the Company.  Any amounts payable to Grantees pursuant to the Plan shall be unfunded and unsecured obligations for all purposes, including, without limitation, Title I of the Employee Retirement Income Security Act of 1974, as amended.  Neither the Company nor any Related Entity shall be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations.  The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations hereunder.  Any investments or the creation or maintenance of any trust or any Grantee account shall not create or constitute a trust or fiduciary relationship between the Administrator, the Company or any Related Entity and a Grantee, or otherwise create any vested or beneficial interest in any Grantee or the Grantee’s creditors in any assets of the Company or a Related Entity.  The Grantees shall have no claim against the Company or any Related Entity for any changes in the value of any assets that may be invested or reinvested by the Company with respect to the Plan.  

19.Construction.  Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan.  Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular.  Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.  

20.Nonexclusivity of the Plan.  Neither the adoption of the Plan by the Board, the submission of the Plan to the stockholders of the Company for approval, nor any provision of the Plan will be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of Awards otherwise than under the Plan, and such arrangements may be either generally applicable or applicable only in specific cases.  

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EX-10.2

Exhibit 10.2

THIRD AMENDMENT TO FINANCING AGREEMENT
AND FORBEARANCE AGREEMENT

This THIRD AMENDMENT TO FINANCING AGREEMENT AND FORBEARANCE AGREEMENT, dated as of December 20, 2019 (this “Amendment”), is entered into by and among Apex Global Brands Inc. (formerly known as Cherokee Inc.), a Delaware corporation (the “Parent” and the “U.S. Borrower”), Irene Acquisition Company B.V., a private company with limited liability incorporated under the laws of the Netherlands, having its statutory seat (statutaire zetel) in Amsterdam, the Netherlands and registered with the Dutch trade register under number 67160921 (the “Dutch Borrower” and, together with the U.S. Borrower, each a “Borrower” and collectively, the “Borrowers”), each Guarantor party hereto, the Lenders party hereto which constitute all of the Lenders party to the Financing Agreement as of the date hereof, Gordon Brothers Finance Company, a Delaware corporation (“GBFC”), as collateral agent for the Lenders (in such capacity, together with its successors and assigns in such capacity, the “Collateral Agent”), and GBFC, as administrative agent for the Lenders (in such capacity, together with its successors and assigns in such capacity, the “Administrative Agent” and together with the Collateral Agent, each an “Agent” and collectively, the “Agents”).

W I T N E S S E T H:

WHEREAS, the Parent, the Borrowers, the Guarantors, the lenders from time to time party thereto (collectively, the “Lenders” and each individually, a “Lender”) and the Agents are parties to that certain Financing Agreement, dated as of August 3, 2018 (as amended by that certain First Amendment to Financing Agreement, dated as of December 28, 2018, as further amended by that certain Second Amendment to Financing Agreement, dated as of January 29, 2019 and as further amended, modified or otherwise supplemented from time to time prior to the date hereof, the “Financing Agreement”);

WHEREAS, an Event of Default has occurred and is continuing under the Financing Agreement pursuant to Section 9.01(c) as a result of the Borrowers breach of Section 7.03(b) for the period ended October 31, 2019 (the “Existing Event of Default”).  The Borrowers have requested the Agents and Lenders forbear from exercising the Agents rights and remedies granted pursuant to the Financing Agreement and other Loan Documents in order to provide the Borrowers an opportunity to consider various business alternatives.  The Agents and Lenders have agreed to forbear from exercising their rights and remedies solely in accordance with the terms and conditions of this Amendment; and

WHEREAS, the Borrowers have requested that the Agents and the Lenders effect certain amendments to the Financing Agreement, in each case, as more specifically set forth herein, and the Agents and the Lenders are willing, as applicable, to effect such amendments to the Financing Agreement, in each case, on the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is hereby agreed by and between the Agents, the Lenders, the Borrowers and the Guarantors, as follows:

1.Defined Terms.  Except as otherwise defined in this Amendment, capitalized terms used herein that are not otherwise defined shall have the meanings given to those terms in the Financing Agreement.

2.Effect on Loan Documents; Ratification and Reaffirmation.  The Financing Agreement and the other Loan Documents, after giving effect to this Amendment, shall be and remain in full force and effect in accordance with their terms and hereby are ratified and confirmed in all respects.  Except as expressly set for the herein, the execution, delivery, and performance of this Amendment shall not operate as a waiver of any right, power, or remedy of the Agents or any other Secured Party under the Financing Agreement or any other Loan Document.  Each Loan Party party hereto hereby ratifies and confirms in all respects all of its obligations under the Loan Documents to which it is a party and each Loan Party party hereto hereby ratifies and confirms in all respects any prior grant of a security interest under the Loan Documents to which it is party and acknowledges that all of such security interests, and all collateral heretofore pledged as security for such indebtedness, continues to be and remains collateral for such indebtedness from and after the date hereof.  Each Loan Party further acknowledges and agrees that none of the Loan Parties have any defense (whether legal or equitable), set-off or counterclaim to the payment or performance of the Obligations in accordance with the terms of the Loan Documents.

3.Representations and Warranties.  Each Loan Party hereby represents and warrants to the Agents and the Lenders as follows:

a.other than the Existing Event of Default, no Default or Event of Default has occurred and is continuing on the date hereof.

b.the execution, delivery and performance by each Loan Party of this Amendment (i) have been duly authorized by all necessary action, (ii) do not and will not contravene (A) any of its Governing Documents, (B) any applicable material Requirement of Law or (C) any material Contractual Obligation binding on or otherwise affecting it or any of its properties, and (iii) do not and will not result in any default, noncompliance, suspension, revocation, impairment, forfeiture or nonrenewal of any permit, license, authorization or approval applicable to its operations or any of its properties, except (solely for the purposes of subclause (iii)), to the extent where such contravention, default, noncompliance, suspension, revocation, impairment, forfeiture or nonrenewal could not reasonably be expected to have a Material Adverse Effect;

c.no authorization or approval or other action by, and no notice to or filing with, any Governmental Authority is required in connection with the due execution, delivery and performance by any Loan Party of this Amendment;

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d.this Amendment has been duly executed and delivered by each Loan Party and this Amendmentconstitutes a legal, valid and binding obligation of each such Loan Party, enforceable againsteach such Loan Party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity; and

e.all representations and warranties contained in the Financing Agreement and each other Loan Document are true and correct in all material respects (except for those representations and warranties that (i) are conditioned by materiality, which shall be true and correct in all respects and (ii) expressly relate to an earlier date or to the Existing Event of Default) on and as of the date hereof.

4.Acknowledgment of Indebtedness.  Each Loan Party acknowledges and agrees that, as of December 16, 2019, the Loan Parties are indebted, jointly and severally, (a) to the Tranche A Term Loan Lenders for the Tranche A Term Loans in an aggregate outstanding principal amount equal to $4,856,250.00 plus accrued and unpaid interest thereon, as provided in the Financing Agreement and the other Loan Documents, (b) the Tranche B Term Loan Lenders for the Tranche B Term Loans in an aggregate outstanding principal amount equal to $33,993,750.00 plus accrued and unpaid interest thereon, as provided in the Financing Agreement and the other Loan Documents; (c) the Tranche C Term Loan Lenders for the Tranche C Term Loans in an aggregate outstanding principal amount equal to $769,282.01 plus accrued and unpaid interest thereon, as provided in the Financing Agreement and the other Loan Documents; (d) the Tranche D Term Loan Lenders for the Tranche D Term Loans in an aggregate outstanding principal amount equal to $4,615,692.02 plus accrued and unpaid interest thereon, as provided in the Financing Agreement and the other Loan Documents and (e) for accrued and unpaid fees and expenses of Agents and Lenders (and any other amounts due under the Financing Agreement and the other Loan Documents, including but not limited to reasonable fees and disbursements of counsel).

5.Acknowledgment of Existence of Event of Default.  Each Loan Party acknowledges and agrees that the Existing Event of Default has occurred and is continuing.  Each Loan Party acknowledges and agrees that the Agents and the Lenders have not waived the Existing Event of Default or any other Event of Default.  Each Loan Party further acknowledges and agrees that, as a result of the occurrence of the Existing Event of Default: (a) all of such Loan Party’s obligations, liabilities and indebtedness to the Agents and the Lenders under the Financing Agreement and the other Loan Documents may at any time, subject to the terms of this Amendment, the Financing Agreement and the other Loan Documents, be declared due and payable in full, (b) the Agents and the Lenders have no further commitment to extend credit to the Borrowers and (c) the Agents and the Lenders, subject to the terms of this Amendment, are entitled to proceed to enforce any and all of their rights and remedies under the terms of the Financing Agreement and the other Loan Documents.

6.Conditions to Effectiveness.  This Amendment shall not be effective until each of the following conditions precedent have been satisfied:

a.The Agents shall have received this Amendment, duly executed by each of the parties hereto.

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b.Each of the representations and warranties set forth in Section 3 hereof shall be true and correct on and as of the date hereof.

c.The Borrowers shall have paid in full all invoiced cost and expenses incurred in connection with the preparation, execution, delivery and administration of this Amendment.

d.The Borrowers shall have paid a forbearance fee to the Administrative Agent in the amount of $75,000.00 which fee shall be fully earned, due and payable on the date hereof and no portion thereof shall be refunded or returned to the Borrowers under any circumstances.

e.All action on the part of the Loan Parties necessary for the valid execution, delivery and performance by the Loan Parties of this Amendment shall have been duly and effectively taken.

7.Covenants and Agreements.  Without any prejudice or impairment whatsoever to any of the rights and remedies of the Agents or any Lender contained in the Financing Agreement or any of the other Loan Documents or in any agreement, document or instrument executed in connection therewith, each of the Loan Party’s covenants and agrees with the Agents and the Lenders as follows:

a.Budget.  The Borrowers shall, not later than 12 noon (Boston time) on (i) December 27, 2019, deliver to the Agents a budget through January 31, 2020 prepared by the Administrative Borrower and (ii) January 3, 2020, deliver to the Agents a budget through March 27, 2020 prepared by the Administrative Borrower, in each case, which budget shall include a weekly cash budget, including information on a line item basis as to (w) projected cash receipts, (x) projected disbursements (including ordinary course operating expenses, capital expenditures, asset sales, credit party expenses and any other fees and expenses relating to the Loan Documents), (y) a calculation of the Borrowing Base and (z) the amount of Qualified Cash, which shall be in form and substance acceptable to the Agents (“Budget”).  The Budget may be updated, modified or supplemented (with the consent of the Agents and/or at the reasonable request of the Agents) from time to time, and each such updated, modified or supplemented budget shall be approved by, and in form and substance satisfactory to, the Agents and no such updated, modified or supplemented budget shall be effective until so approved and once so approved shall be deemed the Budget.

b.Budget Variance Report.  On or before Friday of each week commencing on January 3, 2020, the Borrowers shall deliver to the Agents a Budget Variance Report.  As used herein “Budget Variance Report” means a weekly report provided by the Borrowers to the Agents, showing amount of Qualified Cash as of Saturday of each week and the actual receipts and disbursements for each line item compared to the Budget, as applicable, on a cumulative basis from the date hereof of until the fourth (4th) week after the date hereof and then on a rolling four (4) week basis at all times thereafter, noting therein all variances, on a line-item basis, from amounts set forth for such period in the Budget, and shall include or be accompanied by explanations for all material variances and certified by an Authorized Officer of the Parent.

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c.Advisor.  The U.S. Borrower has engaged an advisory firm (“Advisor”) to provide certain advisory services pursuant to and as set forth in that certain Professional Services Agreement (“PSA”) dated as of December 17, 2019.  On or before January 31, 2020 the U.S. Borrower shall deliver to the Agents a copy of the report prepared by Advisor in accordance with the PSA.  The U.S. Borrower authorizes the Agents to communicate directly with Advisor and the U.S. Borrower will authorize and directAdvisor to communicate directly with the Agents with respect to matters concerning the PSA.

8.Forbearance by Agents and Lenders.  In consideration of the Loan Parties performance in accordance with this Amendment, the Agents and Lenders shall forbear from enforcing their rights and remedies under the Financing Agreement and other Loan Documents until the earlier of (i) February 28, 2020 (the “Termination Date”) or (ii) the occurrence of a Termination Event.  Notwithstanding the foregoing:

a.Nothing contained in this Amendment shall constitute:  (i) a waiver by the Agents or Lenders of any Event of Default under the Financing Agreement or Loan Documents, whether now existing or hereafter arising; or (ii) a waiver of any of the Agents’ or Lenders’ contractual and legal rights and remedies.

b.This Amendment shall only constitute an agreement by the Agents and Lenders to forbear from enforcing its rights and remedies upon the terms and conditions expressly set forth herein.

9.Termination Events.  The occurrence of any one or more of the following events shall constitute a termination event (hereinafter, a “Termination Event”) under this Amendment:

a.The failure of the Loan Parties to promptly, punctually, or faithfully perform any other term, condition, or covenant of this Amendment as and when due, it being expressly acknowledged and agreed that TIME IS OF THE ESSENCE.

b.The occurrence of any Event of Default under the Financing Agreement or any other Loan Document, other than (i) the Existing Event of Default and (ii) any Event of Default with respect to Section 7.03(c) of the Financing Agreement but not if the Appraised Value of the Loan Parties’ Intellectual Property in the next appraisal delivered by the Loan Parties to the Agents pursuant to the Financing Agreement declines by 9.75% or more from the Appraised Value thereof in the appraisal most recently delivered by the Loan Parties to the Agents prior to the date hereof.

10.Rights Upon Termination.  Upon the Termination Date or the occurrence of any Termination Event, the forbearance as set forth in this Amendment shall terminate upon notice to the Administrative Borrower, and thereafter the Agents and Lenders may immediately commence enforcing their rights and remedies pursuant to the Financing Agreement and Loan Documents and otherwise without notice or demand.

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11.Amendments to Financing Agreement.  Subject to the satisfaction of the conditions precedent specified in Section 6 above, the Financing Agreement is hereby amended by amending and restating Section 7.03(a) thereof in its entirety as follows:

“(a)Qualified Cash.  Permit Qualified Cash to be less than $1,000,000 at any time; provided that, prior to the occurrence of the Termination Date or a Termination Event (each as defined in that certain Third Amendment to Financing Agreement and Forbearance Agreement, dated as of December 20, 2019, among the Borrowers, the Guarantors, the Agents and the Lenders), such minimum Qualified Cash amount shall be reduced by fees actually received by GB Brand Architects, LLC from the U.S. Borrower pursuant to that certain Professional Services Agreement dated as of December 9, 2019, (i) in each case, upon receipt by GB Brand Architects LLC of such fees and (ii) in no event shall such minimum Qualified Cash amount be less than $700,000.”

12.Release.  Each Loan Party hereby releases and forever discharges the Agents, the Lenders and each of their parents, subsidiaries and affiliates, past or present, and each of them, as well as each of Agents’ and Lenders’ directors, officers, agents, servants, employees, shareholders, representatives, attorneys, administrators, executors, heirs, assigns, predecessors and successors in interest, and all other persons, firms or corporations with whom any of the former have been, are now, or may hereafter be affiliated, and each of them (collectively, the “Releasees”), from and against any and all claims, demands, liens, agreements, contracts, covenants, actions, suits, causes of action in law or equity, obligations, controversies, debts, costs, expenses, damages, judgments, orders and liabilities of whatever kind or nature in law, equity or otherwise, whether known or unknown, fixed or contingent, suspected or unsuspected by any Loan Party, and whether concealed or hidden (collectively, “Claims”), which any Loan Party now owns or holds or has at any time heretofore owned or held, which are based upon or arise out of or in connection with any matter, cause or thing existing at any time prior to the date hereof or anything done, omitted or suffered to be done or omitted at any time prior to the date hereof in connection with the Financing Agreement, the other Loan Documents or this Amendment (collectively the “Released Matters”).  Each Loan Party represents, warrants and agrees that in executing and entering into this release, they are not relying and have not relied upon any representation, promise or statement made by anyone which is not recited, contained or embodied in this Amendment or the Loan Documents.  Each Loan Party has reviewed this release with the Loan Parties’ legal counsel, and understands and acknowledges the significance and consequence of this release and of the specific waiver thereof contained herein.  Each Loan Party understands and expressly assumes the risk that any fact not recited, contained or embodied therein may turn out hereafter to be other than, different from, or contrary to the facts now known to any Loan Party or believed by any Loan Party to be true.  Nevertheless, each Loan Party intends by this release to release fully, finally and forever all Released Matters and agrees that this release shall be effective in all respects notwithstanding any such difference in facts, and shall not be subject to termination, modification or rescission by reason of any such difference in facts.

13.No Novation; Entire Agreement.  This Amendment evidences solely the specified terms and obligations of the Loan Parties under the Financing Agreement and is not a novation or discharge of any of the other obligations of the Loan Parties under the Financing Agreement.  There are no other understandings, express or implied, among the Loan Parties, the Agents and the Lenders regarding the subject matter hereof or thereof.

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14.Severability.  Any provision of this Amendment which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining portions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.

15.Headings.  Headings and captions used in this Amendment are included for convenience of reference only and shall not be given any substantive effect.

16.Counterparts.  This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement.  Delivery of an executed counterpart of this Amendment by telecopier or electronic mail shall be equally as effective as delivery of an original executed counterpart of this Amendment.  Any party delivering an executed counterpart of this Amendment by telecopier or electronic mail also shall deliver an original executed counterpart of this Amendment but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Amendment.

17.Miscellaneous.  The terms and provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their permitted successors and assigns.

18.Governing Law.  THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK.

19.WAIVER OF JURY TRIAL, ETC.  EACH LOAN PARTY, EACH AGENT AND EACH LENDER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS AMENDMENT OR THE OTHER LOAN DOCUMENTS, OR UNDER ANY AMENDMENT, WAIVER, CONSENT, INSTRUMENT, DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION THEREWITH, OR ARISING FROM ANY FINANCING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AMENDMENT, AND AGREES THAT ANY SUCH ACTION, PROCEEDINGS OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.  EACH LOAN PARTY CERTIFIES THAT NO OFFICER, REPRESENTATIVE, AGENT OR ATTORNEY OF ANY AGENT OR ANY LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT ANY AGENT OR ANY LENDER WOULD NOT, IN THE EVENT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM, SEEK TO ENFORCE THE FOREGOING WAIVERS.  EACH LOAN PARTY HEREBY ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENTS AND THE LENDERS ENTERING INTO THIS AMENDMENT.

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20.Informed Execution.  Each of the Loan Parties represents and warrants to the Agents and Lenders that:

a.Each Loan Party has read and understands all of the terms and conditions of this Amendment;

b.The Loan Parties intend to be bound by the terms and conditions of this Amendment; and

c.The Loan Parties are executing this Amendment freely and voluntarily, without duress, after consultation with independent counsel of the Loan Parties own selection.

[Remainder of Page Intentionally Left Blank; Signature Pages Follow]

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IN WITNESS WHEREOF, this Amendment has been executed as of the date first written above.

BORROWERS:
APEX GLOBAL BRANDS, INC. (f/k/a Cherokee Inc.), as U.S. Borrower
By:	/s/ Henry Stupp
Name:	Henry Stupp
Title:	Chief Executive Officer

IRENE ACQUISITION COMPANY B.V., as Dutch Borrower
By:	/s/ Henry Stupp
Name:	Henry Stupp
Title:	Director A
By:	/s/ Kimberly Doyle
Name:	Kimberly Doyle
Title:	Director B

GUARANTORS:
CHEROKEE INC.
By:	/s/ Henry Stupp
Name:	Henry Stupp
Title:	CEO

SPELL C. LLC
By: CHEROKEE INC., its sole member
By:	/s/ Henry Stupp
Name:	Henry Stupp
Title:	CEO

[Signature Page to Third Amendment]

CHEROKEE BRANDS LLC
By: CHEROKEE INC., its sole member
By:	/s/ Henry Stupp
Name:	Henry Stupp
Title:	CEO

HAWK 900 BRANDS LLC
By: CHEROKEE INC., its sole member
By:	/s/ Henry Stupp
Name:	Henry Stupp
Title:	CEO

EDCA LLC
By: CHEROKEE INC., its sole member
By:	/s/ Henry Stupp
Name:	Henry Stupp
Title:	CEO

FFS HOLDINGS, LLC
By: CHEROKEE INC., its sole member
By:	/s/ Henry Stupp
Name:	Henry Stupp
Title:	CEO

FLIP FLOP SHOES FRANCHISE COMPANY, LLC
By: FFS HOLDINGS, LLC, its sole member
By: CHEROKEE INC., its sole member
By:	/s/ Henry Stupp
Name:	Henry Stupp
Title:	CEO

[Signature Page to Third Amendment]

HI-TEC SPORTS INTERNATIONAL HOLDINGS B.V.
By:	/s/ Henry Stupp
Name:	Henry Stupp
Title:	CEO

HI-TEC SPORTS PLC
By:	/s/ Henry Stupp
Name:	Henry Stupp
Title:	CEO

HI-TEC INTERNATIONAL HOLDINGS B.V.
By:	/s/ Henry Stupp
Name:	Henry Stupp
Title:	CEO

HI-TEC SPORTS UK LIMITED
By:	/s/ Henry Stupp
Name:	Henry Stupp
Title:	CEO

HI-TEC NEDERLAND B.V.
By:	/s/ Henry Stupp
Name:	Henry Stupp
Title:	CEO

COLLATERAL AGENT AND
ADMINISTRATIVE AGENT:
GORDON BROTHERS FINANCE COMPANY
By:	/s/ Felicia Galeota
Name:	Felicia Galeota
Title:	Vice President

[Signature Page to Third Amendment]

LENDERS:
GORDON BROTHERS FINANCE COMPANY, LLC
By:	/s/ Felicia Galeota
Name:	Felicia Galeota
Title:	Vice President

GORDON BROTHERS BRANDS, LLC
By:	/s/ Patricia E. Parent
Name:	Patricia E. Parent
Title:	VP, Asst. Secretary

[Signature Page to Third Amendment]

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Henry Stupp, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Apex Global Brands Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: December 20, 2019	By:	/s/ Henry Stupp
		Henry Stupp
		Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Steven L. Brink, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Apex Global Brands Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: December 20, 2019	By:	/s/ Steven L. Brink
		Steven L. Brink
		Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. § 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Apex Global Brands Inc. (the “ Company ”) hereby certifies, to such officer’s knowledge, that:

(i) the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period ended November 2, 2019 (the “ Report ”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: December 20, 2019	By:	/s/ Henry Stupp
		Henry Stupp
		Chief Executive Officer
		(Principal Executive Officer)

This certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. § 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Apex Global Brands Inc. (the “ Company ”) hereby certifies, to such officer’s knowledge, that:

(i) the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period ended November 2, 2019 (the “ Report ”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: December 20, 2019	By:	/s/ Steven L. Brink
		Steven L. Brink
		Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

This certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.

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Other Current Liabilities (Details) - USD ($) $ in Thousands	Nov. 02, 2019	Feb. 02, 2019
Other Liabilities Current [Abstract]
Accrued employee compensation and benefits	$ 363	$ 376
Restructuring plan liabilities	1,602	3,003
Income taxes payable	486	473
Current lease obligations	564
Other liabilities	770	862
Total other current liabilities	$ 3,785	$ 4,714

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Restructuring Plans (Tables)

9 Months Ended

Nov. 02, 2019

Restructuring And Related Activities [Abstract]

Schedule of restructuring-related costs is measured at its fair value

(In thousands)	FY19 Plan			FY18 Plan			Hi-Tec Plan			Total
Balance, February 2, 2019		2,760			44			199			3,003
Restructuring charges		180			—			—			180
Payments during the period		(1,372	)		(44	)		(165	)		(1,581	)
Balance, November 2, 2019	$	1,568		$	—		$	34		$	1,602

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New Accounting Pronouncements (Details) - USD ($) $ in Thousands	9 Months Ended
	Nov. 02, 2019	Feb. 02, 2019
Revenue Initial Application Period Cumulative Effect Transition [Line Items]
Operating lease obligations	$ 4,181
Right-of-use assets	$ 4,200
ASU 2016-13
Revenue Initial Application Period Cumulative Effect Transition [Line Items]
New Accounting Pronouncement or Change in Accounting Principle, Description	In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments-Credit Losses (“Topic 326”). For trade receivables, the Company will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. This new standard is effective for the Company’s fiscal year ending January 30, 2021 (‘‘Fiscal 2021’’). The Company is currently evaluating the impact of the adoption of this standard on our condensed consolidated financial statements. Management does not expect the impact of adoption to be material.
ASU 2016-02
Revenue Initial Application Period Cumulative Effect Transition [Line Items]
New Accounting Pronouncement or Change in Accounting Principle, Description	In March 2016, the FASB issued authoritative guidance which modified existing guidance for off-balance sheet treatment of a lessee’s operating leases (“Topic 842”). 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 is recognized related to the right to use the underlying asset, and a liability is recognized related to the obligation to make lease payments over the term of the lease. These amounts are determined based on the present value of the lease payments over the lease term. The standard also requires expanded disclosures about leases. The Company adopted this standard as of the beginning of its fiscal year ending February 1, 2020, electing the transition option that allowed it not to restate the comparative periods in its financial statements in the year of adoption and to carry forward its historical assessment of whether contracts are, or contain, leases, along with its historical assessment of lease classifications and initial direct costs.
Operating lease obligations		$ 4,700
Right-of-use assets		$ 4,600

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Commitments and Contingencies

9 Months Ended

Nov. 02, 2019

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

7. Commitments and Contingencies

The Company indemnifies certain customers against liability arising from third‑party claims of intellectual property rights infringement related to the Company’s trademarks.  These indemnities appear in the licensing agreements with the Company’s customers, are not limited in amount or duration and generally survive the expiration of the contracts.  The Company is unable to determine a range of estimated losses that it could incur related to such indemnities since the amount of any potential liabilities cannot be determined until an infringement claim has been made.

The Company is involved from time to time in various claims and other matters incidental to the Company’s business, the resolution of which is not presently expected to have a material adverse effect on the Company’s financial position, results of operations or liquidity.  Estimated reserves for contingent liabilities, including threatened or pending litigation, are recorded as liabilities in the financial statements when the outcome of these matters is deemed probable and the liability is reasonably estimable.

The Company has non-cancelable operating lease agreements with various expiration dates through December 31, 2026 for office space and equipment.  Certain lease agreements include options to renew, which are not reasonably certain to be exercised and therefore are not factored into our determination of the present value of lease obligations.

Operating lease costs are included as a component of selling, general and administrative expense and were $0.1 million and $0.4 million, excluding variable lease costs and sublease income, for the three and nine months ended November 2, 2019, respectively.  Cash paid for operating lease obligations is consistent with operating lease costs for the period.  Total lease expense recognized prior to our adoption of Topic 842 was $0.2 million and $0.6 million for the three and nine months ended November 3, 2018, respectively.

As of November 2, 2019, the weighted-average remaining lease term is 6.2 years, and the weighted-average IBR is 8.8%.  The right-of-use assets as of November 2, 2019 was $4.2 million.  Future minimum commitments under non-cancelable operating leases as of November 2, 2019 are as follows:

(In thousands)	Operating Leases
Remainder of Fiscal 2020	$	193
Fiscal 2021		890
Fiscal 2022		902
Fiscal 2023		884
Fiscal 2024		893
Thereafter		1,597
Total future minimum lease payments		5,359
Less imputed interest		(1,178	)
Present value of operating lease liabilities	$	4,181

Future minimum lease payments as of February 2, 2019 were as follows:

(In thousands)	Operating Leases
Fiscal 2020	$	854
Fiscal 2021		865
Fiscal 2022		876
Fiscal 2023		857
Fiscal 2024		863
Thereafter		1,673
Total future minimum lease payments	$	5,988

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Subsequent Events

9 Months Ended

Nov. 02, 2019

Subsequent Events [Abstract]

Subsequent Events

11. Subsequent Events

In November 2019, the Company entered into a lease termination agreement for its office building in Amsterdam.  The lease will terminate as of December 31, 2019 rather than continue through December 2026. The compensation for early termination is a payment of $0.6 million and a subordinated note of $0.3 million, excluding VAT, reducing the Company’s lease obligation by $2.4 million.

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Taxes on Income - (Details)	3 Months Ended	9 Months Ended
	Nov. 02, 2019 USD ($)	Nov. 02, 2019 USD ($)
Income Tax Disclosure [Abstract]
Unrecognized tax benefits	$ 3,300,000	$ 3,300,000
Decrease in liability for uncertain tax positions	$ 0	$ 100,000

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Restructuring Plans (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Nov. 02, 2019	Nov. 02, 2019	Nov. 03, 2018
Payments for restructuring plan obligations
Balance at beginning of period		$ 3,003
Restructuring charges	$ 138	180	$ 5,615
Payments during the period		(1,581)
Balance at end of period	1,602	1,602
FY19 Plan
Payments for restructuring plan obligations
Balance at beginning of period		2,760
Restructuring charges		180
Payments during the period		(1,372)
Balance at end of period	1,568	1,568
FY18 Plan
Payments for restructuring plan obligations
Balance at beginning of period		44
Payments during the period		(44)
Hi-Tec Plan
Payments for restructuring plan obligations
Balance at beginning of period		199
Payments during the period		(165)
Balance at end of period	$ 34	$ 34

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Nov. 02, 2019	Nov. 03, 2018	Nov. 02, 2019	Nov. 03, 2018
Income Statement [Abstract]
Revenues	$ 4,894	$ 5,842	$ 15,549	$ 18,317
Operating expenses:
Selling, general and administrative expenses	3,193	3,234	10,117	11,577
Stock-based compensation	153	241	876	666
Business acquisition and integration costs	73		284	307
Restructuring charges	138		180	5,615
Intangible asset impairment charge	5,000		5,000
Loss (gain) on sale of assets		25		(546)
Depreciation and amortization	232	292	743	1,223
Total operating expenses	8,789	3,792	17,200	18,842
Operating income (loss)	(3,895)	2,050	(1,651)	(525)
Other income (expense):
Interest expense	(2,182)	(1,910)	(6,678)	(6,007)
Other income (expense), net	(59)	14	2	(3,219)
Total other expense, net	(2,241)	(1,896)	(6,676)	(9,226)
Income (loss) before income taxes	(6,136)	154	(8,327)	(9,751)
Provision for income taxes	692	91	2,026	1,980
Net income (loss)	$ (6,828)	$ 63	$ (10,353)	$ (11,731)
Net loss per share:
Basic earnings (loss) per share	$ (1.23)	$ 0.01	$ (1.93)	$ (2.50)
Diluted earnings (loss) per share	$ (1.23)	$ 0.01	$ (1.93)	$ (2.50)
Weighted average common shares outstanding:
Basic	5,534	4,716	5,359	4,686
Diluted	5,534	4,716	5,359	4,686

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New Accounting Pronouncements

9 Months Ended

Nov. 02, 2019

Accounting Policies [Abstract]

New Accounting Pronouncements

2. New Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments-Credit Losses (“Topic 326”).  For trade receivables, the Company will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable.  This new standard is effective for the Company’s fiscal year ending January 30, 2021 (‘‘Fiscal 2021’’).  The Company is currently evaluating the impact of the adoption of this standard on our condensed consolidated financial statements. Management does not expect the impact of adoption to be material.

In March 2016, the FASB issued authoritative guidance which modified existing guidance for off-balance sheet treatment of a lessee’s operating leases (“Topic 842”).  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 is recognized related to the right to use the underlying asset, and a liability is recognized related to the obligation to make lease payments over the term of the lease.  These amounts are determined based on the present value of the lease payments over the lease term.  The standard also requires expanded disclosures about leases.  The Company adopted this standard as of the beginning of its fiscal year ending February 1, 2020, electing the transition option that allowed it not to restate the comparative periods in its financial statements in the year of adoption and to carry forward its historical assessment of whether contracts are, or contain, leases, along with its historical assessment of lease classifications and initial direct costs.

The Company’s leases obligations comprise primarily individual leases for office space without multiple components.  The Company determines if an arrangement is or contains a lease at inception by evaluating various factors, including whether a vendor’s right to substitute an identified asset is substantive. Lease classification is determined at the lease commencement date when the leased assets are made available for use.  For the Company’s long-term leases, operating leases obligations are included in other current liabilities and long-term lease liabilities, and right-of-use assets are included in accrued revenue and other assets. The Company does not have any material finance leases.  The operating lease obligations and right-of-use assets recognized on adoption of Topic 842 were $4.7 million and $4.6 million, respectively.  The difference between the total right-of-use assets and total lease liabilities recorded on adoption is primarily due to the derecognition of prepaid rent expenses.

The Company uses estimates of its incremental borrowing rate (IBR) based on the information available at the lease commencement date in determining the present value of lease payments. In determining the appropriate IBR, the Company considers information including, but not limited to, its credit rating, the lease term, and the currency in which the arrangement is denominated. For leases which commenced prior to our adoption of Topic 842, we used the estimated IBR on the date of adoption. When the Company has the sole option to either renew or terminate a lease, the present value of the right-of-use asset and lease obligation includes the extension period when it is reasonably certain that the Company will exercise the option. Lease expense is recognized on a straight-line basis over the lease term.

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Debt

9 Months Ended

Nov. 02, 2019

Debt Disclosure [Abstract]

Debt

6. Debt

On August 3, 2018, the Company entered into a senior secured credit facility, which provided a $40.0 term loan, and $13.5 million of subordinated promissory notes (the “Junior Notes”). The credit facility was amended on January 30, 2019 to provide an additional term loan of $5.3 million. The term loans mature in August 2021 and require quarterly principal payments and monthly interest payments based on LIBOR plus a margin.  The additional $5.3 million term loan also requires interest of 3.0% payable in kind with such interest being added to the principal balance of the loan.  The term loans are secured by substantially all the assets of the Company and are guaranteed by the Company’s subsidiaries.  The Junior Notes mature in November 2021, and they are secured by a second priority lien on substantially all of the assets of Company and guaranteed by the Company’s subsidiaries.  Interest is payable monthly on the Junior Notes, but no periodic amortization payments are required.  The Junior Notes are subordinated in rights of payment and priority to the term loans but otherwise have economic terms substantially similar to the term loans.  Excluding the interest payable in kind, the weighted-average interest rate on both the term loans and Junior Notes at November 2, 2019 was 11.1%.

The term loans are subject to a borrowing base and include financial covenants and obligations regarding the operation of the Company’s business that are customary in facilities of this type, including limitations on the payment of dividends.  Financial covenants include the requirement to maintain specified levels of Adjusted EBITDA, as defined in the agreement, and maintain a specified level of cash on hand. The Company is required to maintain a borrowing base comprising the value of the Company’s trademarks that exceeds the outstanding balance of the term loans.  If the borrowing base is less than the outstanding term loans at any measurement period, then the Company would be required to repay a portion of the term loans to eliminate such shortfall.  Events of default include, among other things, the occurrence of a change of control of the Company, and a default under the term loans agreement would also trigger a default under the Junior Notes agreements. The Company’s operating results for the twelve months ended November 2, 2019 resulted in a violation of the minimum Adjusted EBITDA covenant, which is an event of default.  However, the Company’s lender has agreed to forbear from enforcing its rights under the senior secured credit facility through February 28, 2020. (See Note 1, Liquidity and Going Concern.)

Outstanding borrowings under the term loans were $44.1 million at November 2, 2019 with associated unamortized debt issuance costs of $2.0 million.  Outstanding Junior Notes were $13.5 million at November 2, 2019 with associated unamortized debt issuance costs of $0.4 million. As a result of the covenant violation referred to above, the total amount of the Company’s long-term debt is reflected as a current obligation in the Company’s November 2, 2019 consolidated balance sheet.

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Taxes on Income

9 Months Ended

Nov. 02, 2019

Income Tax Disclosure [Abstract]

Taxes on Income

10. Taxes on Income

Each reporting period, the Company evaluates the realizability of its deferred tax assets.  As of November 2, 2019, the Company continued to maintain a full valuation allowance against its deferred tax assets in the United States and the foreign subsidiaries acquired in the Hi-Tec Acquisition.  These valuation allowances will be maintained until there is sufficient positive evidence to conclude that it is more likely than not that these deferred tax assets will be realized.   

As of November 2, 2019, the reserve for uncertain tax positions resulting from unrecognized tax benefits related to the Company’s Hi-Tec subsidiaries was $3.3 million.  There was no change in the three months ended November 2, 2019 and a decrease of $0.1 million in the nine months ended November 2, 2019, in the Company’s liability for uncertain tax positions.      

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Intangible Assets

9 Months Ended

Nov. 02, 2019

Goodwill And Intangible Assets Disclosure [Abstract]

Intangible Assets

3. Intangible Assets

Intangible assets consists of the following:

	November 2, 2019							February 2, 2019
(In thousands)	Gross Amount		Accumulated Amortization			Net Book Value		Gross Amount		Accumulated Amortization			Net Book Value
Amortizable trademarks	$	28,004		(20,379	)	$	7,625	$	27,899		(19,835	)	$	8,064
Indefinite lived trademarks		51,687		—			51,687		56,687		—			56,687
	$	79,691	$	(20,379	)	$	59,312	$	84,586	$	(19,835	)	$	64,751

The Hi-Tec Acquisition during Fiscal 2017 resulted in trademarks valued at $52.4  million that are classified as indefinite lived and not subjected to amortization.  Other indefinite lived trademarks include certain Cherokee brand trademarks that were acquired in historical transactions.  The Company's revenues from its Hi-Tec, Magnum and Interceptor brands, which were acquired in the Hi-Tec Acquisition, were significantly below previous forecasts for the three months ended November 2, 2019.  (See Note 1 for further discussion.)  This was identified as an interim impairment indicator for the related indefinite lived trademarks during the preparation of the Company’s interim financial statements, and management performed an interim impairment test based on updated cash flow projections and discounted cash flows based on estimated weighted average costs of capital (income approach).   The Company determined that the fair values of its Hi-Tec and Magnum trademarks were not in excess of their carrying values, and as a result, an impairment charge of $5.0 million was recorded during the three months ended November 2, 2019 to adjust these trademarks to their estimated fair value.  The fair value of the Company’s Interceptor brand was in excess of its carrying value, so no impairment charge was necessary based on the interim test.  However, the Company believes that increased tariffs and global trade wars have negatively impacted the competitive and economic environment in which Interceptor operates, and an indefinite life is no longer supported.  Accordingly, the Interceptor trademark will be amortized prospectively over its estimated remaining useful life.  The recorded impairment charge is based on the preliminary valuation and is management’s best estimate as of the filing date of these condensed consolidated financial statements.  The Company is in the process of completing its evaluation of the key inputs used to estimate the fair value of its indefinite lived trademarks.  The impairment charge is therefore subject to revision as management’s valuation is performed and completed during the fourth quarter.  The Company has acquired other trademarks that are being amortized over their estimated useful lives, which average 10.0 years with no residual values.  Amortization of intangible assets was $0.2 million and $0.2 million for the three months ended November 2, 2019 and November 3, 2018, respectively, and $0.5 million and $0.7 million for the nine months ended November 2, 2019 and November 3, 2018, respectively.

Goodwill arose from historical acquisitions and the Hi-Tec Acquisition that occurred during Fiscal 2017.  Goodwill is tested at least annually for impairment but was tested this quarter as a result of the revenue shortfall referred to above and the sustained drop in the trading price of the Company’s stock. Because the Company has one reporting unit, its impairment test is based primarily on the relationship between its market capitalization and the book value of its equity adjusted for an estimated control premium.  The goodwill impairment test this quarter indicated that the Company’s goodwill is not impaired.

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Document and Entity Information - shares	9 Months Ended
	Nov. 02, 2019	Dec. 13, 2019
Cover [Abstract]
Entity Registrant Name	Apex Global Brands Inc.
Entity Central Index Key	0000844161
Document Type	10-Q
Document Period End Date	Nov. 02, 2019
Trading Symbol	APEX
Amendment Flag	false
Current Fiscal Year End Date	--02-01
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Shell Company	false
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		5,570,530
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	0-18640
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	95-4182437
Entity Address, Address Line One	5990 Sepulveda Boulevard
Entity Address, City or Town	Sherman Oaks
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	91411
City Area Code	818
Local Phone Number	908-9868
Entity Information, Former Legal or Registered Name	CHEROKEE INC.
Title of 12(b) Security	Common stock
Security Exchange Name	NASDAQ

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Subsequent Events (Details) $ in Millions	Nov. 30, 2019 USD ($)
Subsequent Event [Line Items]
Payment of compensation for early termination decrease lease obligation	$ 2.4
Subsequent Event
Subsequent Event [Line Items]
Lease termination date	Dec. 31, 2019
Lease expiration date	Dec. 31, 2026
Payment of compensation for early termination lease excluding VAT	$ 0.6
Payment of compensation for early termination of subordinated note excluding VAT	$ 0.3

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Debt (Details) - Senior Secured Credit Facility - USD ($)		9 Months Ended
	Aug. 03, 2018	Nov. 02, 2019	Jan. 30, 2019
Term Loan
Debt
Maximum borrowing capacity	$ 40,000,000		$ 5,300,000
Line of credit facility maturity month and year	2021-08
Debt instrument, interest rate, stated percentage			3.00%
Line of credit facility, borrowing capacity, description		The Company is required to maintain a borrowing base comprising the value of the Company’s trademarks that exceeds the outstanding balance of the term loans. If the borrowing base is less than the outstanding term loans at any measurement period, then the Company would be required to repay a portion of the term loans to eliminate such shortfall. Events of default include, among other things, the occurrence of a change of control of the Company, and a default under the term loans agreement would also trigger a default under the Junior Notes agreements.
Line of credit facility, maximum amount outstanding during period		$ 44,100,000
Unamortized debt issuance costs		2,000,000
Junior Notes
Debt
Maximum borrowing capacity	$ 13,500,000
Line of credit facility maturity month and year	2021-11
Debt instrument periodic amortization payment interest	$ 0
Line of credit facility, maximum amount outstanding during period		13,500,000
Unamortized debt issuance costs		$ 400,000
Term Loan and Junior Notes
Debt
Debt instrument, interest rate, stated percentage		11.10%

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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Retained Earnings (Accumulated Deficit)
Balance at Feb. 03, 2018	$ 24,115	$ 280	$ 74,377	$ (50,542)
Balance (in shares) at Feb. 03, 2018		4,666
Increase (Decrease) in Stockholders' Equity
Adoption of ASC 606	275			275
Stock-based compensation	300		300
Stock Warrants	23		23
Net Income (Loss)	(2,741)			(2,741)
Balance at May. 05, 2018	21,972	$ 280	74,700	(53,008)
Balance (in shares) at May. 05, 2018		4,666
Increase (Decrease) in Stockholders' Equity
Stock-based compensation	125		125
Equity issuances, net of tax	777	$ 1	776
Equity issuances, net of tax (in shares)		16
Stock Warrants	21		21
Net Income (Loss)	(9,053)			(9,053)
Balance at Aug. 04, 2018	13,842	$ 281	75,622	(62,061)
Balance (in shares) at Aug. 04, 2018		4,682
Increase (Decrease) in Stockholders' Equity
Stock-based compensation	241		241
Equity issuances, net of tax		$ 3	(3)
Equity issuances, net of tax (in shares)		59
Stock Warrants	22		22
Net Income (Loss)	63			63
Balance at Nov. 03, 2018	14,168	$ 284	75,882	(61,998)
Balance (in shares) at Nov. 03, 2018		4,741
Balance at Feb. 02, 2019	14,335	$ 294	76,633	(62,592)
Balance (in shares) at Feb. 02, 2019		4,900
Increase (Decrease) in Stockholders' Equity
Stock-based compensation	208		208
Equity issuances, net of tax	623	$ 25	598
Equity issuances, net of tax (in shares)		415
Stock Warrants	28		28
Net Income (Loss)	(2,258)			(2,258)
Balance at May. 04, 2019	12,936	$ 319	77,467	(64,850)
Balance (in shares) at May. 04, 2019		5,315
Increase (Decrease) in Stockholders' Equity
Stock-based compensation	515		515
Equity issuances, net of tax		$ 12	(12)
Equity issuances, net of tax (in shares)		207
Stock Warrants	28		28
Net Income (Loss)	(1,267)			(1,267)
Balance at Aug. 03, 2019	12,212	$ 331	77,998	(66,117)
Balance (in shares) at Aug. 03, 2019		5,522
Increase (Decrease) in Stockholders' Equity
Stock-based compensation	153		153
Equity issuances, net of tax	(21)	$ 3	(24)
Equity issuances, net of tax (in shares)		49
Stock Warrants	27		27
Net Income (Loss)	(6,828)			(6,828)
Balance at Nov. 02, 2019	$ 5,543	$ 334	$ 78,154	$ (72,945)
Balance (in shares) at Nov. 02, 2019		5,571

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Other Current Liabilities (Tables)

9 Months Ended

Nov. 02, 2019

Other Liabilities Current [Abstract]

Schedule of other current liabilities

(In thousands)	November 2, 2019		February 2, 2019
Accrued employee compensation and benefits	$	363	$	376
Restructuring plan liabilities		1,602		3,003
Income taxes payable		486		473
Current lease obligations		564		—
Other liabilities		770		862
	$	3,785	$	4,714

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Basis of Presentation (Details) $ in Millions			9 Months Ended
	Sep. 27, 2019 shares	Feb. 02, 2019 USD ($) shares	Nov. 02, 2019 shares	Sep. 26, 2019 shares
Basis Of Presentation [Line Items]
Reverse stock split ratio	0.3333
Reverse stock split description			On September 27, 2019, the Company effected a one-for-three reverse stock split (the “Reverse Stock Split”) of its common stock.
Common stock outstanding | shares	5,500,000			16,600,000
Common stock authorized | shares	10,000,000	10,000,000	10,000,000	30,000,000
Senior Secured Credit Facility
Basis Of Presentation [Line Items]
Adjusted level of earnings before interest tax depreciation and amortization | $		$ 9.5
Minimum cash balance | $		$ 1.0

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Intangible Assets - Weighted Average Period (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Nov. 02, 2019	Nov. 03, 2018	Nov. 02, 2019	Nov. 03, 2018
Acquired Finite-Lived Intangible Assets [Line Items]
Amortization of Intangible Assets	$ 200	$ 200	$ 500	$ 700
Trademarks
Acquired Finite-Lived Intangible Assets [Line Items]
Residual values	$ 0		$ 0
Weighted-average amortization period			10 years

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Nov. 02, 2019	Feb. 02, 2019
Statement Of Financial Position [Abstract]
Preferred stock, par value (in dollars per share)	$ 0.02	$ 0.02
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued	0	0
Common stock, par value (in dollars per share)	$ 0.06	$ 0.06
Common stock, shares authorized	10,000,000	10,000,000
Common stock, shares issued	5,570,530	4,900,318

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Revenues and Concentrations of Risk (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Nov. 02, 2019	Nov. 03, 2018	Nov. 02, 2019	Nov. 03, 2018	Feb. 02, 2019
Revenues From External Customers And Long Lived Assets [Line Items]
Revenues	$ 4,894	$ 5,842	$ 15,549	$ 18,317
Long-lived tangible assets	511		511		$ 620
Deferred revenue	3,900		3,900		$ 2,200
Revenue recognized	$ 100	$ 200	$ 1,500	$ 2,100
Customer Concentration Risk | Accounts Receivable | Three Licensees
Revenues From External Customers And Long Lived Assets [Line Items]
Concentration risk (as a percent)			37.00%
Customer Concentration Risk | Accounts Receivable | Two Licensees
Revenues From External Customers And Long Lived Assets [Line Items]
Concentration risk (as a percent)					29.00%
Customer Concentration Risk | Revenues | Three Licensees
Revenues From External Customers And Long Lived Assets [Line Items]
Concentration risk (as a percent)		32.00%
Customer Concentration Risk | Revenues | Two Licensees
Revenues From External Customers And Long Lived Assets [Line Items]
Concentration risk (as a percent)	29.00%		27.00%	20.00%
U.S. and Canada
Revenues From External Customers And Long Lived Assets [Line Items]
Revenues	$ 1,327	$ 1,505	$ 4,049	$ 4,908
Europe
Revenues From External Customers And Long Lived Assets [Line Items]
Revenues	851	1,136	2,798	4,358
Middle East, India and Africa
Revenues From External Customers And Long Lived Assets [Line Items]
Revenues	636	926	2,107	3,107
Asia/Pacific
Revenues From External Customers And Long Lived Assets [Line Items]
Revenues	1,402	1,431	4,345	3,260
Latin America
Revenues From External Customers And Long Lived Assets [Line Items]
Revenues	678	$ 844	2,250	$ 2,684
United States
Revenues From External Customers And Long Lived Assets [Line Items]
Long-lived tangible assets	200		200		$ 200
Non-US
Revenues From External Customers And Long Lived Assets [Line Items]
Long-lived tangible assets	$ 300		$ 300		$ 400

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Basis of Presentation

9 Months Ended

Nov. 02, 2019

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Basis of Presentation

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statement presentation.  Cherokee Inc. changed its name to Apex Global Brands Inc. effective June 27, 2019.  These financial statements include the accounts of Apex Global Brands Inc. and its consolidated subsidiaries (the “Company”) and include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the Company’s financial condition and the results of operations for the periods presented.  The condensed consolidated financial statements and notes thereto should be read in conjunction with the audited financial statements and notes thereto for the year ended February 2, 2019 included in the Company’s Annual Report on Form 10-K.  Interim results are not necessarily indicative of results to be expected for the full year.

Liquidity and Going Concern

The accompanying condensed 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 senior secured credit facility, the Company is required to maintain specified levels of Adjusted EBITDA as defined ($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 operating results for the twelve months ended November 2, 2019 resulted in a violation of this minimum Adjusted EBITDA covenant, which is an event of default.  However, the Company’s senior lender has agreed to forbear from enforcing its rights under the senior secured credit facility through February 28, 2020. Revenues for the three months ended November 2, 2019 were lower than the Company’s previous forecasts due to lower than expected royalties reported by the Company’s licensees, which have been negatively impacted by the economic uncertainty surrounding Brexit, global trade wars and increasing tariffs on footwear and apparel, and the weakening of the British pound sterling and euro in relation to the United States dollar.  In response, management has enacted certain cash savings measures, but such actions were not adequate to maintain compliance with the Adjusted EBITDA covenant.  The Company has classified its debt as current as financial projections indicate that there is a significant risk of further violations of the minimum Adjusted EBITDA covenant or minimum cash covenant beyond the forbearance period agreed to with the Company’s senior lender.  Future compliance failures would subject the Company to significant risks, including the right of its senior lender to terminate its obligation under the Credit Facility, declare all or any portion of the borrowed amounts then outstanding to be accelerated and due and payable, and/or exercise any other right or remedies it may have under applicable law, including foreclosing on the Company’s and/or its subsidiaries’ assets that serve as collateral for the borrowed amounts.  If any of these rights were to be exercised, the Company’s financial condition and ability to continue operations would be materially jeopardized.  If the Company is unable to meet obligations to lenders and other creditors, the Company may have to significantly curtail or even cease operations.  Because of this uncertainty, there is substantial doubt about the Company’s ability to continue as a going concern.  The Company is in negotiations for new and amended licenses that would increase its working capital and Adjusted EBITDA and is evaluating other potential sources of working capital, including the disposition of certain assets.  Management’s plans also include further negotiations with its lenders and other potential sources of capital, and the Company’s management and board of directors have engaged an advisory firm to advise the Company regarding its business plans, risks and opportunities.  There is no assurance that the Company will be able to execute these plans or continue to operate as a going concern.

Reverse Stock Split

On September 27, 2019, the Company effected a one-for-three reverse stock split (the “Reverse Stock Split”) of its common stock.  The Reverse Stock Split reduced the number of the Company’s outstanding shares of common stock from approximately 16.6 million shares to approximately 5.5 million shares and reduces the number of authorized shares of common stock from 30.0 million shares to 10.0 million shares.  Unless the context otherwise requires, all share and per share amounts in these condensed consolidated financial statements have been revised to reflect the Reverse Stock Split.

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Basis of Presentation (Policies)

9 Months Ended

Nov. 02, 2019

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Liquidity and Going Concern

Liquidity and Going Concern

The accompanying condensed 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 senior secured credit facility, the Company is required to maintain specified levels of Adjusted EBITDA as defined ($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 operating results for the twelve months ended November 2, 2019 resulted in a violation of this minimum Adjusted EBITDA covenant, which is an event of default.  However, the Company’s senior lender has agreed to forbear from enforcing its rights under the senior secured credit facility through February 28, 2020. Revenues for the three months ended November 2, 2019 were lower than the Company’s previous forecasts due to lower than expected royalties reported by the Company’s licensees, which have been negatively impacted by the economic uncertainty surrounding Brexit, global trade wars and increasing tariffs on footwear and apparel, and the weakening of the British pound sterling and euro in relation to the United States dollar.  In response, management has enacted certain cash savings measures, but such actions were not adequate to maintain compliance with the Adjusted EBITDA covenant.  The Company has classified its debt as current as financial projections indicate that there is a significant risk of further violations of the minimum Adjusted EBITDA covenant or minimum cash covenant beyond the forbearance period agreed to with the Company’s senior lender.  Future compliance failures would subject the Company to significant risks, including the right of its senior lender to terminate its obligation under the Credit Facility, declare all or any portion of the borrowed amounts then outstanding to be accelerated and due and payable, and/or exercise any other right or remedies it may have under applicable law, including foreclosing on the Company’s and/or its subsidiaries’ assets that serve as collateral for the borrowed amounts.  If any of these rights were to be exercised, the Company’s financial condition and ability to continue operations would be materially jeopardized.  If the Company is unable to meet obligations to lenders and other creditors, the Company may have to significantly curtail or even cease operations.  Because of this uncertainty, there is substantial doubt about the Company’s ability to continue as a going concern.  The Company is in negotiations for new and amended licenses that would increase its working capital and Adjusted EBITDA and is evaluating other potential sources of working capital, including the disposition of certain assets.  Management’s plans also include further negotiations with its lenders and other potential sources of capital, and the Company’s management and board of directors have engaged an advisory firm to advise the Company regarding its business plans, risks and opportunities.  There is no assurance that the Company will be able to execute these plans or continue to operate as a going concern.

Reverse Stock Split

Reverse Stock Split

On September 27, 2019, the Company effected a one-for-three reverse stock split (the “Reverse Stock Split”) of its common stock.  The Reverse Stock Split reduced the number of the Company’s outstanding shares of common stock from approximately 16.6 million shares to approximately 5.5 million shares and reduces the number of authorized shares of common stock from 30.0 million shares to 10.0 million shares.  Unless the context otherwise requires, all share and per share amounts in these condensed consolidated financial statements have been revised to reflect the Reverse Stock Split.

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Other Current Liabilities

9 Months Ended

Nov. 02, 2019

Other Liabilities Current [Abstract]

Other Current Liabilities

4. Other Current Liabilities

Other current liabilities consist of the following:

(In thousands)	November 2, 2019		February 2, 2019
Accrued employee compensation and benefits	$	363	$	376
Restructuring plan liabilities		1,602		3,003
Income taxes payable		486		473
Current lease obligations		564		—
Other liabilities		770		862
	$	3,785	$	4,714

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Revenues and Concentrations of Risk

9 Months Ended

Nov. 02, 2019

Risks And Uncertainties [Abstract]

Revenues and Concentrations of Risk

8. Revenues and Concentrations of Risk

Revenues by geographic area based upon the licensees’ country of domicile comprise the following:

	Three Months Ended				Nine Months Ended
(In thousands)	November 2, 2019		November 3, 2018		November 2, 2019		November 3, 2018
U.S. and Canada	$	1,327	$	1,505	$	4,049	$	4,908
Europe		851		1,136		2,798		4,358
Middle East, India and Africa		636		926		2,107		3,107
Asia/Pacific		1,402		1,431		4,345		3,260
Latin America		678		844		2,250		2,684
Total	$	4,894	$	5,842	$	15,549	$	18,317

Long‑lived assets located in the United States and outside the United States amount to $0.2 million and $0.3 million, respectively, at November 2, 2019 and $0.2 million and $0.4 million, respectively, at February 2, 2019.

Deferred revenue totaled $3.9 million and $2.2 million at November 2, 2019 and February 2, 2019, respectively.  Revenue recognized in the three and nine months ended November 2, 2019 that was previously included in deferred revenue was $0.1 million and $1.5 million, respectively.  Revenue recognized in the three and nine months ended November 3, 2018 that was previously included in deferred revenue was $0.2 million and $2.1 million.  

Three licensees accounted for approximately 37% of accounts receivable at November 2, 2019, and two licensees accounted for approximately 29% and 27% of revenues for the three and nine months ended November 2, 2019, respectively.  Two licensees accounted for approximately 29% of accounts receivable at February 2, 2019.  Three licensees accounted for approximately 32% of revenues for the three months ended November 3, 2018, and two licensees for approximately 20% of revenues for the nine months ended November 3, 2018.

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Commitments and Contingencies (Tables)

9 Months Ended

Nov. 02, 2019

Commitments And Contingencies Disclosure [Abstract]

Schedule of future minimum commitments under non-cancelable operating leases

Future minimum commitments under non-cancelable operating leases as of November 2, 2019 are as follows:

(In thousands)	Operating Leases
Remainder of Fiscal 2020	$	193
Fiscal 2021		890
Fiscal 2022		902
Fiscal 2023		884
Fiscal 2024		893
Thereafter		1,597
Total future minimum lease payments		5,359
Less imputed interest		(1,178	)
Present value of operating lease liabilities	$	4,181

Schedule of future minimum lease payments

Future minimum lease payments as of February 2, 2019 were as follows:

(In thousands)	Operating Leases
Fiscal 2020	$	854
Fiscal 2021		865
Fiscal 2022		876
Fiscal 2023		857
Fiscal 2024		863
Thereafter		1,673
Total future minimum lease payments	$	5,988

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Intangible Assets (Details) - USD ($) $ in Thousands	Nov. 02, 2019	Feb. 02, 2019
Intangible assets subject to amortization:
Intangible assets, Gross value	$ 79,691	$ 84,586
Accumulated amortization	(20,379)	(19,835)
Intangible Assets, Net (Excluding Goodwill), Total	59,312	64,751
Trademarks
Intangible assets not subject to amortization:
Gross Value and Carrying Value	51,687	56,687
Trademarks
Intangible assets subject to amortization:
Gross Value	28,004	27,899
Accumulated amortization	(20,379)	(19,835)
Carrying Value	$ 7,625	$ 8,064

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Revenues and Concentrations of Risk (Tables)

9 Months Ended

Nov. 02, 2019

Risks And Uncertainties [Abstract]

Schedule of revenues by geographic area based upon the licensees' country of domicile

	Three Months Ended				Nine Months Ended
(In thousands)	November 2, 2019		November 3, 2018		November 2, 2019		November 3, 2018
U.S. and Canada	$	1,327	$	1,505	$	4,049	$	4,908
Europe		851		1,136		2,798		4,358
Middle East, India and Africa		636		926		2,107		3,107
Asia/Pacific		1,402		1,431		4,345		3,260
Latin America		678		844		2,250		2,684
Total	$	4,894	$	5,842	$	15,549	$	18,317

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Intangible Assets - Annual Impairment (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Nov. 02, 2019	Nov. 02, 2019	Feb. 02, 2019	Dec. 07, 2016
Finite Lived And Indefinite Lived Intangible Assets By Major Class [Line Items]
Impairment charges	$ 5,000	$ 5,000
Trademarks
Finite Lived And Indefinite Lived Intangible Assets By Major Class [Line Items]
Intangible assets not subject to amortization	$ 51,687	$ 51,687	$ 56,687
Trademarks | Hi-Tech
Finite Lived And Indefinite Lived Intangible Assets By Major Class [Line Items]
Intangible assets not subject to amortization				$ 52,400

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CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Nov. 02, 2019	Feb. 02, 2019
Current assets:
Cash and cash equivalents	$ 1,448	$ 4,284
Accounts receivable, net	5,352	4,363
Other receivables	290	339
Prepaid expenses and other current assets	650	857
Total current assets	7,740	9,843
Property and equipment, net	511	620
Intangible assets, net	59,312	64,751
Goodwill	16,252	16,252
Accrued revenue and other assets	6,391	1,645
Total assets	90,206	93,111
Current liabilities:
Accounts payable	2,794	3,120
Other current liabilities	3,785	4,714
Current portion of long-term debt	55,219	1,300
Deferred revenue—current	3,869	1,626
Total current liabilities	65,667	10,760
Long-term liabilities:
Long-term debt		53,154
Deferred income taxes	13,218	12,055
Long-term lease liabilities	3,616
Other liabilities	2,162	2,807
Total liabilities	84,663	78,776
Commitments and Contingencies (Note 7)
Stockholders’ Equity:
Preferred stock, $.02 par value, 1,000,000 shares authorized, none issued
Common stock, $.06 par value, 10,000,000 shares authorized, shares issued 5,570,530 (November 2, 2019) and 4,900,318 (February 2, 2019)	334	294
Additional paid-in capital	78,154	76,633
Accumulated deficit	(72,945)	(62,592)
Total stockholders’ equity	5,543	14,335
Total liabilities and stockholders’ equity	$ 90,206	$ 93,111

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Commitments and Contingencies (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Nov. 02, 2019	Nov. 03, 2018	Nov. 02, 2019	Nov. 03, 2018	Feb. 02, 2019
Commitments And Contingencies Disclosure [Abstract]
Operating lease cost excluding variable lease costs and sublease income	$ 100		$ 400
Lease expense recognized		$ 200		$ 600
Operating lease, Weighted-average remaining lease term	6 years 2 months 12 days		6 years 2 months 12 days
Operating lease, Weighted-average IBR	8.80%		8.80%
Operating lease, right-of-use asset	$ 4,200		$ 4,200
Remainder of Fiscal 2020	193		193
Fiscal 2021	890		890
Fiscal 2022	902		902
Fiscal 2023	884		884
Fiscal 2024	893		893
Thereafter	1,597		1,597
Total future minimum lease payments	5,359		5,359
Less imputed interest	(1,178)		(1,178)
Operating lease obligations	$ 4,181		$ 4,181
Fiscal 2020					$ 854
Fiscal 2021					865
Fiscal 2022					876
Fiscal 2023					857
Fiscal 2024					863
Thereafter					1,673
Total future minimum lease payments					$ 5,988

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Nov. 02, 2019	Nov. 03, 2018
Cash flows from operating activities:
Net loss	$ (10,353)	$ (11,731)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	743	1,223
Restructuring charges	180	5,615
Intangible asset impairment charge	5,000
Amortization of deferred financing costs	1,755	3,750
Deferred income taxes and noncurrent provisions	1,163	1,079
Stock-based compensation and stock warrant charges	958	729
Loss (gain) on sale of assets		(546)
Changes in operating assets and liabilities, net of effects from business combinations:
Accounts receivable	(989)	3,764
Other receivables	49	66
Prepaid expenses and other current assets	207	314
Other assets	(569)	(980)
Accounts payable	(323)	(507)
Other current liabilities	(2,317)	(7,180)
Deferred revenue	2,243	(1,692)
Net cash used in operating activities	(2,253)	(6,096)
Net cash used in operating activities from discontinued operations	0	(1,380)
Cash flows from investing activities:
Capital investments	(195)	(184)
Proceeds from business disposition and sale of assets		5,643
Net cash provided by (used in) investing activities	(195)	5,459
Cash flows from financing activities:
Proceeds from term loan, subordinated promissory notes and line of credit		42,000
Payments on term loan and line of credit	(950)	(38,100)
Debt issuance costs	(39)	(3,016)
Issuance of common stock	601	4
Net cash (used in) provided by financing activities	(388)	888
Decrease in cash and cash equivalents	(2,836)	(1,129)
Cash and cash equivalents, beginning of period	4,284	3,174
Cash and cash equivalents, end of period	1,448	2,045
Cash paid for:
Income taxes	790	837
Interest	$ 4,923	5,238
Noncash investing and financing activities:
Conversion of junior participation interests to subordinated promissory notes		$ 11,500

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Restructuring Plans

9 Months Ended

Nov. 02, 2019

Restructuring And Related Activities [Abstract]

Restructuring Plans

5. Restructuring Plans

The Company incurred restructuring charges in Fiscal 2018 and Fiscal 2017 related to the Hi-Tec Acquisition and its integration into the Company’s ongoing operations (the “Hi-Tec Plan”). Restructuring charges were also incurred in the fourth quarter of Fiscal 2018 as the Company’s staff was realigned to appropriately support its then current business (the “FY18 Plan”).  Furthermore, during Fiscal 2019, the Company took additional steps designed to improve its organizational efficiencies by eliminating redundant positions and unneeded facilities, and by terminating various consulting and marketing contracts (the “FY19 Plan”).  

Charges and payments against the restructuring plan obligations were as follows:

(In thousands)	FY19 Plan			FY18 Plan			Hi-Tec Plan			Total
Balance, February 2, 2019		2,760			44			199			3,003
Restructuring charges		180			—			—			180
Payments during the period		(1,372	)		(44	)		(165	)		(1,581	)
Balance, November 2, 2019	$	1,568		$	—		$	34		$	1,602

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Earnings (Loss) Per Share

9 Months Ended

Nov. 02, 2019

Earnings Per Share [Abstract]

Earnings (Loss) Per Share

9. 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 anti‑dilutive.  

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Intangible Assets (Tables)

9 Months Ended

Nov. 02, 2019

Goodwill And Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets

Intangible assets consists of the following:

	November 2, 2019							February 2, 2019
(In thousands)	Gross Amount		Accumulated Amortization			Net Book Value		Gross Amount		Accumulated Amortization			Net Book Value
Amortizable trademarks	$	28,004		(20,379	)	$	7,625	$	27,899		(19,835	)	$	8,064
Indefinite lived trademarks		51,687		—			51,687		56,687		—			56,687
	$	79,691	$	(20,379	)	$	59,312	$	84,586	$	(19,835	)	$	64,751