Revenue Recognition and Deferred Revenue The Company recognizes revenue when persuasive evidence of a sale arrangement exists, delivery has occurred or services have been rendered, the buyers price is fixed or determinable and collection is reasonably assured. Revenues from royalty and brand representation agreements are recognized when earned by applying contractual royalty rates to quarterly point of sale data received from the Companys licensees. The Company's royalty recognition policy provides for recognition of royalties in the quarter earned. The Companys agreement with Target Corporation (Target) covering sales of Cherokee branded products in the U.S. accounts for the majority of the Companys historical revenues and, for most such products, is structured to provide royalty rate reductions once certain cumulative levels of retail sales are achieved by Target. With respect to Targets sales in the U.S. of Cherokee branded products other than in the school uniforms category and adult products sold on Targets website, revenue is recognized by applying the reduced contractual royalty rates prospectively to point of sale data after defined sales thresholds are exceeded. The royalty rate reductions do not apply retroactively to sales since the beginning of the fiscal year. As a result, the Companys historical royalty revenues as a percentage of Targets retail sales in the U.S. are highest at the beginning of each fiscal year and decrease during the fiscal year as Target exceeds sales thresholds as set forth in the Companys agreement with Target. The amount of Cherokee brand royalty revenue earned by the Company from Target in any quarter is dependent not only on Targets retail sales of Cherokee branded products in the U.S. in each quarter, but also on the royalty rate then in effect after considering Targets cumulative level of retail sales for most Cherokee branded products in the U.S. for the fiscal year. Historically, with Target, this has caused the Company to record its highest revenues and prof