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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________
Form 10-K
(cid:3)
(cid:1)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended January 31, 2015
or
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-20243
____________________________________________
EVINE Live Inc.
(Exact name of Registrant as Specified in Its Charter)
Minnesota
(State or Other Jurisdiction of Incorporation or Organization)
6740 Shady Oak Road, Eden Prairie, MN
(Address of Principal Executive Offices)
41-1673770
(I.R.S. Employer Identification No.)
55344-3433
(Zip Code)
952-943-6000
(Registrant’s Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
Common Stock, $0.01 par value
Name of exchange on which registered: Nasdaq Global Market
Securities registered under Section 12(g) of the Exchange Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:1) No (cid:3)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes (cid:1)
No (cid:3)
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 (cid:3) No (cid:1)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes (cid:3) No (cid:1)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. (cid:1)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
(Check one):
Large accelerated filer (cid:1)
Accelerated filer (cid:3)
Non-accelerated filer (cid:1) Smaller reporting company (cid:1)
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. Yes (cid:1) No (cid:3)
As of March 20, 2015 , 56,560,609 shares of the registrant’s common stock were outstanding. The aggregate market value of the common
stock held by non-affiliates of the registrant on August 1, 2014 , the last business day of the registrant’s most recently completed second quarter,
based upon the closing sale price for the registrant’s common stock as reported by the Nasdaq Global Market on August 1, 2014 was
approximately $197,088,722 . For purposes of determining such aggregate market value, all officers and directors of the registrant are considered
to be affiliates of the registrant, as well as shareholders deemed to be affiliates under Rule 12b-2 of the Securities Exchange Act of 1934 either
by holding 10% or more of the outstanding common stock as reflected on Schedules 13D or 13G filed with the registrant or by having certain
contractual relationships with the registrant related to control. This number is provided only for the purpose of this annual report on Form 10-K
and does not represent an admission by either the registrant or any such person as to the status of such person.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A
not later than 120 days after the close of its fiscal year ended January 31, 2015 are incorporated by reference in Part III of
Table of Contents
this annual report on Form 10-K.
Table of Contents
Business
Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4.
Properties
Legal Proceedings
Mine Safety Disclosures
EVINE Live Inc.
ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended
January 31, 2015
TABLE OF CONTENTS
PART I
PART II
Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 5.
Item 6.
Item 7.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Item 8.
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 10. Directors, Executive Officers and Corporate Governance
Item 11.
Item 12.
Item 13.
Item 14.
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
PART III
Exhibits and Financial Statement Schedule
PART IV
Item 15.
Signatures
EX-10.24
EX-10.25
EX-10.36
EX-21
EX-23
EX-31.1
EX-31.2
EX-32
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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This annual report on Form 10-K and other materials we file with the Securities and Exchange Commission (as well as information
included in oral statements or other written statements made or to be made by us) contain certain "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Any statements contained herein that are not statements of historical fact,
including statements regarding guidance, industry prospects or future results of operations or financial position made in this report are forward-
looking. We often use words such as anticipates, believes, expects, intends and similar expressions to identify forward-looking statements. These
statements are based on management’s current expectations and accordingly are subject to uncertainty and changes in circumstances. Actual
results may vary materially from the expectations contained herein due to various important factors, including (but not limited to): consumer
preferences, spending and debt levels; the general economic and credit environment; interest rates; seasonal variations in consumer purchasing
activities; the ability to achieve the most effective product category mixes to maximize sales and margin objectives; competitive pressures on
sales; pricing and gross sales margins; the level of cable and satellite distribution for our programming and the associated fees or estimated cost
savings from contract renegotiations; our ability to establish and maintain acceptable commercial terms with third-party vendors and other third
parties, including on-air personalities, with whom we have contractual relationships, and to successfully manage key vendor relationships and
develop key partnerships and proprietary brands; our ability to manage our operating expenses successfully and our working capital levels; our
ability to remain compliant with our long-term credit facility covenants; our ability to successfully transition our brand name and corporate
name; customer acceptance of our new branding strategy and our repositioning as a digital commerce company; the market demand for
television station sales; changes to our management and information systems infrastructure; challenges to our data and information security;
changes in governmental or regulatory requirements; litigation or governmental proceedings affecting our operations; the risks identified under
Item 1A (Risk Factors) in this annual report on Form 10-K; significant public events that are difficult to predict, or other significant television-
covering events causing an interruption of television coverage or that directly compete with the viewership of our programming; and our ability
to obtain and retain key executives and employees. You are cautioned not to place undue reliance on forward-looking statements, which speak
only as of the date of this filing. We are under no obligation (and expressly disclaim any such obligation) to update or alter our forward-looking
statements whether as a result of new information, future events or otherwise.
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Item 1. Business
PART I
When we refer to "we," "our," "us" or the "Company," we mean EVINE Live Inc. and its subsidiaries unless the context indicates
otherwise. EVINE Live Inc. is a Minnesota corporation with principal and executive offices located at 6740 Shady Oak Road, Eden Prairie,
Minnesota 55344-3433. EVINE Live Inc. (formerly ValueVision Media, Inc.) was incorporated on June 25, 1990.
The Company’s most recently completed fiscal year, fiscal 2014 , ended on January 31, 2015 , and consisted of 52 weeks. Fiscal 2013
ended on February 1, 2014 and consisted of 52 weeks. Fiscal 2012 ended on February 2, 2013 and consisted of 53 weeks.
A. General
We are a digital commerce company that markets, sells and distributes products to consumers through TV, online, mobile and social media.
We operate a 24-hour television shopping network, EVINE Live, which is distributed primarily on cable and satellite systems, through which we
offer brand name and private label products in the categories of jewelry & watches; home & consumer electronics; beauty, health & fitness; and
fashion & accessories. We also operate evine.com, a comprehensive digital commerce platform that sells products which appear on our
television shopping network as well as an extended assortment of online-only merchandise. Our programming and products are also marketed
via mobile devices - including smartphones and tablets, and through the leading social media channels.
On November 18, 2014, the Company announced that it had changed its corporate name to EVINE Live Inc. from ValueVision Media, Inc.
Effective November 20, 2014, the Company's NASDAQ trading symbol also changed to EVLV from VVTV at that time. The Company
transitioned from doing business as "ShopHQ" and rebranded to "EVINE Live" and evine.com on February 14, 2015.
In May 2013, the Company previously announced a rebranding of its 24-hour television shopping network and digital commerce internet
website from ShopNBC and ShopNBC.com to ShopHQ and ShopHQ.com, respectively.
Digital Commerce Retailing
Our primary form of digital commerce retailing is our live 24-hour television shopping network. EVINE Live is the third largest television
shopping network in the United States, while evine.com is a comprehensive online website with complementary and web-only products.
Consolidated net sales, including shipping and handling revenues, totaled $674.6 million , $640.5 million and $586.8 million for fiscal 2014,
fiscal 2013 and fiscal 2012 , respectively. Shoppers can interact and shop via a toll-free telephone number and place orders directly with us or
enter an order on the evine.com website. Our television programming is produced at our Eden Prairie, Minnesota headquarters facility and is
transmitted nationally via satellite to cable system operators, direct-to-home satellite providers, broadcast television station operators, to our
owned full power broadcast television station WWDP TV in Boston, Massachusetts and through a leased full power broadcast television station
in Seattle, Washington.
Products and Product Mix
Products sold on our digital commerce platforms include primarily jewelry & watches, home & consumer electronics, beauty, health &
fitness, and fashion & accessories. Historically, jewelry & watches has been our largest merchandise category. We are focused on diversifying
our merchandise assortment both among our existing product categories as well as with potentially new product categories in an effort to
increase revenues and to grow our new and active customer base. While changes in our product mix have occurred as a result of customer
demand and other factors including our efforts to diversify our offerings within our major merchandise categories, jewelry and watches remained
our largest merchandise category in fiscal 2014 as demonstrated in the table below. The following table shows our merchandise mix as a
percentage of television shopping and digital net merchandise sales for the years indicated by product category group:
Merchandise Category
Jewelry & Watches
Home & Consumer Electronics
Beauty, Health & Fitness
Fashion & Accessories
Fiscal 2014
42%
29%
14%
15%
Fiscal 2013
43%
33%
13%
11%
Fiscal 2012
52%
27%
13%
8%
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Jewelry & Watches. The Company features a broad assortment of jewelry from fine to fashion, silver to gold, genuine gemstones to
simulated diamonds. In addition, the Company offers an extensive collection of men’s and women’s watches from classic to modern designs.
Home & Consumer Electronics. The Company features home décor, bed and bath textiles, cookware, kitchen electrics, mattresses,
tabletop accessories, and home furnishings. With consumer electronics, the Company offers the latest technology trends and solutions for today's
consumer, from some of the world's most recognized brands.
Beauty, Health & Fitness. The Company’s beauty, health and fitness assortment features a variety of skincare, cosmetics, hair care and
bath & body products in addition to nutritional supplements and fitness accessories.
Fashion & Accessories. The Company offers fashionable looks that strike a balance between what's hot and what's essential with a wide
assortment of apparel, outerwear, intimates, handbags, accessories, and footwear.
B. Company Strategy
As a digital commerce company, our strategy includes offering exciting proprietary merchandise using the Internet, mobile, social media
and our commerce infrastructure, which includes television access to 88 million cable and satellite homes in the United States. We believe our
greatest growth opportunity lies in leveraging these digital commerce platforms in a way that engages customers far more often than just when
they are in the mood to shop.
By offering a wider assortment of proprietary merchandise (i.e. product that is not readily available elsewhere), presented in an engaging,
entertaining, shopping-centric format, we believe we will attract a larger customer base targeting a broader demographic. At the root of our
efforts to attract a larger customer base is expanding and strengthening our relationships with the brands, personalities and manufacturers with
whom we do business.
We believe our comparatively smaller size demands a more “think nimble - act nimble” approach to doing business. This means
establishing ourselves as a “launch pad” for new proprietary products delivered by seasoned on-air personalities that can leverage our unique
reach on our multiple digital commerce platforms. Properly executed, we believe these initiatives may provide us a greater opportunity to grow
our top and bottom lines in a more meaningful and competitive way.
The Company changed its corporate name to EVINE Live Inc. from ValueVision Media, Inc. on November 18, 2014. We transitioned the
Company's consumer brand from "ShopHQ" and rebranded to "EVINE Live" and evine.com on February 14, 2015. By positioning our
organization as a digital commerce company, we are focusing on key initiatives such as customer relationship management, partner relationship
management, process improvements, brand building and delivering value to our customers and business partners. We believe that our new brand
identity coupled with a fresh focus on existing as well as emerging platforms and technologies and the development of proprietary brands will
begin repositioning our Company as a digital commerce company that delivers a more engaging and enjoyable customer experience with sales
and service that exceed expectations.
C. Television Program Distribution and Internet Operations
Net sales from our television shopping business, inclusive of shipping and handling revenues, totaled $374 million , $343 million , and
$319 million , representing 55% , 54% and 54% of consolidated net sales for fiscal 2014, fiscal 2013 and fiscal 2012 , respectively. Net sales
from our internet and mobile business, inclusive of shipping and handling revenues, totaled $301 million , $297 million , and $268 million ,
representing 45% , 46% and 46% of consolidated net sales for fiscal 2014, fiscal 2013 and fiscal 2012 , respectively. Our internet sales
percentage is calculated based on sales orders that are generated from our evine.com website, including mobile devices and primarily ordered
directly online. Our television programming continues to be the most significant medium through which we reach our customers and we believe
that our television shopping broadcast program is a key driver of traffic to our evine.com website and mobile platfo r ms. Our internet business
represents an important component of our future growth opportunities, and we will continue to invest in and enhance our online-based
capabilities and mobile presence.
Television Shopping Network
Satellite Delivery of Programming. Our television network is presently distributed via communications satellite transponders to cable
systems and direct-to-home satellite providers, a full power television station in Boston and one leased broadcast station in Seattle. In
January 2005, we entered into a long-term satellite lease agreement with our present provider of satellite services. Pu rsuant to the terms of this
agreement, we distribute our television network via a satellite that was launched in August 2005. The agreement provides us, under certain
circumstances, with preemptible back-up services if satellite transmission is interrupted.
Television Distribution. As of January 31, 2015 , we have entered into affiliation agreements with parties representing 1,854 cable
systems allowing each operator to offer our television shopping network substantially on a full-time basis over their systems.
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The terms of the affiliation agreements typically range from one to five years. During any fiscal year, certain agreements with cable, satellite or
other distributors may expire. Under certain circumstances, we or our distributors may cancel the agreements prior to their expiration. The
affiliation agreements generally provide that we will pay each operator a monthly access fee and in some cases marketing support payments
based on the number of homes receiving our programming. We frequently review distribution opportunities with cable system operators and
broadcast stations providing for full- or part-time carriage of our network.
During fiscal 2014 , there were approximately 118 million homes in the United States with at least one television set. Of those homes,
there were approximately 55 million cable television subscribers, approximately 34 million direct-to-home satellite subscribers and
approximately 13 million homes who receive programming through telephone service providers, such as AT&T and Verizon. We continue to
experience growth in the number of subscriber homes that receive our network.
As of January 31, 2015 , our television shopping network was available to approximately 88.1 million subscriber homes, or 87.5 million
average full time equivalent subscribers ("FTEs"), compared with approximately 86.7 million subscriber homes, or 86.1 million average FTEs,
as of February 1, 2014 .
Online Presence
Our website, evine.com, as well as our mobile platform, provides customers with a watch and shop anytime, anywhere experience and
offers a broad array of consumer merchandise, including all products featured on our television programming as well as merchandise found only
on evine.com. The website includes additional resources, including a live stream of our television programming, an archive of segments of
recent past programming, videos of many individual products that the customer can view on demand, an online program guide, customer-
generated product reviews as well as information about our EVINE Live show hosts and guest personalities. The FCC has required that all full-
length television programming redistributed over the internet is captioned, and it is considering requiring captioning of programming segments.
Our e-commerce activities are subject to a number of general business regulations and laws regarding taxation and online commerce.
There have been continuing efforts to increase the legal and regulatory obligations and restrictions on companies conducting commerce through
the internet, primarily in the areas of taxation, consumer privacy and protection of consumer personal information. A number of states impose
data security requirements on companies that collect certain types of information concerning their residents and other states may adopt similar
requirements in the future. A patchwork of state laws imposing differing security requirements depending on the residence of our customers
could impose added compliance costs.
In November 2002, a number of states approved a multi-state agreement to simplify state sales tax laws by establishing one uniform
system to administer and collect sales taxes on traditional retailers and electronic commerce merchants. The agreement became effective on
October 3, 2005. To date, 24 of the 45 states that impose sales tax have passed conforming legislation. A number of states and the U.S. Congress
are considering other legislative initiatives that would impose tax collection obligations on electronic commerce. No prediction can be made as
to whether individual states or the U.S. Congress will enact legislation requiring retailers such as us to collect and remit sales taxes on electronic
commerce transactions.
There are a number of federal laws that limit our ability to pursue certain direct marketing activities, including the Controlling the Assault
of Non-Solicited Pornography and Marketing Act of 2003, or the CAN-SPAM Act, which allows a recipient to affirmatively opt out of e-mail
solicitations. This type of regulation limits our ability to pursue certain direct marketing activities, thus limiting our sales and potential
customers.
Changes in consumer protection laws also may impose additional burdens on those companies conducting business online. The adoption of
additional laws or regulations may decrease the growth of the internet or other online services, which could, in turn, decrease the demand for our
products and services and increase our cost of doing business through the internet.
In addition, since our website is available over the internet in all states, various states may claim that we are required to qualify to do
business as a foreign corporation in such state, a requirement that could result in fees and taxes as well as penalties for the failure to comply. Any
new legislation or regulation, the application of laws and regulations from jurisdictions whose laws do not currently apply to our business or the
application of existing laws and regulations to the internet and other online services could have a material adverse effect on the growth of our
business in this area.
D. Relationship with GE Equity, Comcast and NBCU
Relationship with GE Equity, Comcast and NBCU
In March 1999, we entered into an alliance with GE Capital Equity Investments, Inc. (“GE Equity”) and NBCUniversal Media, LLC
("NBCU"), pursuant to which we issued Series A redeemable convertible preferred stock and common stock warrants, and entered into a
shareholder agreement, a registration rights agreement and certain other agreements. On February 25, 2009, we entered into an exchange
agreement with the same parties, pursuant to which GE Equity exchanged all outstanding shares of our
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Series A preferred stock for (i) 4,929,266 shares of our Series B redeemable preferred stock, (ii) a warrant to purchase up to 6,000,000 shares of
our common stock at an exercise price of $0.75 per share and (iii) a cash payment in the amount of $3.4 million. In connection with the
exchange, the parties also amended and restated the 1999 shareholder agreement and registration rights agreement as further described below. In
April 2011, we redeemed all of the outstanding Series B preferred stock for $40.9 million and paid accrued dividends of $6.4 million and in June
2014, GE Equity exercised its common stock warrant described above in a cashless exercise acquiring 5,058,741 shares of our common stock.
In January 2011, General Electric Company ("GE") consummated a transaction with Comcast Corporation ("Comcast") pursuant to which
GE contributed all of its holdings in NBCU to NBCUniversal, LLC, a newly formed entity, whose common equity was initially beneficially
owned 51% by Comcast and 49% by GE. As a result of that transaction, NBCU is now a wholly owned subsidiary of NBCUniversal, LLC. In
March 2013, GE sold its remaining 49% common equity interest in NBCUniversal, LLC to Comcast pursuant to an agreement reached in
February 2013. As of January 31, 2015 , the direct equity ownership of GE Equity in the Company consisted of 3,718,767 shares of common
stock, and the direct ownership of NBCU in the Company consists of 7,141,849 shares of common stock. We have a significant cable
distribution agreement with Comcast and believe that the terms of this agreement are comparable to those with other cable system operators.
In connection with the January 2011 transfer of its ownership in NBCU to NBCUniversal, LLC, GE also agreed with Comcast that, for so
long as GE Equity is entitled to appoint at least two members of our board of directors, NBCU will be entitled to retain a board seat provided
that NBCU beneficially owns at least 5% of our adjusted outstanding common stock as computed under the amended and restated shareholders
agreement described below. Furthermore, GE agreed to obtain the consent of NBCU prior to consenting to our adoption of any shareholders
rights plan or certain other actions that would impede or restrict the ability of NBCU to acquire or dispose of shares of our voting stock or our
taking any action that would result in NBCU being deemed to be in violation of the Federal Communications Commission multiple ownership
regulations. As of March 20, 2015 , GE Equity has an approximate 7% beneficial ownership in the Company and has certain rights as further
described in this section.
Amended and Restated Shareholder Agreement
On February 25, 2009, we entered into an amended and restated shareholder agreement with GE Equity and NBCU, which provides for
certain corporate governance and standstill matters. The amended and restated shareholder agreement provides that GE Equity is entitled to
designate nominees for three members of our board of directors so long as the aggregate beneficial ownership of GE Equity and NBCU (and
their affiliates) is at least equal to 50% of their beneficial ownership as of February 25, 2009 (i.e., beneficial ownership of approximately 8.7
million common shares), and two members of our board of directors so long as their aggregate beneficial ownership is at least 10% of the shares
of "adjusted outstanding common stock," as defined in the amended and restated shareholder agreement. In addition, the amended and restated
shareholder agreement provides that GE Equity may designate any of its director-designees to be an observer of the audit, human resources and
compensation, and corporate governance and nominating committees of our board of directors. Neither GE Equity nor NBCU currently has any
designees serving on our board of directors.
The amended and restated shareholder agreement requires the consent of GE Equity prior to us (i) exceeding certain thresholds relating to
the issuance of securities, the payment of dividends, the repurchase or redemption of common stock, acquisitions (including investments and
joint ventures) or dispositions, and the incurrence of debt; (ii) entering into any business different than in what we and our subsidiaries are
currently engaged; and (iii) amending our articles of incorporation to adversely affect GE Equity and NBCU (or their affiliates); provided,
however, that these restrictions will no longer apply when both (1) GE Equity is no longer entitled to designate three director nominees and
(2) GE Equity and NBCU no longer hold any Series B preferred stock. We are also prohibited from taking any action that would cause any
ownership interest by us in television broadcast stations from being attributable to GE Equity, NBCU or their affiliates.
The amended and restated shareholder agreement further provides that during the "standstill period" (as described below), subject to
certain limited exceptions, GE Equity and NBCU are prohibited from: (i) making any asset/business purchases from us in excess of 10% of the
total fair market value of our assets; (ii) increasing their beneficial ownership above 39.9% of our shares; (iii) making or in any way participating
in any solicitation of proxies; (iv) depositing any securities of the Company in a voting trust; (v) forming, joining or in any way becoming a
member of a "13D Group" with respect to any voting securities of the Company; (vi) arranging any financing for, or providing any financing
commitment specifically for, the purchase of any voting securities of the Company; or (vii) otherwise acting, whether alone or in concert with
others, to seek to propose to us any tender or exchange offer, merger, business combination, restructuring, liquidation, recapitalization or similar
transaction involving us, or nominating any person as a director of the Company who is not nominated by the then incumbent directors, or
proposing any matter to be voted upon by our shareholders. If, during the standstill period, any inquiry has been made regarding a "takeover
transaction" or "change in control," each as defined in the amended and restated shareholder agreement, that has not been rejected by our board
of directors, or our board of directors pursues such a transaction, or engages in negotiations or provides information to a third party and the board
of directors has not resolved to terminate such discussions, then GE Equity or NBCU may propose a tender offer or business combination
proposal to us.
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In addition, unless GE Equity and NBCU beneficially own less than 5% or more than 90% of the adjusted outstanding shares of common
stock, GE Equity and NBCU shall not sell, transfer or otherwise dispose of any securities of the Company except for transfers: (i) to certain
affiliates who agree to be bound by the provisions of the amended and restated shareholder agreement, (ii) that have been consented to by us,
(iii) subject to certain exceptions, pursuant to a third-party tender offer, (iv) pursuant to a merger, consolidation or reorganization to which we
are a party, (v) in an underwritten public offering pursuant to an effective registration statement, (vi) pursuant to Rule 144 of the Securities Act
of 1933, or (vii) in a private sale or pursuant to Rule 144A of the Securities Act of 1933; provided, that in the case of any transfer pursuant to
clause (v), (vi) or (vii), the transfer does not result in, to the knowledge of the transferor after reasonable inquiry, any other person acquiring,
after giving effect to such transfer, beneficial ownership, individually or in the aggregate with that person’s affiliates, of more than 10% (or 20%
in the case of a transfer by NBCU) of the adjusted outstanding shares of the common stock, as determined in accordance with the amended and
restated shareholder agreement.
The standstill period will terminate on the earliest to occur of (i) the ten -year anniversary of the amended and restated shareholder
agreement, (ii) our entering into an agreement that would result in a "change in control" (as defined in the amended and restated shareholders
agreement and subject to reinstatement), (iii) an actual "change in control" (subject to reinstatement), (iv) a third-party tender offer (subject to
reinstatement), or (v) six months after GE Equity can no longer designate any nominees to our board of directors. Following the expiration of
the standstill period pursuant to clause (i) above and two years in the case of clause (v) above, GE Equity and NBCU’s beneficial ownership
position may not exceed 39.9% of our adjusted outstanding shares of common stock, except pursuant to issuances or exercises of any warrants or
pursuant to a 100% tender offer for us.
Registration Rights Agreement
On February 25, 2009, we entered into an amended and restated registration rights agreement providing GE Equity, NBCU and their
affiliates and any transferees and assigns, an aggregate of four demand registrations and unlimited piggy-back registration rights. In addition,
NBCU was subsequently granted one additional demand registration right pursuant to the second amendment of the now expired NBCU
trademark license agreement.
E. Marketing and Merchandising
Television and Online Retailing
Our television and online revenues are generated from sales of merchandise offered through our "Shop.Share.Smile" initiative, which
includes cable and satellite television, online at evine.com, mobile devices and social media channels. Our television shopping business utilizes
live and on occasion selected taped television programming 24 hours a day, seven days a week, to create an interactive entertaining and engaging
atmosphere that brings our merchandise to life through demonstration. Our product strategy is to continue to develop and expand new product
offerings across multiple merchandise categories based on customer demand, as well as to offer competitive pricing and special values in order
to attract new customers and optimize margin dollars per minute. Our digital commerce customers - those who interact with our network and
transact through television, online and mobile devices - are primarily women between the ages of 40 and 70. We also have a strong presence of
male customers of a similar age range. We believe our customers make purchases based on our unique products, quality merchandise and value.
We develop our programming schedule with product categories that appeal to specific viewer and customer profiles targeting days of week and
times of day they are most likely to be viewing our network. We feature announced and unannounced promotions to drive interest and
incremental sales, including "Today’s Top Value," a sales program that features one special offer every day. In addition, we also feature major
and special promotional events and inventory-clearance sales during different times of the year.
We continually introduce new products that are easily accessible to customers via our television, online and mobile platforms. Inventory
sources include manufacturers, wholesalers, distributors and importers. We intend to continue to develop and promote proprietary brands, which
generally have higher margins than branded merchandise, across multiple product categories.
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EVINE Live Private Label Consumer Credit Card Program
In December 2011, we entered into a Private Label Consumer Credit Card Program Agreement Amendment with Synchrony Financial,
formerly known as GE Capital Retail Bank, extending our private label consumer credit card program (the "Program") for an additional seven
years until 2019. The Program is made available to all qualified consumers for the financing of purchases of products from EVINE Live and
provides a number of benefits to customers including deferred billing options and free or reduced shipping promotions throughout the year. Use
of the EVINE Live credit card furthers customer loyalty, reduces total credit card expense and reduces our overall bad debt exposure since the
credit card issuing bank bears the risk of loss on EVINE Live credit card transactions that do not utilize our ValuePay installment payment
program. During fiscal 2014 and 2013 , customer use of the private label consumer credit card accounted for approximately 18% and 17% ,
respectively, of our television and online sales.
Synchrony Bank, the issuing bank for the Program, is indirectly majority-owned by the General Electric Company ("GE"), which is also
the parent company of GE Equity. As of March 20, 2015 , GE Equity has an approximate 7% beneficial ownership in us and has certain rights as
further described under "Relationship with GE Equity, Comcast and NBCU" above.
Purchasing Terms
We obtain products for our digital commerce businesses from domestic and foreign manufacturers and/or their suppliers and are often able
to make purchases on more favorable terms based on the volume of products purchased or sold. Some of our purchasing arrangements with our
vendors include inventory terms that allow for return privileges for a portion of the order or stock balancing. We generally do not have long-term
commitments with our vendors, and a variety of sources are available for each category of merchandise sold. During fiscal 2014 , products
purchased from one vendor accounted for approximately 16% of our consolidated net sales. We believe that we could find alternative products
for this vendor’s merchandise assortment if this vendor ceased supplying merchandise; however, the unanticipated loss of any large supplier
could impact our sales and earnings.
F. Order Entry, Fulfillment and Customer Service
Our products are available for purchase via toll-free telephone numbers, on our website or through mobile platforms. We maintain
agreements with Genesys Telecommunications Laboratories, Inc. and West Corporation, as well as other call surge providers to support us with
telephone order-entry operators and automated order-processing services to take customer orders. We also take orders with our own home-based
phone agents and with agents at our Bowling Green, Kentucky and Eden Prairie, Minnesota facilities. At the present time, we do not utilize any
call center services based overseas.
We own a 262,000 square foot distribution facility in Bowling Green, Kentucky, which we use for the fulfillment of primarily all
merchandise purchased and sold by us and for certain call center operations. During fiscal 2014 we also leased approximately 400,000 square
feet of additional variable warehouse space in Bowling Green, Kentucky under a month-to-month lease agreement, which allows for additional
capacity, as needed.
During fiscal 2014, we began a significant operational expansion initiative with respect to overall warehousing capacity and new
equipment and system upgrades at our Bowling Green, Kentucky distribution facility. The expansion project includes the construction of a new
building which, when completed, will expand our current 262,000 square foot facility to an approximately 600,000 square foot facility. The
physical building expansion project is expected to be completed in the first half of fiscal 2015. The updated facilities will also include new high-
speed parcel shipping and item sortation equipment to support our increased level of shipments and units and a new call center facility to better
serve our customers. We intend to vacate the leased space during the first half of fiscal 2015 when the expanded facility is available for use.
The majority of customer purchases are paid for by credit or debit cards. As discussed above, we maintain a private label credit card
program using the EVINE Live name. Purchases and installment charges made with the EVINE Live private label credit card are non-recourse to
us, however, we still maintain credit collection risk from the potential inability to collect future ValuePay installments. We also utilize an
installment payment program called ValuePay, which entitles customers to pay by credit card for certain merchandise in two or more equal
monthly installments. The percentage of our net sales generated utilizing our ValuePay payment program over the past three fiscal years ranged
from 74% to 79% . We intend to continue to sell merchandise using the ValuePay program due to its significant promotional value.
We maintain a product inventory, which consists primarily of consumer merchandise held for resale. The product inventory is valued at the
lower of average cost or realizable value. As of January 31, 2015 and February 1, 2014 , we had inventory balances of $61.5 million and $51.2
million , respectively. We do not have any material amounts of backlog orders.
Merchandise is shipped to customers by the United States Postal Service, UPS, Federal Express or other recognized carriers. We also have
arrangements with certain vendors who ship merchandise directly to our customers after an approved customer order is processed.
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We perform our customer service functions primarily at our Eden Prairie, Minnesota and Bowling Green, Kentucky facilities as well as
with our own home-based phone agents.
Our return policy allows a standard 30-day refund period from the date of invoice for all customer purchases. Our return rate averaged
22% in both fiscal 2014 and fiscal 2013 . We continue to monitor our return rates in an effort to keep our overall return rates in line and
commensurate with our current product sales mix and our average selling price levels.
G. Competition
The digital commerce retail business is highly competitive and we are in direct competition with numerous retailers, including online
retailers, many of whom are larger, better financed and have a broader customer base than we do. In our television shopping and digital
commerce operations, we compete for customers with other television shopping and e-commerce retailers, infomercial companies, other types of
consumer retail businesses, including traditional "brick and mortar" department stores, discount stores, warehouse stores and specialty stores;
catalog and mail order retailers and other direct sellers.
Our direct competitors within the television shopping industry include QVC (owned by Liberty Interactive Corporation), and HSN, Inc.,
(in whom Liberty Interactive Corporation also has a substantial interest, according to public filings) both of whom are substantially larger than
we are in terms of annual revenues and customers, and whose programming is carried more broadly to U.S. households than our programming.
Multimedia Commerce Group, Inc., which operates Jewelry Television, also competes with us for customers in the jewelry category. In addition,
there are a number of smaller niche players and startups in the television shopping arena who compete with us. We believe that our major
competitors incur cable and satellite distribution fees representing a significantly lower percentage of their sales attributable to their television
programming than we do; and that their fee arrangements are substantially on a commission basis (in some cases with minimum guarantees)
rather than on the predominantly fixed-cost basis that we currently have. At our current sales level, our distribution costs as a percentage of total
consolidated net sales are higher than our competition. However, one of our strategies is to maintain our fixed distribution cost structure in order
to leverage our profitability as we grow our business.
We anticipate continuing competition for viewers and customers, for experienced television shopping and e-commerce personnel, for
distribution agreements with cable and satellite systems and for vendors and suppliers - not only from television shopping companies, but also
from other companies that seek to enter the television shopping and internet retail industries, including telecommunications and cable
companies, television networks, and other established retailers. We believe that our ability to be successful in the digital commerce industry will
be dependent on a number of key factors, including continuing to expand our digital footprint to meet our customers' "watch and shop anytime,
anywhere" needs, increasing the number of customers who purchase products from us and increasing the dollar value of sales per customer from
our existing customer base.
H. Federal Regulation
The cable television industry and the broadcasting industry in general are subject to extensive regulation by the Federal Communications
Commission, or FCC. The following does not purport to be a complete summary of all of the provisions of the Communications Act of 1934, as
amended, known as the Communications Act; the Cable Television Consumer Protection Act of 1992, known as the Cable Act; the
Telecommunications Act of 1996, known as the Telecommunications Act; or other laws and FCC rules or policies that may affect our
operations.
Cable Television
The cable industry is regulated by the FCC under the Cable Act and FCC regulations promulgated thereunder, as well as by state or local
governments with respect to certain franchising matters.
Must Carry. In general, the FCC's "must carry" rules entitle full power television stations to mandatory carriage of the primary video and
program-related material in their signals, at no charge, to all cable and direct broadcast satellite homes located within each station's broadcast
market provided that the signal is of adequate strength, and, in the case of cable systems, the must carry signals occupy no more than one-third of
the cable system's capacity.
Broadcast Television
General. Our acquisition and operation of television stations is subject to FCC regulation under the Communications Act. The
Communications Act prohibits the operation of television broadcasting stations except under a license issued by the FCC. The statute empowers
the FCC, among other things, to issue, revoke and modify broadcasting licenses, adopt regulations to carry out the provisions of the
Communications Act and impose penalties for violation of such regulations. Such regulations impose certain obligations with respect to the
programming and operation of television stations, including requirements for carriage of children’s educational and informational programming,
programming responsive to local problems, needs and interests, advertising
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upon request by legally qualified candidates for federal office, closed captioning, and other matters. In addition, FCC rules prohibit foreign
governments, representatives of foreign governments, aliens (a non U.S. citizen or U.S. national) representatives of aliens and corporations and
partnerships organized under the laws of a foreign nation from holding broadcast licenses. Aliens may own up to 20% of the capital stock of a
licensee corporation, or generally up to 25% of a U.S. corporation, which, in turn, has a controlling interest in a licensee. The FCC in 2013
indicated that it would consider a waiver of these limits for broadcast ownership.
Full Power Television Stations. In April 2003, one of our wholly owned subsidiaries acquired a full power television station serving the
Boston, Massachusetts market. On November 25, 2014, the FCC accepted our application for renewal of the station’s license. We also distribute
our programming via leased carriage on a full power television station in Seattle, Washington. Our Boston market station, WWDP TV, currently
broadcasts in a digital format on channel 10, perceived by viewers as channel 46, the station's previous analog channel.
The FCC has begun proceedings to consider reclaiming portions of the electro-magnetic spectrum now used for broadcast television
service with the goal of reallocating some of that spectrum for wireless broadband service. The FCC has proposed to use "incentive auctions"
that would permit broadcasters on a voluntary basis to agree to give up some or all of their spectrum and obtain a portion of the proceeds the
FCC would collect from auctioning that spectrum. The FCC would also consider "repacking" broadcast television channels to clear spectrum.
Congress passed legislation in February 2012 authorizing a single incentive auction of television spectrum and an associated repacking of the
television band. That legislation requires the FCC to make a reasonable effort to preserve stations' coverage areas in the repacking process. The
legislation also allows two stations to agree to share one channel and allow the remaining channel to be returned to the FCC for auction. The
legislation allows $1.75 billion for the expenses of repacking. In 2014, the FCC adopted rules that will apply to this “incentive auction,” and it is
working to adopt additional specific procedures. In the Northeast portion of the United States, the number of channels that may be available will
depend, in part, on whether Canada adopts a similar repacking plan. (An Industry Canada proceeding along these lines was commenced in late
2014.) The FCC says that it will request binding commitments from U.S. television stations about their participation in the auction in late 2015,
and then will conduct the auction in 2016, although that schedule could change. The FCC has provided estimates of both opening bids and final
auction prices for the high and median priced stations in each television market. We will consider participation in the auction as the rules and
opening prices become firm.
I. Seasonality and Economic Sensitivity
Our business is subject to seasonal fluctuation, with the highest sales activity normally occurring during our fourth fiscal quarter of the
year, namely November through January. Our business is also sensitive to general economic conditions and business conditions affecting
consumer spending. Additionally, our television audience (and therefore sales revenue) can be significantly impacted by major world or
domestic events which attract television viewership and divert audience attention away from our programming.
J. Employees
At January 31, 2015 , we had approximately 1,300 employees, the majority of whom are employed in customer service, order fulfillment
and television production. Approximately 19% of our employees work part-time. We are not a party to any collective bargaining agreement with
respect to our employees.
K. Executive Officers of the Registrant
Set forth below are the names, ages and titles of the persons serving as our executive officers.
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Name
Mark C. Bozek
G. Robert Ayd
William J. McGrath
G. Russell Nuce
Jean-Guillaume Sabatier
Teresa J. Dery
Michael A. Murray
Nicholas J. Vassallo
Beth K. McCartan
Ashish G. Akolkar
Position(s) Held
Age
55
66
57
50
45
48
56
51
45
42
Chief Executive Officer and Director
President
Executive Vice President — Chief Financial Officer
Executive Vice President - Chief Strategy Officer
Senior Vice President — Sales & Product Planning and Programming
Senior Vice President — General Counsel
Senior Vice President — Operations
Vice President — Corporate Controller
Vice President — Financial Planning & Analysis
Vice President — IT Operations
Mark C. Bozek joined the Company in June 2014 as Chief Executive Officer. Most recently, Mr. Bozek served as Co-Founder of, and
Chief Executive Officer of, Dollars Per Minute Inc., a merchandising and entertainment company, from 2011 until he joined the Company in
June 2014. Prior to forming Dollars Per Minute Inc., Mr. Bozek formed and operated the media and consulting company Galgos Entertainment
LLC, where he served as a principal from 2007 to 2011. Through Galgos Entertainment, Mr. Bozek acted as a consultant for private equity firms
(including Goldman Sachs and Bain Capital) on various retail and commerce related ventures. Prior to Galgos Entertainment, Mr. Bozek
worked for 14 years with Barry Diller, including serving as the Chief Executive Officer of Home Shopping Network (HSN), a multi-channel
retailer and television network specializing in home shopping, from January 1999 to January 2003. Mr. Bozek also served as a director of Sykes
Enterprises, Inc. from August 2003 until April 2013.
G. Robert Ayd joined the Company in February 2010 as President, overseeing Merchandising, Planning, Programming, Broadcast
Operations, and On-Air Talent. Mr. Ayd brings an extensive background and a track record of success to the Company, including executive
leadership roles at QVC and Macy’s. Most recently, Mr. Ayd provided consulting services to a range of clients in his own consulting business
from 2008 until he joined the Company in February 2010 and served as Executive Vice President and Chief Merchandising Officer at QVC
(USA) from 2006 to 2008. During his tenure at QVC, Mr. Ayd also served as Senior Vice President, Design Development & Global Sourcing
and Brand Development from 2005 to 2006, and Senior Vice President of Jewelry and Fashion from 2000 to 2004. Prior to joining QVC in 1995
as Vice President of Fashion, Mr. Ayd held numerous executive leadership positions for Macy’s, culminating with Senior Vice President in
Women’s Sportswear from 1991 to 1995. Mr. Ayd began his career at Macy’s in 1975 as a buyer of handbags, bodywear and footwear.
William J. McGrath was named Senior Vice President and Chief Financial Officer in August 2010 after having joined the Company in
January 2010 as Vice President of Quality Assurance and being named interim Chief Financial Officer in February 2010. Most recently, Mr
McGrath provided operational consulting services to a range of clients in his own operational consulting business from 2008 until he joined the
Company in 2010 and served as Vice President Global Sourcing Operations and Finance at QVC in 2008. During his tenure at QVC, he also
served as Vice President Corporate Quality Assurance and Quality Control from 1999 — 2008; Vice President Merchandise Operations and
Inventory Control from 1995-1999; Vice President Market Research and Sales Analysis from 1992 — 1995; and Director Financial Planning
and Analysis from 1990-1992. Prior to QVC, Mr. McGrath held a variety of leadership positions at Subaru of America from 1983-1990 and
Arthur Andersen from 1979-1983. He holds an MBA in finance from Drexel University and a BS in Accounting from Saint Joseph’s University.
G. Russell Nuce joined the Company as Chief Strategy Officer in November 2014. Most recently, Mr. Nuce served as the Co-Founder of,
and Secretary and Treasurer of, Dollars Per Minute Inc., a merchandising and entertainment company, from 2011 until he joined the Company in
November 2014. Prior to founding Dollars Per Minute Inc., Mr. Nuce served as a principal of Galgos Entertainment, LLC, a media and
production company from 2007 to 2011. Previously, he served as Vice President and General Counsel of Wear Me Apparel, Inc. from 2004 to
2006 and Vice President and General Counsel of Covington Industries Inc. from 1998 to 2004. Mr. Nuce began his career as an associate
attorney with the law firm Milbank, Tweed, Hadley & McCloy in New York.
Jean-Guillaume Sabatier joined the Company as Senior Vice President, Sales & Product Planning in November 2008. During fiscal 2012,
Mr. Sabatier also led a special projects initiative in the planning area. Mr. Sabatier served as Director, Sales and Product Planning for QVC, Inc.,
from July 2007 to October 2008. Prior to that time, Mr. Sabatier held various positions in QVC’s
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German business unit, including Director, Programming and Planning from July 2003 to July 2007. He began his QVC career as a sales and
product planner in June 1997.
Teresa J. Dery was appointed Senior Vice President and General Counsel in June 2011, Corporate Secretary in February 2011 and joined
the Company in 2004 as Senior Corporate Counsel. She was appointed Associate General Counsel in 2006. Ms. Dery has 19 years of corporate
law experience. Prior to joining the Company, she served as Corporate Counsel and Corporate Secretary of Net Perceptions between 2000 and
2004. Previously, she served as Corporate Secretary and Vice President of Finance and Legal for national restaurant franchise 1 Potato 2 from
1993 to 2000.
Michael A. Murray was named Senior Vice President of Operations in September 2009 after having joined the Company as Vice President
of Operations in May 2004. Mr. Murray has over 30 years of operations and business management experience. Prior to joining the Company,
Mr. Murray was Senior Vice President of Operations for the Fingerhut Companies and Federated Department Stores direct to consumer divisions
primarily from May 1991 to October 2002. While at Fingerhut, Mr. Murray also led FBSI operations, Fingerhut’s 3rd party direct to consumer
arm serving Walmart.com, Intuit, Levi’s, Wet Seal and others. Mr. Murray has held executive leadership positions in various direct to consumer
and retail companies including Merrill Corporation, Lieberman Enterprises, and Associated Wholesale Grocers. Mr. Murray began his career
with John Deere as an Industrial Engineer.
Nicholas J. Vassallo has served as Vice President and Corporate Controller since 2000. He first joined the Company as director of
financial reporting in October 1996. During that time he also had responsibility for direct-mail acquisitions and other corporate business
development ventures. Mr. Vassallo was named corporate controller in 1999 and the following year was promoted to vice president. Prior to
joining the Company, he served as corporate controller for Fourth Shift Corporation, a software development company. Mr. Vassallo began his
career with Arthur Anderson, LLP where he spent eight years in their audit practice group. Mr. Vassallo is a CPA and holds a BS in Accounting
from Saint John’s University in New York.
Beth K. McCartan has served as Vice President Financial Planning & Analysis since 2006. She first joined the Company as Finance
Manager in January 2001. She was promoted to Finance Director in 2003 and to Vice President three years later. Prior to joining the Company,
she worked for The Pillsbury Company in several finance positions including Sr. Financial Analyst for Green Giant and Progresso brands and as
a plant controller. She began her career with Pillsbury in February 1993. Ms. McCartan holds an MBA in finance from the University of
Minnesota and has undergraduate degrees in Finance, Marketing and Advertising from The University of St. Thomas.
Ashish G. Akolkar has served as Vice President of IT Operations since June 2007. Mr. Akolkar joined the Company in November 2000
and has held director and managerial positions at the Company overseeing enterprise architecture, software development, application support &
maintenance and technology infrastructure functions. Prior to joining the Company, Mr. Akolkar served as a technology consultant for ERP
applications while working for companies including netbriefings.com and Sunflower Information Technologies. Mr. Akolkar has an MBA in
finance and BS in electronics engineering from Mumbai University, India.
L. Available Information
Our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments to these reports if
applicable, are available, without charge, on our investor relations website as soon as reasonably practicable after they are filed electronically
with the Securities and Exchange Commission. Copies also are available, without charge, by contacting the General Counsel, EVINE Live Inc.,
6740 Shady Oak Road, Eden Prairie, Minnesota 55344-3433.
Our investor relations website address is http://evine.com/ir. Our goal is to maintain the investor relations website as a way for investors to
easily find information about us, including press releases, announcements of investor conferences, investor and analyst presentations and
corporate governance. We also make available free of charge our quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements
and all amendments to these filings as soon as practicable after that material is electronically filed with or furnished to the SEC. The information
found on our website is not part of this or any other report we file with, or furnish to, the SEC.
Item 1A. Risk Factors
In addition to the general investment risks and those factors set forth throughout this document, including those set forth under the caption
"Cautionary Statement Concerning Forward-Looking Information," the following risks should be considered regarding our company.
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We have a history of losses and a high fixed cost operating base and may not be able to achieve or maintain profitable operations in the
future.
We experienced operating income (losses) of approximately $1.0 million , $0.1 million and $(23.3) million in fiscal 2014, fiscal 2013 and
fiscal 2012 , respectively. We reported net losses of $(1.4) million , $(2.5) million and $(27.7) million in fiscal 2014, fiscal 2013 and fiscal
2012 , respectively. There is no assurance that we will be able to achieve or maintain profitable operations in future fiscal years.
Our television shopping business operates with a high fixed cost base, primarily driven by fixed fees under distribution agreements with
cable and direct-to-home satellite providers to carry our programming. In order to operate on a profitable basis, we must reach and maintain
sufficient annual sales revenues to cover our high fixed cost base and/or negotiate a reduction in this cost structure. If our sales levels are not
sufficient to cover our operating expenses, our ability to reduce operating expenses in the near term will be limited by the fixed cost base. In that
case, our earnings, cash balance and growth prospects could be materially and adversely affected.
Prior to fiscal 2013, we have had a historic trend of operating losses, which, if not permanently reversed, could reduce our operating cash
resources to the point where we will not have sufficient liquidity to meet the ongoing cash commitments and obligations to continue
operating our business.
As of January 31, 2015 , we had approximately $19.8 million in unrestricted cash, with an additional $2.1 million of restricted cash and
investments used to secure letters of credit. We expect to use our cash and available credit line to finance our working capital requirements and
to make necessary capital expenditures in order to operate our business and to fund any further operating losses. Prior to fiscal 2013, we have
had a historic trend of operating losses, which, if not permanently reversed, could reduce our operating cash resources to the point where we
would not be able to adequately fund working capital requirements or necessary capital expenditures.
On March 6, 2015 , the Company entered into a fourth amendment to its revolving credit, term loan and security agreement with PNC, as
previously amended that, among other things, increases the size of the revolving line of credit from $60 million to $75 million for a total credit
facility of $90 million which includes a $15 million term loan to fund the improvements at our distribution facility in Bowling Green, Kentucky.
All borrowings under the amended Credit Facility mature and are payable on May 1, 2018. Maximum borrowings and available capacity under
the amended revolving Credit Facility are equal to the lesser of $75 million or a calculated borrowing base comprised of eligible accounts
receivable and eligible inventory. Remaining capacity under the amended Credit Facility, currently $30.0 million, provides liquidity for working
capital and general corporate purposes.
The fourth amendment adds The Private Bank to the facility and provides an accordion feature that would allow the Company to expand
the size of the revolving line of credit by another $15 million upon certain conditions being met. The fourth amendment also increased certain
advance rates under the borrowing base for Value Pay accounts receivable and provides for certain fees related to the syndication and
amendments of the facility and an annual administrative agent’s fee.
We still have significant future commitments for our cash, which primarily include payments for cable and satellite program distribution
obligations and the eventual repayment of our credit facility. Based on our current projections for fiscal 2015 , we believe that our existing cash
balances and available credit line will be sufficient to maintain liquidity to fund our normal business operations over the next twelve months.
However, our amended and restated shareholder agreement with GE Equity and NBCU requires the consent of GE Equity in order for us to issue
new equity securities and to incur indebtedness above certain thresholds, and there can be no assurance that we would receive this consent if we
made a request. Furthermore, our amended credit facility includes certain restrictions on our ability to incur additional debt, as well as
restrictions on our ability to make material changes in the nature of our business, both of which may be necessary in times of liquidity
constraints. Therefore, there can be no assurance that, if required, we would be able to raise additional capital or reduce spending to have
sufficient liquidity to meet our ongoing cash commitments and obligations to continue operating our business.
Our inability to recruit and retain key employees may adversely impact our ability to sustain growth.
Our continued growth is contingent, in part, on our ability to retain and recruit employees that have the distinct skills necessary for a
business that demands knowledge of the general retail industry, merchandising and product sourcing, television production, televised and
internet-based marketing and fulfillment. For example, the Company is currently in the process of searching for the key open position of a Chief
Merchandising Officer. T he marketplace for such key employees is very competitive and limited. Our growth may be adversely impacted if we
are unable to attract and retain key employees. Further, we may incur significant expenses related to any executive transition costs that may
impact our operating results. For example, in fiscal 2014, the Company recorded charges to income of $5,520,000 related to severance payments
to which our former Chief Executive Officer and certain other terminated executive officers received primarily in calendar 2015.
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The failure to secure suitable placement for our television programming and the use of digital technology to expand the number of
channels and services available on cable, direct broadcast satellite and internet protocol TV-based video distribution systems could adversely
affect our ability to attract and retain television viewers and could result in a decrease in revenue.
We are dependent upon our ability to compete for television viewers. Effectively competing for television viewers is dependent, in part, on
our ability to secure placement of our television programming within a suitable programming tier at a desirable channel position. The majority of
multi-video programming distributors now offer programming on a digital basis. While the growth of digital cable and these other systems may
over time make it possible for our programming to be more widely distributed, there are several risks as well. The primary risks associated with
the growth of digital cable and alternative digital platforms are demonstrated by the following:
• we could experience declines in sales per digital tier subscriber because of the increased number of channels offered on digital systems
competing for the same number of viewers and the higher channel location we typically are assigned in digital tiers;
• more competitors may enter the marketplace as additional channel capacity is added;
• we may not be able to successfully negotiate renewal terms for our programming distribution agreements that are favorable to us or that
offer our programming to viewers within a suitable programming tier at a desirable channel position; and
• more programming options being available to the viewing public in the form of new television networks and time-shifted viewing ( e.g.
, personal video recorders, video-on-demand, interactive television and streaming video over broadband internet connections).
cable, satellite, and telecommunication providers are facing competition from new services which could result in a loss of subscribers.
•
Failure to adapt to these risks will result in lower revenue and may harm our results of operations. In addition, failure to anticipate and
adapt to technological changes in a cost-effective manner that meets customer demands and evolving industry standards will also reduce our
revenue, harm our results of operations and financial condition and have a negative impact on our business.
We may not be able to expand or could lose some of our existing programming distribution if we cannot negotiate profitable distribution
agreements.
We are seeking to continue to reduce the costs associated with our cable and satellite distribution agreements. However, while we were
able to achieve reductions in 2013 without a loss in households, there can be no assurance that we will achieve comparable cost reductions in the
future or that we will be able to maintain or grow our households on financial terms that are profitable to us. Terms of certain of our distribution
agreements allow for increases in our distribution costs as a result of a variety of factors, not all of which are within our control. These factors
include but are not limited to, increases in the number of subscribers receiving our programming, improvements in channel placement through
lowering our channel position, the addition of a second channel or other factors. Significant changes to these factors could result in a material
increase in our cost of distribution. If we are unable to negotiate new or renewal terms in our distribution agreements that are more favorable to
us, our distribution costs could increase. Further, it is possible that we may need to reduce our programming distribution in certain systems if we
are unable to obtain appropriate financial terms. Failure to successfully renew agreements covering a material portion of our existing cable and
satellite households on acceptable financial and other terms could adversely affect our future growth, sales revenues and earnings unless we are
able to arrange for alternative means of broadly distributing our television programming.
NBCU, Comcast and GE Equity have the ability to exert significant influence over us and have the right to disapprove of certain actions
by us.
As a result of their equity ownership in our company, NBCU (and Comcast, as the owner of all of the common equity of NBCU) and GE
Equity together are currently among our largest shareholders and have the ability to exert significant influence over actions requiring shareholder
approval, including the election of directors, adoption of equity-based compensation plans and approval of mergers or other significant corporate
events. Through the provisions in the amended and restated shareholder agreement, NBCU (and Comcast, as the majority owner of NBCU) and
GE Equity also have the right to block us from taking certain actions that our board of directors might otherwise determine to be in the interests
of our other shareholders (as discussed in greater detail under "Business — Relationship with GE Equity, Comcast and NBCU above).
Our stock ownership is concentrated among a relatively small group of principal shareholders who have substantial control over us,
including our directors and executive officers, and could delay or prevent a change in corporate control.
GE Equity and NBCU (and Comcast, as the owner of all of the common equity of NBCU), together with their affiliates, along with our
directors and executive officers, beneficially own, in the aggregate, approximately 25% of our common stock. As a result, these shareholders,
acting together, would have the ability to significantly influence or control the outcome of matters submitted to our shareholders for approval,
including the election of directors and any merger, consolidation or sale of all or
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substantially all of our assets. In addition, these shareholders, acting together, would have the ability to significantly influence or control the
management and affairs of our company. Accordingly, this concentration of ownership might harm the market price of our common stock by:
• delaying, deferring or preventing a change in corporate control;
•
• discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.
impeding a merger, consolidation, takeover or other business combination involving us; or
Competition in the general merchandise retailing industry and particularly the live television shopping and e-commerce sectors could
limit our growth and reduce our profitability.
As a general merchandise retailer, we compete for consumers with other forms of retail businesses, including other television shopping and
e-commerce retailers, infomercial companies, other types of consumer retail businesses, including traditional "brick and mortar" department
stores, discount stores, warehouse stores, specialty stores, catalog and mail order retailers and other direct sellers. In the competitive television
shopping sector, we compete with QVC, HSN, and Jewelry Television, as well as a number of smaller "niche" television shopping competitors.
QVC and HSN both are substantially larger than we are in terms of annual revenues and customers, their programming is more broadly available
to U.S. households than is our programming and in many markets they have more favorable channel locations than we have. The digital
commerce industry is also highly competitive, with numerous e-commerce websites competing in every product category we carry, in addition to
the websites operated by the other television shopping companies. This competition in the internet retailing sector makes it more challenging and
expensive for us to attract new customers, retain existing customers and maintain desired gross margin levels.
We may not be able to maintain our satellite services in certain situations, beyond our control, which may cause our programming to go
off the air for a period of time and cause us to incur substantial additional costs.
Our programming is presently distributed to cable systems, full power television stations and satellite dish operators via a leased
communications satellite transponder. Satellite service may be interrupted due to a variety of circumstances beyond our control, such as satellite
transponder failure, satellite fuel depletion, governmental action, preemption by the satellite service provider, solar activity and service failure.
Our satellite transponder agreement provides us with preemptible back-up service if satellite transmission is interrupted under certain conditions.
In the event of a serious transmission interruption where back-up service is not available, we may need to enter into new arrangements, resulting
in substantial additional costs and the inability to broadcast our signal for some period of time.
The FCC could limit must-carry rights, which would impact distribution of our television shopping programming and might impair the
value of our Boston FCC license.
If the FCC withdraws mandatory cable carriage (or "must-carry") rights for TV broadcast stations carrying home shopping programming
that the FCC’s rules accord to other TV stations we could lose our current carriage distribution on cable systems in two markets: Boston and
Seattle, which currently constitute approximately 3.2 million full-time households receiving our programming. We own our Boston television
station and have a carriage contract with the third party Seattle television station. In addition, if must-carry rights for home shopping stations are
withdrawn, it may not be possible to replace these households on commercially reasonable terms and the carrying value of our Boston FCC
license, which has an asset carrying value of $12.0 million as of January 31, 2015 , may become further impaired.
We may be subject to product liability claims for on-air misrepresentations or if people or properties are harmed by products sold by us.
Products sold by us and representations related to these products may expose us to potential liability from claims by purchasers of such
products, subject to our rights, in certain instances, to seek indemnification against this liability from the suppliers or manufacturers of the
products. In addition to potential claims of personal injury, wrongful death or damage to personal property, the live unscripted nature of our
television broadcasting may subject us to claims of misrepresentation by our customers, the Federal Trade Commission and state attorneys
general. We maintain, and have generally required the manufacturers and vendors of these products to carry, product liability and errors and
omissions insurance. There can be no assurance that we will maintain this coverage or obtain additional coverage on acceptable terms, or that
this insurance will provide adequate coverage against all potential claims or even be available with respect to any particular claim. There also
can be no assurance that our suppliers will continue to maintain this insurance or that this coverage will be adequate or available with respect to
any particular claims. Product liability claims could result in a material adverse impact on our financial performance. Our Company is also
subject to two FTC consent decrees, one issued in 2001 and one issued in 2003; both have a duration of 20 years. They consist of claims
involving recordkeeping, compliance policies, and attention to detail on claim substantiation. Violations of these decrees could result in
significant civil fines and penalties.
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Our ValuePay installment payment program could lead to significant unplanned credit losses if our credit loss rate was to materially
deteriorate.
We utilize an installment payment program called ValuePay that entitles customers to purchase merchandise and generally pay for the
merchandise in two or more equal monthly installments. Our ValuePay installment program is a key element of our promotional strategy. As of
January 31, 2015 , we had approximately $106.7 million due from customers under the ValuePay installment program. We maintain allowances
for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. There is no guarantee that we
will continue to experience the same credit loss rate that we have in the past or that losses will be within current provisions. A significant
increase in our credit losses above what we have been experiencing could result in a material adverse impact on our financial performance.
Failure to comply with existing laws, rules and regulations applicable to our company, or to obtain and maintain required licenses and
rights, could subject us to additional liabilities.
We market and provide a broad range of merchandise through multiple channels. As a result, we are subject to a wide variety of statutes,
rules, regulations, policies and procedures in various jurisdictions which are subject to change at any time, including laws regarding consumer
protection, privacy, the regulation of retailers generally, the importation, sale and promotion of merchandise and the operation of warehouse
facilities, the ownership of television stations as well as laws and regulations applicable to the internet, electronic devices and businesses
engaged in e-commerce. These laws and regulations may cover subject matters including taxation, privacy, data protection, pricing, content,
copyrights, distribution, mobile communications, electronic device certification, electronic contracts and other communications, consumer
protection, unencumbered internet access to our services, the design and operation of websites and the characteristics and quality of our products
and services. Although we undertake to monitor changes in these laws, if these laws change without our knowledge, or are violated by importers,
designers, vendors, manufacturers or distributors or other third-parties we do business with, we could experience delays in shipments and receipt
of goods or be subject to fines or other penalties under the controlling regulations, any of which could adversely affect our business. In addition,
failure to comply with these laws and regulations could result in fines and proceedings against us by governmental agencies and consumers,
which could adversely affect our business, financial condition and results of operations. Moreover, unfavorable changes in the laws, rules and
regulations applicable to us could decrease demand for merchandise offered by us, increase costs and subject us to additional liabilities. Finally,
certain of these regulations impact our marketing efforts.
We may be subject to claims by consumers and state and federal authorities for security breaches involving customer information, which
could materially harm our reputation and business or add significant administrative and compliance cost to our operations.
In order to operate our business, which includes multiple retail channels, we take orders for our products from customers. This requires us
to obtain personal information from these customers including, but not limited to, credit card numbers. Although we take reasonable and
appropriate security measures to protect customer information, there is still the risk that external or internal security breaches could occur,
including cyber incidents. In addition, new tools and discoveries by third parties in computer or communications technology or software or other
developments may facilitate or result in a future compromise or breach of our computer systems. Such compromises or breaches could result in
data loss and/or identity theft leading to significant liability or costs to us from notification requirements, lawsuits brought by consumers,
shareholders or other businesses seeking monetary redress, state and federal authorities for fines and penalties, and could also lead to
interruptions in our operations and negative publicity causing damage to our reputation and limiting customers’ willingness to purchase products
from us. Businesses in the retail industry have experienced material sales declines after discovering data breaches, and our business could be
similarly impacted. Reputational value is based in large part on perceptions of subjective qualities. While reputations may take decades to build,
a significant negative incident can erode trust and confidence, particularly if it results in adverse mainstream and social media publicity,
governmental investigations or litigation. Theft of credit card numbers of consumers could result in significant dollar fines and consumer
settlement costs, litigation costs, FTC audit requirements, and significant internal administrative costs.
In addition to possible claims for security breaches involving customer information, the secure processing, maintenance and transmission
of customer information is critical to our operations and business strategy, and we devote significant resources to protecting our customer
information. The expenses associated with complying with a patchwork of state laws imposing differing security requirements depending on the
residence of our customers could reduce our operating margins. As mentioned above, there have been continuing efforts to increase the legal and
regulatory obligations and restrictions on companies conducting commerce, primarily in the areas of taxation, consumer privacy and protection
of consumer personal information and we may have to devote significant resources to information security.
Nearly all of our sales are paid for by customers using credit or debit cards and the increasingly heightened Payment Card Industry (PCI)
standards regarding the storage and security of customer information could potentially impact our ability to accept card brands.
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Nearly all of our customers pay for purchases via a credit or debit card. Credit and debit card brand issuers continue to heighten PCI
standards that are applicable to all merchants who accept these cards. These standards primarily pertain to the processes and procedures for
secure storage of customer data. By virtue of the volume of our overall credit card transactions, we are a Level 1 merchant which requires the
annual completion of a formal Record of Compliance (ROC) by a Qualified Security Assessor. Failure to comply with PCI standards, as required
by card issuers, could result in card brand fines and/or the possible inability for us to accept a card brand. Our inability to accept one or all card
brands could materially affect sales in a negative manner. We received an approved ROC on July 31, 2014.
We depend on relationships with numerous domestic and foreign manufacturers and suppliers for our products and proprietary brands; a
decrease in product quality or an increase in product cost, the unanticipated loss of our larger suppliers, or the lack of customer receptivity
or brand acceptance to our proprietary brands could impact our sales.
We procure merchandise from numerous domestic and foreign manufacturers and suppliers generally pursuant to short-term contracts and
purchase orders. Our ability to identify and establish relationships with these parties, as well as access quality merchandise in a timely and
efficient manner on acceptable terms and at acceptable costs, can be challenging. We depend on the ability of these parties in the U.S. and
abroad to timely produce and deliver goods that meet applicable quality standards, which is impacted by a number of factors not within the
control of these parties, such as political or financial instability, trade restrictions, tariffs, currency exchange rates and transport capacity and
costs, among others, and to deliver products that meet or exceed our customers’ expectations.
Our failure to identify new vendors and manufacturers, maintain relationships with a significant number of existing vendors and
manufacturers and/or access quality merchandise in a timely and efficient manner could cause us to miss customer delivery dates or delay
scheduled promotions, which would result in the failure to meet customer expectations and could cause customers to cancel orders or cause us to
be unable to source merchandise in sufficient quantities, which could result in lost sales.
It is possible that one or more of our larger suppliers could experience financial difficulties, including bankruptcy, or otherwise could
determine to cease doing business with us. During fiscal 2014 , products purchased from one vendor accounted for approximately 16% of our
consolidated net sales. The unanticipated loss of this supplier or any other large supplier could impact our sales and earnings. We have
periodically experienced the loss of a major vendor and if a number of our larger vendors ceased doing business with us, this could materially
and adversely impact our sales and profitability.
Our efforts to accelerate the development of proprietary brands may require inventory working capital investments for the development
and promotion of new brands and concepts. In addition, factors such as minimum purchase quantities and reduced merchandise return rights,
typically associated with the purchasing of products associated with proprietary brands, can lead to excess on-hand inventory if sales for these
brands do not meet our expectations due to a lack of customer receptivity or brand acceptance. Our ability to successfully offer a wider
assortment of proprietary merchandise may also be adversely impacted if any of the risks mentioned above related to our manufacturers and
suppliers materialize.
Many of our key functions are concentrated in a single location, and a natural disaster could seriously impact our ability to operate.
Our television broadcast studios, internet operations, IT systems, merchandising team, inventory control systems, executive offices and
finance/accounting functions, among others, are centralized in our adjacent offices at 6740 and 6690, Shady Oak Road in Eden Prairie,
Minnesota. In addition, our only fulfillment and distribution facility is centralized at a location in Bowling Green, Kentucky. A natural disaster,
such as a tornado, could seriously disrupt our ability to continue or resume normal operations for some period of time. While we have certain
business continuity plans in place, no assurances can be given as to how quickly we would be able to resume operations and how long it may
take to return to normal operations. We could incur substantial financial losses above and beyond what may be covered by applicable insurance
policies, and may experience a loss of customers, vendors and employees during the recovery period.
We could be subject to additional sales tax collection obligations and claims for uncollected amounts.
Over the past several years, a number of states have adopted legislation that would require out-of-state retailers to collect and remit sales
tax on transactions originating on the internet or by other remote means such as television shopping, infomercial and catalog distribution. These
new laws seek to assert indirect physical "nexus" by the out-of-state retailer based on either the presence in the state of e-commerce "click-thru"
affiliates who are paid by the retailer to direct e-commerce traffic to the retailer through independent websites or by the presence in the state of
companies with which the out-of-state retailer shares common ownership. These laws are being challenged by internet and other retailers under
federal constitutional grounds, but court challenges have to date been largely unsuccessful. We continually monitor this legislation and,
depending upon our facts in the state, have either registered to collect tax (such as in New York, North Carolina, Colorado, and Pennsylvania) or
have confirmed that we have no direct or indirect physical relationships with the state at the time such legislation becomes effective. Several new
state legislatures are introducing similar legislation each year, and federal legislation (which could require nationwide collection from all of our
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customers) has also been introduced in the federal House and Senate. The US Senate passed a version of this legislation (the "Mainstreet Tax
Fairness Act") in May of 2013 which has not yet been voted on by the House of Representatives. If this trend continues and the laws are upheld
after legal challenges, we could be required to collect additional state and local taxes in many additional jurisdictions. Adding sales tax to our
internet transactions could negatively impact consumer demand, create a competitive disadvantage (if all retailers are not equally impacted), and
create an additional costly administrative burden of complying with the collection laws of multiple jurisdictions. While we believe we comply
with current state sales tax regulations, a successful assertion by one or more states requiring us to collect taxes where we do not do so could
result in substantial tax liabilities, including for past sales, as well as penalties and interest.
We place a significant reliance on technology and information management tools and operational applications to run our existing
businesses, the failure of which could adversely impact our operations.
Our businesses are dependent, in part, on the use of sophisticated technology, some of which is provided to us by third parties. These
technologies include, but are not necessarily limited to, satellite based transmission of our programming, use of the internet and other mobile
commerce devices in relation to our on-line business, new digital technology used to manage and supplement our television broadcast
operations, the age of our legacy operational applications to distribute product to our customers and a network of complex computer hardware
and software to manage an ever increasing need for information and information management tools. The failure of any of these legacy systems
or operational infrastructure elements, technologies, or our inability to have this technology supported, updated, expanded or integrated into new
business processes or other technologies, could adversely impact our operations. Although we have, when possible, developed alternative
sources of technology and built redundancy into our computer networks and tools, there can be no assurance that these efforts to date would
protect us against all potential issues or disaster occurrences related to the loss of any such technologies or their use. Further, we may face
challenges in keeping pace with rapid technological changes and adopting new products or platforms and migrating to new systems.
The rebranding of our operations as ‘EVINE Live’ may not be successful and our operating results may suffer if we are unable to
successfully transition our brand.
On November 18, 2014, we announced that we are rebranding our business as “EVINE Live” which represents a change from the brand of
our television home shopping network and internet site as ShopHQ and ShopHQ.com. We had been operating under the ShopHQ brand since
May 2013, and previously operated under the ShopNBC brand under an exclusive, worldwide licensing agreement with NBCU for the use of
NBCU trademarks, service marks and domain names, which expired on January 31, 2014.
On February 14, 2015, we officially began using the new EVINE Live brand name and logo across television, online, mobile and social
platforms. Rebranding our business has resulted in and will continue to result in additional expenditures including, but not limited to, updating
our television and internet logos and graphics, reprinting all of our signage, the costs of engaging a branding agency that worked with us to
validate our new brand, and increased marketing costs to inform our customers of our new branding. In addition, challenges to our new brand
could also result in incremental operating expenses. In the event these incremental expenses exceed customary and expected costs, there could be
a material adverse impact on our business.
Rebranding could also impact our future operating results due to the potential loss of customers who do not respond favorably to the new
brand or from a loss of potential new customers who choose not to explore our offerings since we are no longer branded with the more familiar
ShopHQ and ShopNBC name and trademarks. A significant loss of customers resulting in a significant loss or extended loss of revenue, would
have a material adverse impact on our business.
In connection with the rebranding, we changed our corporate name to “EVINE Live Inc.” to better reflect our future business operations. In
connection with the corporate name change and our rebranding, we may experience loss of good will, and customers, suppliers and market
participants may not recognize our new name, which may have a material adverse impact on our business.
If the implementation and installation of our new warehouse management system were to be delayed or not be successful, we could have
potential shipping delays resulting in slower shipments to our customers, which could have a negative effect on our overall operating results.
In conjunction with our Bowling Green, Kentucky distribution center expansion effort, we are implementing and installing a new parcel
sortation system coupled with a new warehouse management system. These new systems are expected to be phased into production during the
summer and fall of fiscal 2015. While the benefits expected to be achieved from the implementation of our new warehouse management system
include an increase in our shipping capacity, an improvement in our operating efficiency and inventory accuracy and an expansion of our parcel
sortation capabilities, such benefits may not be immediately realized, if they are realized at all. As we transition and implement our new
warehouse management system, risks related to a delayed or problematic implementation could include the following: an extended shipping
efficiency reduction; an increase in shipping costs as a result of the need to “split-ship” if implementation is delayed for an extended period of
time; and warehouse capacity constraints
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if the new system were not to work properly upon conversion. If the implementation and installation of our new warehouse management system
were to be delayed, not be successful or not result in the benefits that we expect, we could have potential shipping delays resulting in slower
shipments to our customers, which, could result in cancelled orders or a negative impact on our service reputation, among other things. For these
reasons, any delays in the implementation or installation of these systems or the failure of these systems to achieve their expected benefits could
have a negative effect on our overall operating results.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
We own two commercial buildings occupying approximately 209,000 square feet, plus land, in Eden Prairie, Minnesota (a suburb of
Minneapolis). These buildings are used for office space including executive offices, television studios, broadcast facilities and administrative
offices. We own a 262,000 square foot distribution facility on a 34 -acre parcel of land in Bowling Green, Kentucky. During fiscal 2014, we
began a significant operational expansion initiative with respect to overall warehousing capacity and new equipment and system upgrades at our
Bowling Green, Kentucky distribution facility. The expansion project includes the construction of a new building which, when completed, will
expand our current 262,000 square foot facility to an approximately 600,000 square foot facility. The physical building expansion project is
expected to be completed in the first half of fiscal 2015. The updated facilities will also include new high-speed parcel shipping and item
sortation equipment to support our increased level of shipments and units and a new call center facility to better serve our customers. Our owned
real property in Eden Prairie, Minnesota and Bowling Green, Kentucky is currently pledged as collateral under our bank credit facility. We also
lease approximately 400,000 square feet of additional variable warehouse space in Bowling Green, Kentucky under a month-to-month lease
agreement, which allows for additional capacity, as needed. We intend to vacate the leased space during the first half of fiscal 2015 when the
expanded facility is available for use. Additionally, we rent transmitter site and studio locations in Boston, Massachusetts for our full power
television station.
We believe that our existing facilities and variable warehouse capacity are adequate to meet our current needs and that suitable additional
alternative space will be available as needed to accommodate expansion of operations.
Item 3. Legal Proceedings
We are involved from time to time in various claims and lawsuits in the ordinary course of business. In the opinion of management, none
of the claims and suits, either individually or in the aggregate will have a material adverse effect on our operations or consolidated financial
statements.
Item 4. Mine Safety Disclosures
Not Applicable.
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PART II
Item 5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
Market Information for Common Stock
Our common stock is traded on the Nasdaq Global Market under the symbol "EVLV." The following table sets forth the range of high and
low sales prices of our common stock as quoted by the Nasdaq Global Market for the periods indicated.
Fiscal 2014
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Fiscal 2013
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Holders
High
Low
$
$
6.60 $
5.27
5.82
7.00
4.47 $
6.35
6.20
7.06
4.38
4.20
4.43
5.32
2.57
3.66
4.11
4.99
As of March 20, 2015 , we had approximately 715 common shareholders of record.
Dividends
We have never declared or paid any dividends with respect to our common stock. Any future determination by us to pay cash dividends on
our common stock will be at the discretion of our board of directors and will be dependent upon our results of operations, financial condition,
any contractual restrictions then existing and other factors deemed relevant at the time by the board of directors. We currently expect to retain
our earnings for the development and expansion of our business and do not anticipate paying cash dividends on the common stock in the
foreseeable future.
Pursuant to the amended and restated shareholder agreement with GE Equity and NBCU, we are prohibited from paying dividends on our
common stock without GE Equity’s prior consent. We are further restricted from paying dividends on our common stock by our amended Credit
Facility, as discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Credit Facility".
Issuer Purchases of Equity Securities
There were no authorizations for repurchase programs or repurchases made in any fiscal month within the fourth quarter of fiscal 2014 ,
except as disclosed in the table below:
Period
November 30, 2014
through January 31, 2015
Total Number of
Shares Purchased (1)
Average Price
Paid per Share (1)
Total Number of Shares Purchased as
Part of Publicly Announced Plans or
Programs
Approximate Dollar Value of Shares
That May Yet Be Purchased Under the
Plans or Programs
34,400 $
6.10
— $
—
(1) The purchases in this column include 34,400 shares that were repurchased by the Company to satisfy tax withholding obligations related to
vesting of restricted stock.
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Stock Performance Graph
The graph below compares the cumulative five-year total return to our shareholders (based on appreciation or depreciation of the market
price of our common stock) on an indexed basis with (i) a broad equity market index and (ii) two published industry indices. The presentation
compares the common stock price in the period from January 30, 2010 to January 31, 2015 to the Nasdaq Composite Index, the S&P 500
Retailing Index and the Morningstar Specialty Retail Index. The cumulative return is calculated assuming an investment of $100 on January 30,
2010 , and reinvestment of all dividends. You should not consider shareholder return over the indicated period to be indicative of future
shareholder returns.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among EVINE Live Inc., The Nasdaq Composite Index,
S&P 500 Retailing Index and the Morningstar Specialty Retail Index
ASSUMES $100 INVESTED ON JANUARY 30, 2010
ASSUMES DIVIDENDS REINVESTED
FISCAL YEAR ENDING JANUARY 31, 2015
EVINE Live Inc.
NASDAQ Composite Index
S&P 500 Retailing Index
Morningstar Specialty Retail Index
January 30,
2010
100.00 $
100.00 $
100.00 $
100.00 $
January 29,
2011
156.55 $
126.31 $
127.17 $
133.41 $
$
$
$
$
January 28,
2012
February 2,
2013
37.38 $
133.72 $
144.23 $
143.15 $
67.48 $
152.92 $
183.31 $
185.77 $
February 1,
2014
149.76 $
200.01 $
229.70 $
219.91 $
January 31,
2015
152.18
228.61
275.85
229.26
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Equity Compensation Plan Information
The following table provides information as of January 31, 2015 for our compensation plans under which securities may be issued:
Plan Category
Equity Compensation Plans Approved by
Security Holders
Equity Compensation Plans Not Approved by
Security Holders
Total
_______________________________________
Number of Securities to be
Issued Upon Exercise of
Outstanding Options,
Warrants and Rights
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
Number of Securities
Remaining Available for
Future Issuance under
Equity Compensation Plans
4,495,200
$5.33
2,658,400 (1)
450,000 (2)
4,945,200
$4.51
$5.25
—
2,658,400
(1)
Includes securities available for future issuance under shareholder approved compensation plans other than upon the exercise of
outstanding options, warrants or rights, as follows: 2,658,400 shares under the 2011 Omnibus Stock Plan.
(2)
Reflects 450,000 shares of common stock issuable upon exercise of nonstatutory employee stock options granted at exercise prices
equal to the fair market value of a share of common stock on the date of grant. Nonstatutory employee stock options have historically
been granted to new employees as inducement grants when shareholder approved equity compensation plan shares have been depleted.
Each of these options expires ten years from the grant date and vests over three years.
Item 6. Selected Financial Data
The selected financial data for the five years ended January 31, 2015 have been derived from our audited consolidated financial statements.
The selected financial data presented below should be read in conjunction with, the financial statements and notes thereto and other financial and
statistical information referenced elsewhere herein including the information referenced under the caption "Management’s Discussion and
Analysis of Financial Condition and Results of Operations."
Year Ended
January 31,
2015(a)
February 1,
2014(b)
February 2,
2013(c)
January 28,
2012(d)
January 29,
2011(e)
(In thousands, except per share data)
Statement of Operations Data:
Net sales
Gross profit
Operating income (loss)
Net loss
$ 674,618 $ 640,489 $ 586,820 $ 558,394 $ 562,273
245,048 230,024 212,372 204,095 199,529
(15,466 )
(25,868 )
(16,838 )
(48,064 )
(23,297 )
(27,676 )
77
(2,515 )
1,003
(1,378 )
Per Share Data:
Net loss per common share
Net loss per common share — assuming dilution
Weighted average shares outstanding:
Basic
Diluted
$
$
(0.03 ) $
(0.03 ) $
(0.05 ) $
(0.05 ) $
(0.57 ) $
(0.57 ) $
(1.03 ) $
(1.03 ) $
(0.78 )
(0.78 )
53,459
53,459
49,505
49,505
48,875
48,875
46,451
46,451
33,326
33,326
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Balance Sheet Data:
Cash
Restricted cash and investments
Current assets
Property, equipment and other assets
Total assets
Current liabilities
Series B redeemable preferred stock
Other long-term obligations
Shareholders’ equity
Other Data:
Gross profit
Working capital
Current ratio
Adjusted EBITDA (as defined)(f)
Cash Flows:
Operating
Investing
Financing
________________
January 31,
2015
February 1,
2014
February 2,
2013
January 28,
2012
January 29,
2011
(In thousands)
$
19,828 $
2,100
200,943
56,748
257,691
119,961
—
53,202
84,528
29,177 $
2,100
195,857
37,848
233,705
115,916
—
39,581
78,208
26,477 $
2,100
170,712
41,387
212,099
96,400
—
38,420
77,279
32,957 $
2,100
163,271
55,189
218,460
91,364
—
25,507
101,589
46,471
4,961
185,357
53,002
238,359
103,798
14,599
36,810
83,152
January 31,
2015
February 1,
2014
Year Ended
February 2,
2013
January 28,
2012
January 29,
2011
(In thousands, except statistical data)
36.3 %
35.9 %
36.2 %
36.6 %
35.5 %
$
$
80,982
1.7
22,773
$
$
79,941
1.7
18,012
$
$
74,312
1.8
4,494
$
$
71,907
1.8
996
$
$
81,559
1.8
2,351
$
$
$
(1,315 ) $
(25,178 ) $
$
17,144
13,953
$
(11,077 ) $
(176 ) $
(8,482 ) $
(10,055 ) $
$
12,057
(12,949 ) $
(7,819 ) $
$
7,254
327
(7,430 )
36,574
(a) Results of operations for fiscal 2014 includes activist shareholder response charges of approximately $3.5 million and executive
transition costs of $5.5 million.
(b) Results of operations for fiscal 2013 includes activist shareholder response charges of approximately $2.1 million.
(c) Results of operations for fiscal 2012 includes an $11.1 million write-down of our FCC broadcast license and a $500,000 charge
resulting from the early retirement of our $25 million term loan. Also, as a result of the Company's retail accounting calendar, fiscal
2012 includes 53 weeks of operations as compared to 52 weeks for the other periods presented. See Notes 2, 4 and 8 to the consolidated
financial statements.
(d) Results of operations for fiscal 2011 includes a $25.7 million total charge related to the early preferred stock debt extinguishment.
(e) Results of operations for fiscal 2010 include the following: (i) a $1.2 million charge due to early payment of preferred stock obligations
and (ii) a $1.1 million charge related to incremental restructuring charges incurred in fiscal 2010.
(f) EBITDA as defined for this statistical presentation represents net income (loss) for the respective periods excluding depreciation and
amortization expense, interest income (expense) and income taxes. We define Adjusted EBITDA as EBITDA excluding debt
extinguishment; non-operating gains (losses); non-cash impairment charges and write downs; activist shareholder response costs;
executive transition costs; restructuring costs; and non-cash share-based compensation expense. Management has included the term
Adjusted EBITDA in its EBITDA reconciliation in order to adequately assess the operating performance of our television and online
businesses and in order to maintain comparability to our analyst’s coverage and financial guidance, when given. Management believes
that Adjusted EBITDA allows investors to make a meaningful comparison between our business operating results over different periods
of time with those of other similar companies. In addition, management uses Adjusted EBITDA as a metric to evaluate operating
performance under its management and executive incentive compensation programs. Adjusted EBITDA should not be construed as an
alternative to operating income (loss), net income (loss) or to cash flows from operating activities as determined in accordance with
generally accepted accounting principles and should not be construed as a measure of liquidity. Adjusted EBITDA may not be
comparable to similarly entitled measures reported by other companies.
A reconciliation of Adjusted EBITDA to its comparable GAAP measurement, net loss, follows:
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Adjusted EBITDA
Less:
Activist shareholder response costs
Debt extinguishment
Non-operating gains (losses)
FCC license impairment
Restructuring costs
Executive transition costs
Non-cash share-based compensation expense
EBITDA (as defined)
A reconciliation of EBITDA to net loss is as
follows:
EBITDA (as defined)
Adjustments:
Depreciation and amortization
Interest income
Interest expense
Income taxes
Net loss
January 31,
2015
February 1,
2014
Year Ended
February 2,
2013
(In thousands)
January 28,
2012
January 29,
2011
$
22,773 $
18,012 $
4,494 $
996 $
2,351
(3,518 )
—
—
—
—
(5,520 )
(3,860 )
9,875 $
(2,133 )
—
—
—
—
—
(3,217 )
12,662 $
—
(500 )
100
(11,111 )
—
—
(3,257 )
(10,274 ) $
—
(25,679 )
—
—
—
—
(5,007 )
(29,690 ) $
—
(1,235 )
—
—
(1,130 )
—
(3,350 )
(3,364 )
$
$
9,875 $
12,662 $
(10,274 ) $
(29,690 ) $
(3,364 )
(8,872 )
10
(1,572 )
(819 )
(1,378 ) $
(12,585 )
18
(1,437 )
(1,173 )
(2,515 ) $
(13,423 )
11
(3,970 )
(20 )
(27,676 ) $
(12,827 )
64
(5,527 )
(84 )
(48,064 ) $
(13,337 )
51
(9,795 )
577
(25,868 )
$
25
Table of Contents
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Introduction
The following discussion and analysis of financial condition and results of operations is qualified by reference to and should be read in
conjunction with our audited consolidated financial statements and notes thereto included elsewhere in this annual report.
Cautionary Statement Regarding Forward-Looking Statements
This Annual Report on Form 10-K, including the following Management’s Discussion and Analysis of Financial Condition and Results of
Operations and other materials we file with the SEC (as well as information included in oral statements or other written statements made or to be
made by us) contain certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Any
statements contained herein that are not statements of historical fact, including statements regarding guidance, industry prospects or future
results of operations or financial position made in this report are forward-looking. We often use words such as anticipates, believes, expects,
intends and similar expressions to identify forward-looking statements. These statements are based on management’s current expectations and
accordingly are subject to uncertainty and changes in circumstances. Actual results may vary materially from the expectations contained herein
due to various important factors, including (but not limited to): consumer preferences, spending and debt levels; the general economic and credit
environment; interest rates; seasonal variations in consumer purchasing activities; the ability to achieve the most effective product category
mixes to maximize sales and margin objectives; competitive pressures on sales; pricing and gross sales margins; the level of cable and satellite
distribution for our programming and the associated fees or estimated cost savings from contract renegotiations; our ability to establish and
maintain acceptable commercial terms with third-party vendors and other third parties, including on-air personalities, with whom we have
contractual relationships, and to successfully manage key vendor relationships and develop key partnerships and proprietary brands; our ability
to manage our operating expenses successfully and our working capital levels; our ability to remain compliant with our long-term credit facility
covenants; our ability to successfully transition our brand name and corporate name; customer acceptance of our new branding strategy and our
repositioning as a digital commerce company; the market demand for television station sales; changes to our management and information
systems infrastructure; challenges to our data and information security; changes in governmental or regulatory requirements; litigation or
governmental proceedings affecting our operations; the risks identified under Item 1A (Risk Factors) in this report on Form 10-K; significant
public events that are difficult to predict, or other significant television-covering events causing an interruption of television coverage or that
directly compete with the viewership of our programming; and our ability to obtain and retain key executives and employees. You are cautioned
not to place undue reliance on forward-looking statements, which speak only as of the date of this filing. We are under no obligation (and
expressly disclaim any such obligation) to update or alter our forward-looking statements whether as a result of new information, future events
or otherwise.
Overview
Our Company
We are a digital commerce company that markets, sells and distributes products to consumers through TV, online, mobile and social media.
We operate a 24-hour television shopping network, EVINE Live, which is distributed primarily on cable and satellite systems, through which we
offer brand name and private label products in the categories of jewelry & watches; home & consumer electronics; beauty, health & fitness; and
fashion & accessories. We also operate evine.com, a comprehensive digital commerce platform that sells products which appear on our
television shopping network as well as an extended assortment of online-only merchandise. Our programming and products are also marketed
via mobile devices - including smartphones and tablets, and through the leading social media channels.
New Corporate Name and Branding
On November 18, 2014, the Company announced that it had changed its corporate name to EVINE Live Inc. from ValueVision Media, Inc.
Effective November 20, 2014, the Company's NASDAQ trading symbol also changed to EVLV from VVTV. The Company transitioned from
doing business as "ShopHQ" to "EVINE Live" and evine.com on February 14, 2015.
In May 2013, the Company previously announced a rebranding of its 24-hour television shopping network and digital commerce internet
website from ShopNBC and ShopNBC.com to ShopHQ and ShopHQ.com, respectively.
Products and Customers
Products sold on our media channel platforms include primarily jewelry & watches, home & consumer electronics, beauty, health &
fitness, and fashion & accessories. Historically jewelry & watches has been our largest merchandise category. We are focused on diversifying
our merchandise assortment both among our existing product categories as well as with potentially new
26
Table of Contents
product categories in an effort to increase revenues and to grow our new and active customer base. While changes in our product mix have
occurred as a result of customer demand and other factors including our efforts to diversify our offerings within our major merchandise
categories, jewelry and watches remained our largest merchandise category in fiscal 2014 as demonstrated in the table below. The following
table shows our merchandise mix as a percentage of television shopping and online net merchandise sales for the years indicated by product
category group:
Merchandise Category
Jewelry & Watches
Home & Consumer Electronics
Beauty, Health & Fitness
Fashion & Accessories
For the Years Ended
January 31,
2015
February 1,
2014
February 2,
2013
42%
29%
14%
15%
43%
33%
13%
11%
52%
27%
13%
8%
Our product strategy is to continue to develop and expand new product offerings across multiple merchandise categories based on customer
demand, as well as to offer competitive pricing and special values in order to drive new customers and maximize margin dollars per minute. Our
digital commerce customers — those who interact with our network and transact through TV, online and mobile device — are primarily women
between the ages of 40 and 70. We also have a strong presence of male customers of similar age. We believe our customers make purchases
based on our unique products, quality merchandise and value.
Company Strategy
As a digital commerce company, our strategy includes offering exciting proprietary merchandise using the Internet, mobile, social media
and our commerce infrastructure, which includes television access to 88 million cable and satellite homes in the United States. We believe our
greatest growth opportunity lies in leveraging these digital commerce platforms in a way that engages customers far more often than just when
they are in the mood to shop.
By offering a wider assortment of proprietary merchandise (i.e. product that is not readily available elsewhere), presented in an engaging,
entertaining, shopping-centric format, we believe we will attract a larger customer base targeting a broader demographic. At the root of our
efforts to attract a larger customer base is expanding and strengthening our relationships with the brands, personalities and manufacturers with
whom we do business.
We believe our comparatively smaller size demands a more “think nimble - act nimble” approach to doing business. This means
establishing ourselves as a “launch pad” for new proprietary products delivered by seasoned on-air personalities that can leverage our unique
reach on our multiple digital commerce platforms. Properly executed, we believe these initiatives may provide us a greater opportunity to grow
our top and bottom lines in a more meaningful and competitive way.
The Company changed its corporate name to EVINE Live Inc. from ValueVision Media, Inc. on November 18, 2014. We transitioned the
Company's consumer brand from "ShopHQ" and rebranded to "EVINE Live" and evine.com on February 14, 2015. By positioning our
organization as a digital commerce company, we are focusing on key initiatives such as customer relationship management, partner relationship
management, process improvements, brand building and delivering value to our customers and business partners. We believe that our new brand
identity coupled with a fresh focus on existing as well as emerging platforms and technologies and the development of proprietary brands will
begin repositioning our Company as a digital commerce company that delivers a more engaging and enjoyable customer experience with sales
and service that exceed expectations.
Our Competition
The digital commerce retail business is highly competitive and we are in direct competition with numerous retailers, including internet
retailers, many of whom are larger, better financed and have a broader customer base than we do. In our television shopping and digital
commerce operations, we compete for customers with other television shopping and e-commerce retailers, infomercial companies, other types of
consumer retail businesses, including traditional "brick and mortar" department stores, discount stores, warehouse stores and specialty stores;
catalog and mail order retailers and other direct sellers.
Our direct competitors within the television shopping industry include QVC (owned by Liberty Interactive Corporation), and HSN, Inc.,
(in whom Liberty Interactive Corporation also has a substantial interest, according to public filings) both of whom are substantially larger than
we are in terms of annual revenues and customers, and whose programming is carried more broadly to U.S. households than our programming.
Multimedia Commerce Group, Inc., which operates Jewelry Television, also competes with us for customers in the jewelry category. In addition,
there are a number of smaller niche players and startups in the television shopping arena who compete with us. We believe that our major
competitors incur cable and satellite distribution fees representing a significantly lower percentage of their sales attributable to their television
programming than we do; and that their fee arrangements
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Table of Contents
are substantially on a commission basis (in some cases with minimum guarantees) rather than on the predominantly fixed-cost basis that we
currently have. At our current sales level, our distribution costs as a percentage of total consolidated net sales are higher than our competition.
However, one of our strategies is to maintain our fixed distribution cost structure in order to leverage our profitability as we grow our business.
We anticipate continuing competition for viewers and customers, for experienced television shopping and e-commerce personnel, for
distribution agreements with cable and satellite systems and for vendors and suppliers - not only from television shopping companies, but also
from other companies that seek to enter the television shopping and internet retail industries, including telecommunications and cable
companies, television networks, and other established retailers. We believe that our ability to be successful in the digital commerce industry will
be dependent on a number of key factors, including continuing to expand our digital footprint to meet our customers' "watch and shop anytime,
anywhere" needs, increasing the number of customers who purchase products from us and increasing the dollar value of sales per customer from
our existing customer base.
Results for Fiscal 2014, 2013 and 2012
Consolidated net sales in fiscal 2014 were $674.6 million compared to $640.5 million in fiscal 2013 , a 5% increase. Consolidated net sales
in fiscal 2013 were $640.5 million compared to $586.8 million in fiscal 2012 , a 9% increase. We reported operating income of $1.0 million and
a net loss of $1.4 million for fiscal 2014 . Results of operations for fiscal 2014 includes executive transition costs and activist shareholder
response charges of approximately $5.5 million and $3.5 million, respectively. We reported operating income of $77,000 and a net loss of $2.5
million for fiscal 2013. Our operating income in fiscal 2013 includes activist shareholder response charges of approximately $2.1 million. We
reported an operating loss of $23.3 million and a net loss of $27.7 million for fiscal 2012. Our operating loss in fiscal 2012 included an $11.1
million non-cash impairment charge related to our FCC television broadcasting license.
Credit Facility Amendment
On March 6, 2015 , the Company entered into a fourth amendment to its revolving credit and security agreement with PNC, as previously
amended that, among other things, increases the size of the revolving line of credit from $60 million to $75 million , adds The Private Bank and
provides an accordion feature that would allow the Company to expand the size of the revolving line of credit by another $15 million upon
certain conditions being met. The fourth amendment also modifies certain advance rates under the borrowing base for Value Pay accounts
receivable and provides for certain fees related to the syndication and amendments of the facility and an annual administrative agent’s fee.
Activist Shareholder Response Costs
I n October of 2013, the Company received a demand from an activist shareholder to call a special meeting of shareholders for the purpose,
among other things, of voting on a new slate of directors and amending certain of the Company’s bylaws. The Company retained a team of
advisers, including a financial adviser, proxy solicitor, investor relations firm and legal counsel, to assist in responding to the demand and the
solicitation of proxies. In conjunction with such activities, the Company recorded charges to income in fiscal 2014 and fiscal 2013 totaling $3.5
million and $2.1 million , respectively, which includes $750,000 as reimbursement for a portion of the activist shareholder’s expenses in fiscal
2014 .
Executive Transition Costs
On June 22, 2014, Keith R. Stewart resigned as a member of the Company's board of directors and as Chief Executive Officer of the
Company. In conjunction with Mr. Stewart's resignation and separation agreement, as well as other executive terminations made subsequent to
June 22, 2014, the Company recorded charges to income of $5.5 million in fiscal 2014, relating primarily to the following: severance payments
which Mr. Stewart is entitled to receive in accordance with the terms of his employment agreement; severance payments related to the
termination of our Chief Operating and Chief Merchandising Officers; and other direct costs associated with the Company's 2014 executive
transition.
FCC License Impairment (Fiscal 2012)
During the Company's annual fair value assessment of its FCC television broadcast license, we determined that the asset was impaired in
fiscal 2012. The Company made this determination utilizing independent market data and assumptions in its discounted cash flow models, which
reflected declines in independent television station industry revenues and operating margins due to television station rating declines and reduced
advertising purchases on local broadcast television stations. As a result, cash flows from our discounted cash flow model did not support
recovery of the asset's carrying value and we recorded an $11.1 million non-cash impairment charge in the fourth quarter of fiscal 2012.
28
Table of Contents
Results of Operations
The following table sets forth, for the periods indicated, certain statement of operations data expressed as a percentage of net sales.
Net sales
Gross margin
Operating expenses:
Distribution and selling
General and administrative
Depreciation and amortization
Activist shareholder response costs
Executive transition costs
FCC license impairment
Total operating expenses
Operating income (loss)
Interest expense, net
Loss before income taxes
Income taxes
Net loss
Key Operating Metrics
Program Distribution
Total homes (average 000's)
Merchandise Metrics
Gross margin %
Net shipped units (000's)
Average selling price
Return rate
Online net sales % (b)
Total Customers - 12 Month Rolling (000's)
January 31,
2015
Year Ended (a)
February 1,
2014
February 2,
2013
100.0 %
36.3 %
100.0 %
35.9 %
100.0 %
36.2 %
30.0 %
3.6 %
1.3 %
0.5 %
0.8 %
— %
36.2 %
0.1 %
(0.2 )%
(0.1 )%
(0.1 )%
(0.2 )%
30.0 %
3.7 %
1.9 %
0.3 %
— %
— %
35.9 %
— %
(0.2 )%
(0.2 )%
(0.2 )%
(0.4 )%
32.9 %
3.1 %
2.3 %
— %
— %
1.9 %
40.2 %
(4.0 )%
(0.7 )%
(4.7 )%
— %
(4.7 )%
January 31,
2015
Change
February 1,
2014
Change
February 2,
2013
Year Ended (a)
87,481
2 %
86,120
4 %
82,761
36.3 %
9,055
$67
21.5 %
44.6 %
1,446
+40 bps
27 %
(17 )%
(80) bps
(60) bps
7 %
35.9 % (30) bps
7,152
$81
27 %
(16 )%
22.3 % +20 bps
45.2 % (50) bps
1,357
18 %
36.2 %
5,620
$96
22.1 %
45.7 %
1,147
(a) The Company’s most recently completed fiscal year, fiscal 2014 , ended on January 31, 2015 , and consisted of 52 weeks. Fiscal 2013
ended on February 1, 2014 and consisted of 52 weeks. Fiscal 2012 ended on February 2, 2013 and consisted of 53 weeks.
(b) Online net sales percentage is calculated based on net sales that are generated from our evine.com website and mobile platforms, which
are primarily ordered directly online.
Pro Forma Comparison of Results
Because we follow a 4-5-4 retail calendar, every five or six years we have an extra week of operations within our fiscal year and this
occurred in fiscal 2012. Therefore, operations for our fourth quarter and full year fiscal 2012 have 14 and 53 weeks, respectively, as compared to
operations for fourth quarter and full year fiscal 2013 and 2014 which both have 13 and 52 weeks, respectively. To facilitate a comparison with
fiscal 2012 results, we are presenting pro forma comparable 52-week results for fiscal 2012 as compared to fiscal 2013 and 2014. Fiscal 2012
fourth quarter pro forma results were calculated by dividing actual fourth quarter results by 14 and then by multiplying the quotients by 13. The
fiscal 2012 pro forma results were calculated by adding our
29
Table of Contents
fourth quarter 13-week pro forma calculation to previously reported fiscal year-to-date third quarter results of operations. We believe that the pro
forma results being presented for fiscal 2012 in the table below are useful to investors for comparison to our fiscal 2013 and 2014 results but
have not presented pro forma results for our current fiscal year because both fiscal 2014 and fiscal 2013 consisted of 52 weeks.
Actual
Fiscal 2014
(52 Weeks)
Actual
Fiscal 2013
(52 Weeks)
Pro Forma
Fiscal 2012
(52 Weeks)
Results of Operations (in millions)
Net sales
Gross profit
Adjusted EBITDA
Net loss
Operating Metrics (in thousands)
Net shipped units
Total Customers - 12 Month Rolling
$ 674.6 $ 640.5 $ 574.1
$ 245.0 $ 230.0 $ 208.3
4.2
$
(27.7 )
$
22.8 $
(1.4 ) $
18.0 $
(2.5 ) $
9,055
1,446
7,152
1,357
5,495
1,132
Program Distribution
Average homes reached, or full time equivalent ("FTE") subscribers, grew 2% in fiscal 2014 , resulting in a 1.4 million increase in average
homes reached versus fiscal 2013 . Average FTE subscribers grew 4% in fiscal 2013 , resulting in a 3.4 million increase in average homes
reached compared to fiscal 2012 . The annual increases were driven primarily by increases in our footprint as we expand into more widely
distributed digital tiers of service. During fiscal 2012 , we made low-cost infrastructure investments that have enabled us to soft launch an up-
converted version of our digital signal in a high definition ("HD") format and that improved the appearance of our primary network feed. As of
January 31, 2015 our up converted high definition feed is carried in approximately 12 million households. We have been distributing the
networks' HD feed in selected markets since 2012 and we believe that having an HD feed of our service allows us to attract new viewers and
customers. Our television shopping programming is also simulcast live 24 hours a day, 7 days a week through our internet website, evine.com,
which is not included in the foregoing data on homes reached.
Cable and Satellite Distribution Agreements
We have entered into distribution agreements with cable operators, direct-to-home satellite providers and telecommunications companies
that allow each operator to offer our television network over their systems. The terms of the affiliation agreements typically range from one to
five years. During the fiscal year, certain agreements with cable, satellite or other distributors may expire. Under certain circumstances, the cable
operators or we may cancel the agreements prior to their expiration. Additionally, we may elect not to renew distribution agreements whose
terms result in sub-standard or negative contribution margins. If the operator drops our service or if either we or the operator fails to reach
mutually agreeable business terms concerning the distribution of our service so that the agreements are terminated, our business may be
materially adversely affected. Failure to maintain our distribution agreements covering a material portion of our existing households on
acceptable financial and other terms could materially and adversely affect our future growth, sales revenues and earnings unless we are able to
arrange for alternative means of broadly distributing our television programming.
In February 2012, we renewed our largest television distribution agreement. The terms of this agreement better reflect rates in today's
competitive distribution environment, resulting in a net reduction in annual television distribution costs under this agreement by approximately
$15 million which began in January 2013. As part of the agreement, we also received a second channel on this distribution provider which began
in January 2013.
As of January 31, 2015 , the direct ownership of NBCU (which is indirectly owned by Comcast) in the Company consisted of 7,141,849
shares of common stock. The Company has a significant cable distribution agreement with Comcast and believes that the terms of this
agreement are comparable to those with other cable system operators.
Net Shipped Units
The number of net shipped units during fiscal 2014 increased 27% from fiscal 2013 to 9.1 million from 7.2 million . The number of net
shipped units during fiscal 2013 increased 27% (30% on a pro forma basis) from fiscal 2012 to 7.2 million from 5.6 million . We believe the
increase in units shipped during fiscal 2014 reflects the continued broadening of our merchandise assortment, particularly by the strong
performances of our fashion &accessories and health & beauty product categories, the decline in our average selling price and the overall growth
in net sales as discussed below.
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Table of Contents
Average Selling Price
Our average selling price, or ASP, per net unit was $67 in fiscal 2014 , a 17% decrease from fiscal 2013 . The decrease in the ASP during
fiscal 2014 , which is a key component in our customer acquisition efforts by driving impulse shopping and increasing repeat customers,
continues to reflect strong growth within our fashion & accessories and beauty, health & fitness categories, which typically have lower average
selling prices, as well as a general shift to lower price points in other merchandise categories. The decreases in our ASP are consistent with our
long-term strategy to further broaden and expand our product assortment of lower priced items to reach a broader audience. For fiscal 2013 , the
ASP was $81 , a 16% decrease over fiscal 2012 . The decrease in the fiscal 2013 ASP was driven primarily by a higher concentration of product
sales in our fashion & accessories and home product lines.
Return Rates
Our return rate was 21.5% in fiscal 2014 as compared to 22.3% in fiscal 2013 , an 80 bps decrease. The decrease in the fiscal 2014 return
rate was primarily driven by decreases in our return rates within our beauty, health and fitness category and our watch and consumer electronics
merchandise categories. Our return rate was 22.3% in fiscal 2013 compared to 22.1% in fiscal 2012 , a 20 bps increase. The increase in the fiscal
2013 return rate was influenced by increases in our return rates within our fashion & accessories and home & consumer electronics categories.
We continue to monitor our return rates in an effort to keep our overall return rates in line and commensurate with our product mix and our
average selling price levels.
Total Customers
Total customers purchasing over the last twelve months increased 7% to 1,446,000 during fiscal 2014 from 1,357,000 in fiscal 2013 . We
believe the increase in total customers is primarily due to continued broadening of our product assortment at lower price points. Total customers
purchasing increased 18% to 1,357,000 during fiscal 2013 from 1,147,000 in fiscal 2012 (a 20% increase on a pro forma basis). The percentage
growth of our customers during fiscal 2014 was much less than the growth achieved in fiscal 2013 due to the higher mix of consumer electronics
experienced in fiscal 2013, which typically results in higher new customers.
Net Sales
Consolidated net sales, inclusive of shipping and handling revenue, for fiscal 2014 were $674.6 million , a 5% increase over consolidated
net sales of $640.5 million for fiscal 2013 . The increase in our consolidated net sales from the prior year was driven primarily by sales growth in
our fashion & accessories product category but also increased sales volume in our home, watches and beauty, health and fitness categories,
partially offset by sales decreases in our consumer electronics and jewelry product categories. Our e-commerce sales penetration, or, the
percentage of net sales that are generated from our evine.com website and mobile platforms, which are primarily ordered directly online, was
44.6% in fiscal 2014 as compared to 45.2% in fiscal 2013 . Overall, we continue to deliver strong online sales penetration. The decrease in
penetration during fiscal 2014 is primarily due to our mix shift away from watches and consumer electronics, which have a strong online
penetration. Our mobile penetration increased to 33.5% of total online sales during fiscal 2014 versus 25.2% of total online sales during fiscal
2013. We believe that the increase experienced in our mobile penetration during fiscal 2014 was due to the rollout of our tablet mobile
applications in the fall of 2013, improvements made in our mobile phone checkout site and the overall increase in consumers' use of tablets for
retail purchases since 2013.
Consolidated net sales, inclusive of shipping and handling revenue, for fiscal 2013 were $640.5 million, a 9% increase over consolidated
net sales of $586.8 million for fiscal 2012 (a 12% increase on a pro forma basis). As noted above, fiscal 2012 had 53 weeks as compared to fiscal
2013, which had 52 weeks, and pro forma consolidated net sales for fiscal 2012 were $574.1 million. The increase in our consolidated net sales
from the prior year was driven primarily by sales improvements in the home & consumer electronics and fashion & accessories categories. Our
e-commerce sales penetration, was 45.2% in fiscal 2013 as compared to 45.7% in fiscal 2012. The decrease in penetration during fiscal 2013 is
primarily due to our mix shift away from watches, which are a high online penetration product category, to more fashion and home product
categories which tend to have a lower online sales penetration.
Gross Profit
Gross profit for fiscal 2014 was $245.0 million , an increase of 7% , compared to $230.0 million for fiscal 2013 . The increase in the gross
profits experienced during fiscal 2014 was driven primarily by the year-over-year sales increase discussed above and the higher gross margin
percentages experienced due to sales of higher margin products. Gross margin percentages for fiscal 2014 , fiscal 2013 and fiscal 2012 were
36.3% , 35.9% and 36.2% respectively, representing a 40 bps increase from fiscal 2013 to fiscal 2014 , and a 30 bps decrease (40 bps on a pro
forma basis) from fiscal 2012 to fiscal 2013 . The increase in the gross margin percentage experienced in fiscal 2014 reflects an increased sales
mix of fashion & accessories and beauty, health and fitness, which typically carry higher margin percentages, as well as margin rate
improvements in beauty, health and fitness, partially offset by
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increased levels of shipping and handling promotional activity during the year. The decrease in gross margin percentage experienced during
fiscal 2013 was driven primarily by a higher sales mix of lower margin product categories such as consumer electronics, offset by margin
improvements in the jewelry and fashion & accessories categories as well as reduced levels of shipping and handling promotional activity during
the year. Although our blended gross margin percentage fluctuates corresponding with changes within our product mix, levels of shipping and
handling promotional activity and other influences, we are not aware of any known trend with respect to our product mix that could be
reasonably expected to impact gross margins.
Gross profit for fiscal 2013 was $230.0 million, an increase of 8%, compared to $212.4 million for fiscal 2012 (a 10% increase on a pro
forma basis). As noted above, fiscal 2012 had 53 weeks as compared to fiscal 2013, which had 52 weeks, and pro forma gross profit for fiscal
2012 was $208.3 million. The increase in the gross profits experienced during fiscal 2013 was driven primarily by the year-over-year sales
increase discussed above partially offset by the lower gross margin percentages experiences as discussed above.
Operating Expenses
Total operating expenses were $244.0 million , $229.9 million and $235.7 million for fiscal 2014 , fiscal 2013 and fiscal 2012 respectively,
representing an increase of $14.1 million or 6% from fiscal 2013 to fiscal 2014 , and a decrease of $5.7 million , or 2% from fiscal 2012 to fiscal
2013 . Total operating expenses as a percentage of net sales were 36.2%, 35.9% and 40.2% for fiscal 2014 , fiscal 2013 and fiscal 2012 ,
respectively. Total operating expenses for fiscal 2014 includes activist shareholder response charges of $3.5 million and executive transition
costs of $5.5 million. Total operating expenses for fiscal 2013 includes activist shareholder response charges of $2.1 million. Excluding
shareholder activist response and executive transition costs, total operating expenses as a percentage of net sales were 34.8% and 35.6% for
fiscal 2014 and fiscal 2013, respectively. Results of operations for fiscal 2012 includes an $11.1 million write-down of our FCC broadcast
license asset. As noted above, fiscal 2014 and fiscal 2013 had 52 weeks of operating expenses as compared to fiscal 2012, which had 53 weeks
of operating expenses.
Distribution and selling expense for fiscal 2014 increased $10.9 million , or 6% , to $202.6 million or 30.0% of net sales compared to
$191.7 million or 30.0% of net sales in fiscal 2013 . Distribution and selling expense increased during fiscal 2014 primarily due to increased
program distribution expense of $6.1 million relating to a 2% increase in average homes reached during the year as well as investments made
associated with improved channel positions which began in the second half of fiscal 2013 and continued through fiscal 2014. The increase over
the prior year was also due to increases in variable credit card processing fees and other credit expenses of $2.0 million, customer service and
telecommunications expenses of $1.3 million, increases in salaries, wages and accrued incentive compensation costs of $1.3 million and
increased warehouse occupancy expense of $689,000, partially offset by decreased share-based compensation expenses of $503,000. Total
variable expenses in fiscal 2014 were approximately 8.7% of total net sales versus approximately 8.0% of total net sales in fiscal 2013. The
increase in variable expense as a percentage of net sales coincides with the reduction in average selling price and resulting 27% increase in net
shipped units during fiscal 2014. To the extent that our average selling price continues to decline, our variable expense as a percentage of net
sales could increase as the number of our shipped units increase. Program distribution expense is primarily a fixed cost per household, however,
this expense may be impacted by growth in the number of average homes reached or by rate changes associated with improvements in our
channel positions.
Distribution and selling expense for fiscal 2013 decreased $1.3 million, or 1%, to $191.7 million , or 30.0% of net sales compared to
$193.0 million or 32.9% of net sales in fiscal 2012 . Distribution and selling expense decreased from fiscal 2012 primarily due to net decreased
program distribution expense of $18.5 million, reflecting lower rates on renewed distribution agreements that became effective in January 2013.
This decrease over the prior year was partially offset by increases in salaries, wages and accrued incentive compensation costs of $9.8 million,
variable credit card processing fees and other credit expenses of $3.7 million, customer service and telecommunications expenses of $1.8
million, advertising and promotion expense of $1.0 million and incremental rebranding marketing and consulting expenses totaling $258,000.
Total variable expenses, in fiscal 2013 were approximately 8% of total net sales versus approximately 7% of total net sales in fiscal 2012. The
increase in variable expense as a percentage of net sales coincides with the reduction in average selling price and resulting 30% increase in net
shipped units during fiscal 2013.
General and administrative expense for fiscal 2014 increased $0.2 million , or 1% , to $24.0 million , or 3.6% of net sales compared to
$23.8 million or 3.7% of net sales in fiscal 2013 . General and administrative expense increased from fiscal 2013 primarily as a result of
increased share-based compensation expense of $1.1 million due to immediate equity vesting associated with the termination of our former chief
executive officer and new board member grants and software expense of $319,000, offset by lower salary and accrued incentive compensation
expenses of $1.1 million and decreased legal fees of $137,000. In addition, fiscal 2014 general and administrative expense included $349,000 in
information systems and website related rebranding costs. General and administrative expense for fiscal 2013 increased $5.5 million , or 30.1% ,
to $23.8 million or 3.7% of net sales compared to $18.3 million or 3.1% of net sales in fiscal 2012 . General and administrative expense
increased from fiscal 2012 primarily as a result of increased salaries, wages and accrued incentive compensation costs of $4.1 million,
information systems and website
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related rebranding costs of $700,000 and the effect of net favorable legal settlements in fiscal 2012 totaling $300,000 that reduced year-to-date
general and administrative expense in the prior year.
Depreciation and amortization expense was $8.4 million , $12.3 million and $13.2 million for fiscal 2014 , fiscal 2013 and fiscal 2012 ,
respectively, representing a decrease of $3.9 million , or 31% from fiscal 2013 to fiscal 2014 and a decrease of $0.9 million , or 7% from fiscal
2012 to fiscal 2013 . Depreciation and amortization expense as a percentage of net sales was 1.3% for fiscal 2014 , 1.9% for fiscal 2013 and
2.3% fiscal 2012 . The decrease in depreciation and amortization expense during fiscal 2014 was primarily due to decreased amortization
expense of $4.0 million associated with the expiration of the NBC trademark license. The decrease in depreciation and amortization expense
during fiscal 2013 was primarily due to decreased depreciation expense of $778,000 as a result of a reduction in our depreciable asset base year
over year and decreased amortization expense of $52,000 related to our NBC trademark license asset.
Operating Income (Loss)
We reported operating income of $1.0 million in fiscal 2014 compared to operating income of $77,000 for fiscal 2013 , representing an
improvement of $926,000 . Our operating results improved during fiscal 2014 primarily as a result of increased gross profit dollars achieved and
lower depreciation and amortization expense, primarily offset by higher distribution and selling expense, executive transition costs and activist
shareholder costs, as noted above.
We reported operating income of $77,000 for fiscal 2013 compared with an operating loss of $23.3 million for fiscal 2012 , representing an
improvement of $23.4 million . Our operating results improved during fiscal 2013 primarily as a result of increased gross profit dollars achieved
and lower distribution and selling and depreciation and amortization expense, partially offset by higher general and administrative expense and
activist shareholder response costs incurred as noted above. Also contributing to the fiscal 2013 improvement was the fact that during fiscal
2012, we had recorded an $11.1 million non-cash write down of our FCC license asset.
Net Loss
For fiscal 2014 , we reported a net loss of $1.4 million or $0.03 per basic and dilutive share, on 53,458,662 weighted average common
shares outstanding. For fiscal 2013 we reported a net loss of $2.5 million or $0.05 per basic and dilutive share, on 49,504,892 weighted average
common shares outstanding. For fiscal 2012 , we reported a net loss of $27.7 million , or $0.57 per basic and dilutive share, on 48,874,842
weighted average common shares outstanding. Net loss for fiscal 2014 includes costs related to an activist shareholder response of
approximately $3.5 million, executive transition costs of $5.5 million and interest expense of $1.6 million , relating primarily to interest on
outstanding advances under our Credit Facility and the amortization of fees paid to obtain our credit facility, offset by interest income totaling
$10,000 earned on our cash and restricted cash and investments. Net loss for fiscal 2013 includes costs related to an activist shareholder response
of approximately $2.1 million and interest expense of $1.4 million, relating primarily to interest on outstanding advances under our Credit
Facility and the amortization of fees paid to obtain our Credit Facility, offset by interest income totaling $18,000 earned on our cash and
restricted cash and investments. Net loss for fiscal 2012 includes interest expense of $4.0 million, relating primarily to a non-cash interest charge
of $2.3 million in connection with the write-off of previously capitalized debt financing costs, interest expense on outstanding advances under
our Credit Facility and the amortization of fees paid to obtain our Credit Facility. Net loss for fiscal 2012 also includes a $500,000 charge
relating to a pre-payment penalty paid on the early retirement of our $25 million term loan, offset by a gain of $100,000 recorded on the sale of a
non-operating asset and interest income totaling $11,000 earned on our cash and investments.
For fiscal 2014 , net loss reflects an income tax provision of $819,000 . The fiscal 2014 tax provision includes a non-cash charge of
approximately $788,000 relating to changes in our long-term deferred tax liability related to the tax amortization of the Company's indefinite-
lived intangible FCC license asset that is not available to offset existing deferred tax assets in determining changes to our income tax valuation
allowance. The remaining fiscal 2014 income tax provision relates to state income taxes payable on certain income for which there is no loss
carryforward benefit available. For fiscal 2013 , net loss reflects an income tax provision which a non-cash charge of approximately $1.2 million
relating to changes in our long-term deferred tax liability related to the tax amortization of the Company's indefinite-lived intangible FCC license
and state income taxes payable on certain income for which there is no loss carryforward benefit available. For fiscal 2012 , net loss reflects an
income tax provision of $20,000 relating to state income taxes payable on certain income for which there is no loss carryforward benefit
available.
We have not recorded any income tax benefit on the losses recorded during fiscal 2014 , fiscal 2013 and fiscal 2012 due to the uncertainty
of realizing income tax benefits in the future as indicated by our recording of an income tax valuation allowance. Based on our recent history of
losses, a full valuation allowance has been recorded and was calculated in accordance with GAAP, which places primary importance on our most
recent operating results when assessing the need for a valuation allowance. We will continue to maintain a valuation allowance against our net
deferred tax assets, including those related to net operating loss carryforwards, until we believe it is more likely than not that these assets will be
realized in the future.
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Quarterly Results
The following summarized unaudited results of operations for the quarters in fiscal 2014 and fiscal 2013 have been prepared on the same
basis as the annual financial statements and reflect normal recurring adjustments that we consider necessary for a fair presentation of results of
operations for the periods presented. Our results of operations have varied and may continue to fluctuate significantly from quarter to quarter due
to seasonality and the timing of operating expenses. Results of operations in any period should not be considered indicative of the results to be
expected for any future period.
Fiscal 2014
Net sales
Gross profit
Gross profit margin
Operating expenses
Operating income (loss) (a)
Other expense, net
Income tax provision
Net income (loss) (a)
Net income (loss) per share
Net income (loss) per share — assuming dilution
Weighted average shares outstanding:
Basic
Diluted
Fiscal 2013
Net sales
Gross profit
Gross profit margin
Operating expenses
Operating income (loss) (b)
Other expense, net
Income tax provision
Net income (loss) (b)
Net income (loss) per share
Net income (loss) per share — assuming dilution
Weighted average shares outstanding:
Basic
Diluted
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
(In thousands, except percentages and per share amounts)
$
$
159,701
60,006
156,587
60,435
$
$
157,106
59,066
201,224
65,541
$
674,618
245,048
37.6 %
38.6 %
37.6 %
32.6 %
36.3 %
$
$
$
58,954
1,052
(391 )
(201 )
460
$
64,142
(3,707 )
(381 )
(201 )
(4,289 ) $
59,263
(197 )
(404 )
(207 )
(808 ) $
61,686
3,855
(386 )
(210 )
3,259
$
244,045
1,003
(1,562 )
(819 )
(1,378 )
0.01
0.01
$
$
(0.08 ) $
(0.08 ) $
(0.01 ) $
(0.01 ) $
0.06
0.06
$
$
(0.03 )
(0.03 )
49,844
56,341
52,200
52,200
55,433
55,433
56,357
57,598
53,459
53,459
$
$
151,354
57,033
148,564
55,657
$
$
147,318
55,235
193,253
62,099
$
640,489
230,024
37.7 %
37.5 %
37.5 %
32.1 %
35.9 %
$
$
$
55,349
1,684
(367 )
(294 )
1,023
$
55,817
55,808
62,973
(160 )
(345 )
(294 )
(799 ) $
(573 )
(352 )
(292 )
(1,217 ) $
(874 )
(355 )
(293 )
(1,522 ) $
229,947
77
(1,419 )
(1,173 )
(2,515 )
0.02
0.02
$
$
(0.02 ) $
(0.02 ) $
(0.02 ) $
(0.02 ) $
(0.03 ) $
(0.03 ) $
(0.05 )
(0.05 )
49,227
54,654
49,407
49,407
49,605
49,605
49,782
49,782
49,505
49,505
(a) Net income (loss) and operating income (loss) for the first and second quarters of fiscal 2014 includes activist shareholder response
charges of approximately $1.0 million and $2.5 million, respectively. In addition, net income (loss) and operating income (loss) for the
second, third and fourth quarters of fiscal 2014 includes executive transition costs of $2.6 million, $2.4 million and $485,000,
respectively.
(b) Net loss and operating loss for the third and fourth quarters of fiscal 2013 includes activist shareholder response charges of
approximately $344,000 and $1.8 million, respectively.
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Financial Condition, Liquidity and Capital Resources
As of January 31, 2015 , we had cash of $19.8 million and had restricted cash and investments of $2.1 million pledged as collateral for our
issuances of commercial letters of credit. Our restricted cash and investments are generally restricted for a period ranging from 30-60 days and to
the extent that commercial letters of credit remain outstanding. In addition, under our amended Credit Facility with PNC, we are required to
maintain a minimum of $10 million of unrestricted cash and unused line availability at all times. As our unused line availability is greater than
$10 million at January 31, 2015 , no additional cash is required to be restricted. As of February 1, 2014 , we had cash of $29.2 million and had
restricted cash and investments of $2.1 million pledged as collateral for our issuances of commercial letters of credit. During fiscal 2014 ,
working capital increased $1.0 million to $81.0 million compared to working capital of $79.9 million for fiscal 2013 . The current ratio (our total
current assets over total current liabilities) was 1.7 at January 31, 2015 and 1.7 at February 1, 2014 .
Sources of Liquidity
Our principal source of liquidity is our available cash of $19.8 million as of January 31, 2015 . At January 31, 2015 , our cash was held in
bank depository accounts primarily for the preservation of cash liquidity.
On February 9, 2012, the Company entered into a credit and security agreement (as amended to date, the "Credit Facility") with PNC Bank,
N.A. ("PNC"), a member of The PNC Financial Services Group, Inc., as lender and agent, which was most recently amended on March 6, 2015.
The Credit Facility, which added The Private Bank to the facility, provides a revolving line of credit of $75 million and provides for a $15
million term loan on which the Company has drawn and may continue to draw to fund improvements at the Company's distribution facility in
Bowling Green, Kentucky. The amended Credit Facility also provides an accordion feature that would allow the Company to expand the size of
the revolving line of credit by another $15 million upon certain conditions being met.
All borrowings under the amended Credit Facility mature and are payable on May 1, 2018. Subject to certain conditions, the Credit Facility
also provides for the issuance of letters of credit in an aggregate amount up to $6 million which, upon issuance, would be deemed advances
under the Credit Facility. Maximum borrowings and available capacity under the revolving line of credit under the Credit Facility are equal to
the lesser of $75 million or a calculated borrowing base comprised of eligible accounts receivable and eligible inventory.
The revolving line of credit under the Credit Facility, as amended, bears interest at LIBOR plus 3% per annum. The term loan bears interest
at either a LIBOR rate or a base rate plus a margin consisting of between 4% and 5% on base rate loans and 5% to 6% on LIBOR rate loans
based on the Company’s leverage ratio as demonstrated in its audited financial statements. As of January 31, 2015, the Company had borrowings
of $40.7 million under its revolving line of credit. The Credit Facility also provides for a $15 million term loan on which the Company draws to
fund an expansion at the Company's distribution facility in Bowling Green, Kentucky. As of January 31, 2015 , approximately $12.2 million has
been drawn against the term loan to fund the expansion initiative of which $1.7 million was classified as current in the accompanying balance
sheet. Remaining capacity under our amended revolving line of credit is currently $30.0 million, of which $6.0 million is earmarked for our
distribution facility expansion, provides liquidity for working capital and general corporate purposes.
Principal borrowings under the term loan are to be payable in monthly installments over an 84 month amortization period commencing on
January 1, 2015 and are also subject to mandatory prepayment in certain circumstances, including, but not limited to, upon receipt of certain
proceeds from dispositions of collateral. Borrowings under the term loan are also subject to mandatory prepayment starting in the fiscal year
ending January 31, 2016 in an amount equal to fifty percent ( 50% ) of excess cash flow for such fiscal year, with any such payment not to
exceed $2 million in any such fiscal year.
The amended Credit Facility contains customary covenants and conditions, including, among other things, maintaining a minimum of
unrestricted cash plus facility availability of $10 million at all times and limiting annual capital expenditures. Certain financial covenants,
including minimum EBITDA levels (as defined in the Credit Facility) and a minimum fixed charge coverage ratio, become applicable only if
unrestricted cash plus facility availability falls below $16 million or upon an event of default. In addition, the Credit Facility places restrictions
on the Company’s ability to incur additional indebtedness or prepay existing indebtedness, to create liens or other encumbrances, to sell or
otherwise dispose of assets, to merge or consolidate with other entities, and to make certain restricted payments, including payments of dividends
to common shareholders.
Another potential source of near-term liquidity is our ability to increase our cash flow resources by reducing the percentage of our sales
offered under our ValuePay installment program or by decreasing the length of time we extend credit to our customers under this installment
program. However, any such change to the terms of our ValuePay installment program could impact future sales, particularly for products sold
with higher price points.
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Table of Contents
Cash Requirements
Currently, our principal cash requirements are to fund our business operations, which consist primarily of purchasing inventory for resale,
funding accounts receivable growth through the use of our ValuePay installment program in support of sales growth, funding our basic operating
expenses, particularly our contractual commitments for cable and satellite programming, and the funding of necessary capital expenditures. We
closely manage our cash resources and our working capital. We attempt to manage our inventory receipts and reorders in order to ensure our
inventory investment levels remain commensurate with our current sales trends. We also monitor the collection of our credit card and ValuePay
installment receivables and manage our vendor payment terms in order to more effectively manage our working capital which includes matching
cash receipts from our customers, to the extent possible, with related cash payments to our vendors. Our ValuePay installment program entitles
customers to purchase merchandise and generally make payments in two or more equal monthly credit card installments. ValuePay remains a
cost effective promotional tool for us. We continue to make strategic use of our ValuePay program in an effort to increase sales and to respond to
similar competitive programs.
During fiscal 2014 , we began a significant operational expansion initiative with respect to overall warehousing capacity and new
equipment and system upgrades at our Bowling Green, Kentucky distribution facility. The expansion project includes the construction of a new
building which, when completed, will expand our current 262,000 square foot facility to an approximately 600,000 square foot facility. The
expansion project is expected to be completed in the first half of fiscal 2015. The updated facilities will also include new high-speed parcel
shipping and item sortation equipment to support our increased level of shipments and units and a new call center facility to better serve our
customers. Total cost of the expansion will be approximately $25 million and has been and will continue to be financed with our Credit Facility.
Construction started in the second quarter of fiscal 2014 with total cash payments of $15 million during fiscal 2014 and anticipated cash
payments of approximately $10 million during the first half of fiscal 2015.
We also have significant future commitments for our cash, primarily payments for cable and satellite program distribution obligations and
the eventual repayment of our Credit Facility. We believe that our existing cash balances will be sufficient to maintain liquidity to fund our
normal business operations over the next twelve months. We currently have total contractual cash obligations and commitments primarily with
respect to our cable and satellite agreements, credit facility, distribution center expansion and operating leases totaling approximately $360.0
million over the next five fiscal years.
For fiscal 2014 , net cash used for operating activities totaled $1.3 million compared to net cash provided by operating activities of $14.0
million in fiscal 2013 and net cash used for operating activities of $8.5 million in fiscal 2012 . Net cash used for operating activities for fiscal
2014 reflects a net loss, as adjusted for depreciation and amortization, share-based payment compensation, long-term deferred income taxes and
the amortization of deferred revenue and other financing costs. In addition, net cash used for operating activities for fiscal 2014 reflects an
increase in accounts receivable and inventories offset by a decrease in prepaid expenses and an increase in accounts payable and accrued
liabilities. Accounts receivable increased due to increased sales levels, primarily in the fourth quarter. Inventory increased as a result of planned
purchases in support of higher sales levels and in preparation for fiscal 2015 sales growth initiatives. Accounts payable and accrued liabilities
increased during fiscal 2014 primarily due to increased inventory receipts and the timing of payments made to vendors.
Net cash provided by operating activities for fiscal 2013 reflects a net loss, as adjusted for depreciation and amortization, share-based
payment compensation, long-term deferred income taxes and the amortization of deferred revenue and other financing costs. In addition, net
cash provided by operating activities for fiscal 2013 reflects an increase in accounts receivable and inventories offset by a decrease in prepaid
expenses and an increase in accounts payable and accrued liabilities. Accounts receivable increased due to increased sales levels, primarily in the
fourth quarter, as well as due to higher utilization of our ValuePay installment payment program during the fourth quarter. Inventory increased as
a result of planned purchases in support of higher sales levels and in preparation for fiscal 2014 sales growth initiatives. Accounts payable and
accrued liabilities increased during fiscal 2013 primarily due to increased inventory receipts and the timing of payments made to vendors, an
increase in accrued incentive compensation and employee benefit contributions and increased accrued activist shareholder response costs.
Net cash used for operating activities for fiscal 2012 reflects a net loss, as adjusted for depreciation and amortization, share-based payment
compensation, loss on debt extinguishment, write-off of deferred financing costs, gain from disposal of assets, asset impairments and write-offs
and the amortization of deferred revenue and other financing costs. In addition, net cash used for operating activities for fiscal 2012 reflects an
increase in accounts receivable and prepaid expenses offset by a decrease in inventory and an increase in accounts payable and accrued
liabilities. Accounts receivable increased due to increased sales levels, primarily in the fourth quarter, as well as due to higher utilization of our
ValuePay installment payment program during the fourth quarter. Inventory decreased primarily as a result of our increased sales levels during
the fourth quarter. Accounts payable and accrued liabilities increased in 2012 primarily due to increased inventory receipts and the timing of
payments made to inventory vendors and program distribution operators during the fourth quarter of fiscal 2012 compared to the fourth quarter
of fiscal 2011, offset by our payment of a $12.4 million deferred obligation to a television distribution provider.
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Table of Contents
Net cash used for investing activities totaled $25.2 million for fiscal 2014 compared to net cash used for investing activities of $11.1
million for fiscal 2013 and net cash used for investing activities of $10.1 million in fiscal 2012 . Expenditures for property and equipment were
$25.1 million in fiscal 2014 compared to $8.2 million in fiscal 2013 and $6.2 million in fiscal 2012 . Expenditures for property and equipment
during fiscal 2014, fiscal 2013 and fiscal 2012 primarily include capital expenditures made for the distribution facility expansion, development,
upgrade and replacement of computer software, order management and merchandising systems, related computer equipment, digital
broadcasting equipment and other office equipment, warehouse equipment and production equipment. The increase in the capital expenditures
from fiscal 2013 to fiscal 2014 primarily relate to expenditures totaling $15 million made during fiscal 2014 in connection with our distribution
facility expansion. Principal future capital expenditures are expected to include: the development, upgrade and replacement of various enterprise
software systems; the continuation of our significant warehousing capacity expansion effort and related equipment improvements at our
distribution facility in Bowling Green, Kentucky; security upgrades to our information technology; the upgrade and digitalization of television
production and transmission equipment; and related computer equipment associated with the expansion of our television shopping business and
digital commerce initiatives. During fiscal 2013, we also made a cash payment of $2.8 million in connection with the extension of our NBCU
trademark license. During fiscal 2012, we made a $4 million cash payment in connection with the extension of our NBCU trademark license and
received proceeds of $102,000 relating to the disposal of assets and equipment.
Net cash provided by financing activities totaled $17.1 million in fiscal 2014 and related primarily to proceeds of the term loan under the
Credit Facility of $12.2 million, proceeds of the revolving loan under the Credit Facility of $2.7 million and proceeds from the exercise of stock
option of $2.8 million, partially offset by payments for deferred Credit Facility issuance costs of $308,000, payments on the term loan of
$145,000 and capital lease payments of $50,000. Net cash used for financing activities totaled $176,000 in fiscal 2013 and related primarily to
payments totaling $390,000 for deferred issuance costs in connection with increasing our Credit Facility, capital lease payments of $13,000,
offset by cash proceeds of $227,000 from the exercise of stock options. Net cash provided by financing activities totaled $12.1 million in fiscal
2012 and related primarily to cash proceeds of $38.2 million from our Credit Facility and cash proceeds of $109,000 from the exercise of stock
options, offset by payments made totaling $25.5 million to refinance an existing term loan, long term credit facility payments totaling $215,000
and payment of deferred issuance costs of $552,000.
Financial Covenants
The Company's Credit Facility contains customary covenants and conditions, including, among other things, maintaining a minimum of
unrestricted cash plus facility availability of $10 million at all times and limiting annual capital expenditures. Certain financial covenants,
including minimum EBITDA levels (as defined in the Credit Facility) and a minimum fixed charge coverage ratio, become applicable only if
unrestricted cash plus facility availability falls below $16 million or upon an event of default. As of January 31, 2015 , the Company's
unrestricted cash plus facility availability was $39.1 million and the Company was in compliance with applicable financial covenants of the
Credit Facility.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, investments in special purpose entities or undisclosed borrowings or debt.
Additionally, we are not party to any derivative contracts or synthetic leases.
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Table of Contents
Contractual Cash Obligations and Commitments
The following table summarizes our obligations and commitments as of January 31, 2015 , and the effect these obligations and
commitments are expected to have on our liquidity and cash flow in future periods:
Cable and satellite agreements (a)
Long term credit facility
Operating leases
Capital leases
Employment agreements
Distribution center expansion
Purchase order obligations
Total
_______________________________________
Payments Due by Period
Total
Less than
1 Year
1-3 Years
3-5 Years
(In thousands)
More than
5 Years
$
$
176,020 $
52,707
2,362
91
4,626
10,100
114,124
360,030 $
81,626 $
1,736
1,456
55
3,501
10,100
114,124
212,598 $
94,394 $
50,971
906
36
1,125
—
—
147,432 $
— $
—
—
—
—
—
—
— $
—
—
—
—
—
—
—
—
(a) Future cable and satellite payment commitments are based on subscriber levels as of January 31, 2015 and commitments entered into as
of the date of this report. Future payment commitment amounts could increase or decrease as the number of cable and satellite
subscribers increase or decrease, or with changes in channel position. Under certain circumstances, operators or we may cancel the
agreements prior to expiration.
Impact of Inflation
We believe that inflation has not had a material impact on our results of operations for each of the fiscal years in the three-year period
ended January 31, 2015 . We cannot assure you that inflation will not have an adverse impact on our operating results and financial condition in
future periods.
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board issued Revenue from Contracts with Customers, Topic 606 (Accounting
Standards Update (ASU) No. 2014-09), which provides a framework for the recognition of revenue, with the objective that recognized revenues
properly reflect amounts an entity is entitled to receive in exchange for goods and services. This guidance, which includes additional disclosure
requirements regarding revenue, cash flows and obligations related to contracts with customers, will be effective for interim and annual reporting
periods beginning after December 15, 2016. We are currently evaluating the impact of adopting ASU 2014-09 on our consolidated financial
statements.
Critical Accounting Policies and Estimates
Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements,
which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these
financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
reporting periods. On an on-going basis, management evaluates its estimates and assumptions, including those related to the realizability of
accounts receivable, inventory, product returns, intangible assets and deferred tax assets. Management bases its estimates and assumptions on
historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. There can be no
assurance that actual results will not differ from these estimates under different assumptions or conditions.
Management believes the following critical accounting policies affect the more significant assumptions and estimates used in the
preparation of the consolidated financial statements:
• Accounts receivable. We utilize an installment payment program called ValuePay that entitles customers to purchase merchandise and
generally pay for the merchandise in two or more equal monthly credit card installments in which we bear the risk of collection. The
percentage of our net sales generated utilizing our ValuePay payment program over the past three fiscal years ranged from 74% to
79% . As of January 31, 2015 and February 1, 2014 , we had approximately $106.7 million and $101.7 million , respectively, due from
customers under the ValuePay installment program. We maintain
38
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allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments.
Estimates are used in determining the provision for doubtful accounts and are based on historical rates of actual write offs and
delinquency rates, historical collection experience, credit policy, current trends in the credit quality of our customer base, average
length of ValuePay offers, average selling prices, our sales mix and accounts receivable aging. The provision for doubtful accounts
receivable, which is primarily related to our ValuePay program, for fiscal 2014, fiscal 2013 and fiscal 2012 were $13.0 million , $12.8
million and $11.8 million , respectively. Based on our fiscal 2014 bad debt experience, a one-half point increase or decrease in our bad
debt experience as a percentage of total television shopping and online net sales would have an impact of approximately $3.4 million on
consolidated distribution and selling expense.
•
Inventory. We value our inventory, which consists primarily of consumer merchandise held for resale, principally at the lower of
average cost or net realizable value. As of January 31, 2015 and February 1, 2014 , we had inventory balances of $61.5 million and
$51.2 million , respectively. We regularly review inventory quantities on hand and record a provision for excess and obsolete inventory
based primarily on a percentage of the inventory balance as determined by its age and specific product category. In determining these
percentages, we look at our historical write off experience, the specific merchandise categories on hand, our historic recovery
percentages on liquidations, forecasts of future product television shows, historic show pricing and the current market value of gold.
Provision for excess and obsolete inventory for fiscal 2014, fiscal 2013 and fiscal 2012 was $3.8 million for each year. Based on our
fiscal 2014 inventory write down experience, a 10% increase or decrease in inventory write downs would have had an impact of
approximately $384,000 on consolidated gross profit.
• Product returns. We record a reserve as a reduction of gross sales for anticipated product returns at each month-end and must make
estimates of potential future product returns related to current period product revenue. Our return rates on our television and online sales
were 21.5% in fiscal 2014 , 22.3% in fiscal 2013 , and 22.1% in fiscal 2012 . We estimate and evaluate the adequacy of our returns
reserve by analyzing historical returns by merchandise category, looking at current economic trends and changes in customer demand
and by analyzing the acceptance of new product lines. Assumptions and estimates are made and used in connection with establishing
the sales returns reserve in any accounting period. Reserves for future product returns, included in accrued liabilities in the
accompanying balance sheets at the end of fiscal 2014 and fiscal 2013 were $5.6 million and $4.9 million , respectively. Based on our
fiscal 2014 sales returns, a one-point increase or decrease in our television and online sales returns rate would have had an impact of
approximately $3.5 million on gross profit.
• FCC broadcasting license . As of January 31, 2015 and February 1, 2014 , we have recorded an intangible FCC broadcasting license
asset totaling $12.0 million , as a result of our acquisition of Boston television station WWDP TV in fiscal 2003. We annually review
our FCC television broadcast license for impairment in the fourth quarter, or more frequently if an impairment indicator is present. We
estimated the fair value of our FCC television broadcast license primarily by using income-based discounted cash flow models with the
assistance of an independent outside fair value consultant. The discounted cash flow models utilize a range of assumptions including
revenues, operating profit margin, projected capital expenditures and a discount rate. We also consider comparable asset market and
sales data for recent comparable market transactions for standalone television broadcasting stations to assist in determining fair value.
During our annual fiscal 2012 fair value assessment and utilizing independent market data, assumptions in our discounted cash flow
models reflected declines in independent television station industry revenues and operating margins due to television station rating
declines and reduced advertising purchases on local broadcast television stations. As a result, cash flows from our discounted cash flow
model did not support recovery of the asset's carrying value and we recorded an $11.1 million non-cash impairment charge in the fourth
quarter of fiscal 2012. While we believe that our estimates and assumptions regarding the valuation of the license are reasonable,
different assumptions or future events could materially affect its valuation. In addition, due to the illiquid nature of this asset, our
valuation for this license could be materially different if we were to decide to sell it in the short term which, upon revaluation, could
result in a future impairment of this asset.
• Deferred taxes. We account for income taxes under the liability method of accounting whereby income taxes are recognized during the
fiscal year in which transactions enter into the determination of financial statement income (loss). Deferred tax assets and liabilities are
recognized for the expected future tax consequences of temporary differences between the financial statement and tax basis of assets
and liabilities. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of the enactment
of such laws. We assess the recoverability of our deferred tax assets in accordance with GAAP. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning
strategies in making this assessment. In accordance with that standard, as of January 31, 2015 and February 1, 2014 , we recorded a
valuation allowance of approximately $124.3 million and $121.9 million , respectively, for our net deferred tax assets, including net
operating loss carryforwards. Based on our recent history of losses, a full valuation allowance
39
Table of Contents
was recorded in fiscal 2014, fiscal 2013 and fiscal 2012 . We intend to maintain a full valuation allowance for our net deferred tax
assets until sufficient positive evidence exists to support reversal of allowances.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We do not enter into financial instruments for trading or speculative purposes and do not currently utilize derivative financial instruments
as a hedge to offset market risk. Our operations are conducted primarily in the United States and are not subject to foreign currency exchange
rate risk. Some of our products are sourced internationally and may fluctuate in cost as a result of foreign currency swings; however, we believe
these fluctuations have not been significant. We currently have a bank credit facility that has exposure to interest rate risk; changes in market
interest rates could impact the level of interest expense and income earned on our cash portfolio.
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Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
OF EVINE Live Inc.
AND SUBSIDIARIES
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of January 31, 2015 and February 1, 2014
Consolidated Statements of Operations for the Years Ended January 31, 2015, February 1, 2014 and February 2, 2013
Consolidated Statements of Shareholders’ Equity for the Years Ended January 31, 2015, February 1, 2014 and February 2, 2013
Consolidated Statements of Cash Flows for the Years Ended January 31, 2015, February 1, 2014 and February 2, 2013
Notes to Consolidated Financial Statements
Financial Statement Schedule — Schedule II — Valuation and Qualifying Accounts
Page
42
43
44
45
46
47
71
41
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
EVINE Live Inc. and Subsidiaries
Eden Prairie, Minnesota
We have audited the accompanying consolidated balance sheets of EVINE Live Inc. (formerly ValueVision Media, Inc.) and subsidiaries (the
"Company") as of January 31, 2015 and February 1, 2014, and the related consolidated statements of income, stockholders' equity, and cash
flows for each of the three years in the period ended January 31, 2015. Our audits also included the financial statement schedule listed in the
Index at Item 15. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
these financial statements and the financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of EVINE Live Inc. and
subsidiaries as of January 31, 2015 and February 1, 2014, and the results of their operations and their cash flows for each of the three years in the
period ended January 31, 2015, in conformity with accounting principles generally accepted in the United States of America. Also, in our
opinion, the financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present
fairly in all material respects, the information set forth therein.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's
internal control over financial reporting as of January 31, 2015, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 26, 2015 expressed an
unqualified opinion on the Company's internal control over financial reporting.
Minneapolis, Minnesota
March 26, 2015
/s/ DELOITTE & TOUCHE LLP
42
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EVINE Live Inc. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
Current assets:
Cash
Restricted cash and investments
Accounts receivable, net
Inventories
Prepaid expenses and other
Total current assets
Property & equipment, net
FCC broadcasting license
Other assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable
Accrued liabilities
Current portion of long term credit facility
Deferred revenue
Total current liabilities
Capital lease liability
Deferred revenue
Deferred tax liability
Long term credit facility
Total liabilities
Commitments and contingencies
Shareholders' equity:
Common stock, $.01 per share par value, 100,000,000 shares authorized; 56,448,663 and 49,844,253
shares issued and outstanding
Warrants to purchase common stock
Additional paid-in capital
Accumulated deficit
Total shareholders’ equity
January 31,
2015
February 1,
2014
(In thousands, except share and per share
data)
$
$
$
19,828 $
2,100
112,275
61,456
5,284
200,943
42,759
12,000
1,989
257,691 $
81,457 $
36,683
1,736
85
119,961
36
249
1,946
50,971
173,163
29,177
2,100
107,386
51,162
6,032
195,857
24,952
12,000
896
233,705
77,296
38,535
—
85
115,916
88
335
1,158
38,000
155,497
564
—
418,846
(334,882 )
84,528
257,691 $
498
533
410,681
(333,504 )
78,208
233,705
$
The accompanying notes are an integral part of these consolidated financial statements.
43
Table of Contents
Net sales
Cost of sales
Gross profit
Operating expense:
Distribution and selling
General and administrative
Depreciation and amortization
Executive transition costs
Activist shareholder response costs
FCC license impairment
Total operating expense
Operating income (loss)
Other income (expense):
Interest income
Interest expense
Gain on sale of assets
Loss on debt extinguishment
Total other expense
Loss before income taxes
Income tax provision
Net loss
Net loss per common share
EVINE Live Inc. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended
January 31,
2015
February 1,
2014
February 2,
2013
(In thousands, except share and per share data)
674,618 $
429,570
245,048
640,489 $
410,465
230,024
586,820
374,448
212,372
202,579
23,983
8,445
5,520
3,518
—
244,045
1,003
10
(1,572 )
—
—
(1,562 )
(559 )
(819 )
(1,378 ) $
(0.03 ) $
(0.03 ) $
191,695
23,799
12,320
—
2,133
—
229,947
77
18
(1,437 )
—
—
(1,419 )
(1,342 )
(1,173 )
(2,515 ) $
(0.05 ) $
(0.05 ) $
193,037
18,297
13,224
—
—
11,111
235,669
(23,297 )
11
(3,970 )
100
(500 )
(4,359 )
(27,656 )
(20 )
(27,676 )
(0.57 )
(0.57 )
$
$
$
$
Net loss per common share — assuming dilution
Weighted average number of common shares outstanding:
Basic
Diluted
53,458,662
53,458,662
49,504,892
49,504,892
48,874,842
48,874,842
The accompanying notes are an integral part of these consolidated financial statements.
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Table of Contents
EVINE Live Inc. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
For the Years Ended January 31, 2015 , February 1, 2014 and February 2, 2013
Common Stock
Number
of Shares
Par
Value
Common
Stock
Purchase
Warrants
Additional
Paid-In
Capital
Accumulated
Deficit
Total
Shareholders'
Equity
(In thousands, except share data)
BALANCE, January 28, 2012
48,560,205 $
486 $
Net loss
Common stock issuances pursuant to equity
compensation plans
Stock purchase warrants forfeited
Share-based payment compensation
BALANCE, February 2, 2013
Net loss
Common stock issuances pursuant to equity
compensation plans
Share-based payment compensation
BALANCE, February 1, 2014
Net loss
Common stock issuances pursuant to equity
compensation plans
Share-based payment compensation
Common stock issuance - warrant exercise
Common stock issuance
579,156
—
—
49,139,361
704,892
—
49,844,253
1,366,827
—
5,058,741
178,842
BALANCE, January 31, 2015
56,448,663 $
567 $ 403,849 $ (303,313 ) $ 101,589
(27,676 )
(27,676 )
104
34
3,257
—
—
—
(34 )
—
—
533 407,244 (330,989 )
(2,515 )
220
3,217
—
—
—
—
533 410,681 (333,504 )
(1,378 )
109
—
3,257
77,279
(2,515 )
227
3,217
78,208
(1,378 )
5
—
—
491
7
—
498
13
—
51
2
—
—
(533 )
—
2,794
3,860
—
1,044
564 $ — $ 418,846 $ (334,882 ) $ 84,528
2,781
3,860
482
1,042
—
—
—
—
The accompanying notes are an integral part of these consolidated financial statements.
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Table of Contents
EVINE Live Inc. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
OPERATING ACTIVITIES:
Net loss
Adjustments to reconcile net loss to net cash provided by (used for) operating
activities:
Depreciation and amortization
Share-based payment compensation
Write-off of deferred financing costs
Amortization of deferred revenue
Amortization of deferred financing costs
Asset impairments
Deferred income taxes
Loss on debt extinguishment
Gain from disposal of assets
Changes in operating assets and liabilities:
Accounts receivable, net
Inventories
Prepaid expenses and other
Accounts payable and accrued liabilities
Net cash provided by (used for) operating activities
INVESTING ACTIVITIES:
Property and equipment additions
Purchase of NBC trademark license
Purchase of EVINE trademark
Proceeds from disposal of assets
Net cash used for investing activities
FINANCING ACTIVITIES:
Payments for deferred issuance costs
Proceeds of term loan
Proceeds from revolving loan
Payments on term loan
Payments on capital leases
Proceeds from exercise of stock options
Net cash provided by (used for) financing activities
Net increase (decrease) in cash
BEGINNING CASH
ENDING CASH
For the Years Ended
January 31,
2015
February 1,
2014
February 2,
2013
(in thousands)
$
(1,378 ) $
(2,515 ) $
(27,676 )
8,872
3,860
—
(86 )
231
—
788
—
—
(4,889 )
(10,294 )
815
766
(1,315 )
(25,119 )
—
(59 )
—
(25,178 )
12,585
3,217
—
(85 )
178
—
1,158
—
—
(9,026 )
(14,007 )
649
21,799
13,953
(8,247 )
(2,830 )
—
—
(11,077 )
(307 )
12,152
2,700
(145 )
(50 )
2,794
17,144
(9,349 )
29,177
19,828 $
(390 )
—
—
—
(13 )
227
(176 )
2,700
26,477
29,177 $
$
13,424
3,257
2,306
(87 )
249
11,111
—
500
(102 )
(18,086 )
6,321
(2,066 )
2,367
(8,482 )
(6,157 )
(4,000 )
—
102
(10,055 )
(552 )
—
38,215
(25,715 )
—
109
12,057
(6,480 )
32,957
26,477
The accompanying notes are an integral part of these consolidated financial statements.
46
Table of Contents
(1) The Company
EVINE Live Inc. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended January 31, 2015 , February 2, 2013 and January 28, 2012
EVINE Live Inc. (formerly ValueVision Media, Inc.) and its subsidiaries ("we," "our," "us," or the "Company") is a digital commerce
company that markets, sells and distributes products to consumers through TV, online, mobile and social media. The Company operates a 24-
hour television shopping network, EVINE Live, which is distributed primarily on cable and satellite systems, through which it offers brand name
and private label products in the categories of jewelry & watches; home & consumer electronics; beauty, health & fitness; and fashion &
accessories. Orders are fulfilled via telephone, online and mobile channels. The television network is distributed into approximately 88 million
homes, primarily through cable and satellite affiliation agreements and agreements with telecommunications companies such as AT&T and
Verizon. Programming is also streamed live online at evine.com and is also available on all mobile channels. Programming is also distributed
through a Company-owned full power television station in Boston, Massachusetts and through leased carriage on a full power television station
in Seattle, Washington.
The Company also operates evine.com, a comprehensive digital commerce platform that sells products which appear on its television
shopping network as well as an extended assortment of online-only merchandise. The live programming and products are also marketed via
mobile devices, including smartphones and tablets, and through the leading social media channels.
On November 18, 2014, the Company announced that it had changed its corporate name to EVINE Live Inc. from ValueVision Media, Inc.
Effective November 20, 2014, the Company's NASDAQ trading symbol also changed to EVLV from VVTV at that time. The Company
transitioned from doing business as "ShopHQ" to "EVINE Live" and evine.com on February 14, 2015.
In May 2013, the Company previously announced a rebranding of its 24-hour television shopping network and digital commerce internet
website from ShopNBC and ShopNBC.com to ShopHQ and ShopHQ.com, respectively.
(2) Summary of Significant Accounting Policies
Fiscal Year
The Company's fiscal year ends on the Saturday nearest to January 31. References to years in this report relate to fiscal years, rather than to
calendar years. The Company’s most recently completed fiscal year, fiscal 2014 , ended on January 31, 2015 , and consisted of 52 weeks. Fiscal
2013 ended on February 1, 2014 and consisted of 52 weeks. Fiscal 2012 ended on February 2, 2013 and consisted of 53 weeks.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.
Intercompany accounts and transactions have been eliminated in consolidation.
Revenue Recognition and Accounts Receivable
Revenue is recognized at the time merchandise is shipped or when services are provided. Shipping and handling fees charged to customers
are recognized as merchandise is shipped and are classified as revenue in the accompanying statements of operations in accordance with
generally accepted accounting principles ("GAAP"). The Company classifies shipping and handling costs in the accompanying statements of
operations as a component of cost of sales. Revenue is reported net of estimated sales returns and excludes sales taxes. Sales returns are
estimated and provided for at the time of sale based on historical experience. Payments received for unfilled orders are reflected as a component
of accrued liabilities.
Accounts receivable consist primarily of amounts due from customers for merchandise sales and from credit card companies, and are
reflected net of reserves for estimated uncollectible amounts of $6,706,000 at January 31, 2015 and $6,446,000 at February 1, 2014 . The
Company utilizes an installment payment program called ValuePay that entitles customers to purchase merchandise and generally pay for the
merchandise in two or more equal monthly credit card installments. As of January 31, 2015 and February 1, 2014 , the Company had
approximately $106,678,000 and $101,658,000 , respectively, of net receivables due from customers under the ValuePay installment program.
The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required
payments. Provision for doubtful accounts receivable primarily
47
EVINE Live INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
related to the Company’s ValuePay program were $13,007,000 , $12,762,000 and $11,792,000 for fiscal 2014, fiscal 2013 and fiscal 2012 ,
respectively.
Cost of Sales and Other Operating Expenses
Cost of sales includes primarily the cost of merchandise sold, shipping and handling costs, inbound freight costs, excess and obsolete
inventory charges and customer courtesy credits. Purchasing and receiving costs, including costs of inspection, are included as a component of
distribution and selling expense and were approximately $10,984,000 , $10,112,000 and $9,348,000 for fiscal 2014, fiscal 2013 and fiscal 2012 ,
respectively. Distribution and selling expense consist primarily of cable and satellite access fees, credit card fees, bad debt expense and costs
associated with purchasing and receiving, inspection, marketing and advertising, show production, website marketing and merchandising,
telemarketing, customer service, warehousing and fulfillment. General and administrative expense consists primarily of costs associated with
executive, legal, accounting and finance, information systems and human resources departments, software and system maintenance contracts,
insurance, investor and public relations and director fees.
Cash
Cash consists of cash on deposit. The Company maintains its cash balances at financial institutions in demand deposit accounts that are
federally insured. The Company has not experienced losses in such accounts and believes it is not exposed to any significant credit risk on its
cash.
Restricted Cash and Investments
The Company had restricted cash and investments of $2,100,000 for each of fiscal 2014 and fiscal 2013 . The restricted cash and
investments primarily collateralize the Company’s issuances of commercial letters of credit. The Company’s restricted cash and investments
consist of certificates of deposit. Interest income is recognized when earned.
Inventories
Inventories, which consists of consumer merchandise held for resale, are stated at the lower of average cost or net realizable value, giving
consideration to obsolescence provision write downs of $3,838,000 , $3,776,000 and $3,787,000 for fiscal 2014, fiscal 2013 and fiscal 2012 ,
respectively.
Marketing and Advertising Costs
Marketing and advertising costs are expensed as incurred and consist primarily of contractual marketing fees paid to certain cable
operators for cross channel promotions and online advertising, including amounts paid to online search engine operators, customer mailings and
traffic-driving affiliate websites. Total marketing and advertising costs and online search marketing fees totaled $1,946,000 , $1,827,000 and
$1,843,000 for fiscal 2014, fiscal 2013 and fiscal 2012 , respectively. The Company includes advertising costs as a component of distribution
and selling expense in the Company’s consolidated statement of operations.
Property and Equipment
Property and equipment are stated at cost. Improvements and renewals that extend the life of an asset are capitalized and depreciated.
Repairs and maintenance are charged to expense as incurred. The cost and accumulated depreciation of property and equipment retired or
otherwise disposed of are removed from the related accounts, and any residual values are charged or credited to operations. Depreciation and
amortization for financial reporting purposes are provided on the straight-line method based upon estimated useful lives. Costs incurred to
develop software for internal use and the Company’s websites are capitalized and amortized over the estimated useful life of the software. Costs
related to maintenance of internal-use software and for the Company’s website are expensed as incurred.
Intangible Assets
The Company’s primary identifiable intangible assets include an FCC broadcast license and the EVINE trademark and brand name and
prior to its expiration in January 2014, a trademark license agreement. Identifiable intangibles with finite lives are amortized and those
identifiable intangibles with indefinite lives are not amortized. Identifiable intangible assets that are subject to amortization are evaluated for
impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Identifiable intangible assets
not subject to amortization are tested for impairment annually or more frequently if events warrant. The impairment test consists of a comparison
of the fair value of the intangible asset with its carrying amount.
48
EVINE Live INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Income Taxes
The Company accounts for income taxes under the liability method of accounting whereby deferred tax assets and liabilities are
recognized for the expected future tax consequences of temporary differences between financial statement and tax basis of assets and liabilities.
Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of the enactment of such laws. The
Company assesses the recoverability of its deferred tax assets in accordance with GAAP.
The Company recognizes interest and penalties related to uncertain tax positions within income tax expense.
Net Loss Per Common Share
Basic loss per share is computed by dividing reported loss by the weighted average number of common shares outstanding for the reported
period. Diluted net loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock of the Company during reported periods.
A reconciliation of net loss per share calculations and the number of shares used in the calculation of basic net loss per share and diluted
net loss per share is as follows:
Net loss (a)
Weighted average number of common shares outstanding — Basic
Dilutive effect of stock options, non-vested shares and warrants
Weighted average number of common shares outstanding — Diluted
Net loss per common share
Net loss per common share — assuming dilution
For the Years Ended
January 31,
2015
(1,378,000 ) $
53,458,662
—
53,458,662
February 1,
2014
(2,515,000 ) $
49,504,892
—
49,504,892
February 2,
2013
(27,676,000 )
48,874,842
—
48,874,842
(0.03 ) $
(0.03 ) $
(0.05 ) $
(0.05 ) $
(0.57 )
(0.57 )
$
$
$
(a) The net losses for fiscal 2014 and fiscal 2013 includes activist shareholder response charges of approximately $3.5 million and $2.1
million , respectively. In addition, the net loss for fiscal 2014 also includes executive transition costs of $5.5 million . The net loss for
fiscal 2012 includes an $11.1 million non-cash intangible asset impairment charge related to the Company's FCC broadcasting license. In
addition, the net loss for fiscal 2012 also include charges totaling $500,000 related to losses on debt extinguishment made during that
fiscal year.
For fiscal 2014, fiscal 2013 and fiscal 2012 , approximately 3,118,000 , 6,247,000 and 3,920,000 , respectively, incremental in-the-money
potentially dilutive common share stock options and, with respect to fiscal 2013 and fiscal 2012, warrants have been excluded from the
computation of diluted earnings per share, as the effect of their inclusion would be anti-dilutive.
Fair Value of Financial Instruments
GAAP requires disclosures of fair value information about financial instruments for which it is practicable to estimate that value. In cases
where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those
techniques are significantly affected by the assumptions used, including discount rate and estimates of future cash flows. In that regard, the
derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in
immediate settlement of the instrument. GAAP excludes certain financial instruments and all non-financial instruments from its disclosure
requirements.
The Company used the following methods and assumptions in estimating its fair values for financial instruments:
The carrying amounts reported in the accompanying consolidated balance sheets approximate the fair value for cash, short-term
investments, accounts receivable, trade payables and accrued liabilities, due to the short maturities of those instruments. The fair value of the
Company’s $53 million Credit Facility is estimated based on rates available to the Company for issuance of debt. As of January 31, 2015 , the
Company's Credit Facility had a carrying amount and an estimated fair value of $53 million .
Fair Value Measurements on a Nonrecurring Basis
Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to the Company's tangible fixed assets and
intangible FCC broadcasting license asset, which are remeasured when estimated fair value is below carrying value on the consolidated balance
sheets. For these assets, the Company does not periodically adjust its carrying value to fair value except in the event of impairment. If the
Company determines that impairment has occurred, the carrying value of the asset is reduced to fair value and the difference is recorded as a loss
within operating income in the consolidated statement of operations. During
49
EVINE Live INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
fiscal 2012, the Company recorded an $11.1 million non-cash impairment charge to reduce the carrying value of its intangible FCC broadcasting
license asset to fair value. The Company had no remeasurements of such assets or liabilities to fair value during fiscal 2014 and fiscal 2013.
Use of Estimates
The preparation of financial statements in conformity with GAAP in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the
financial statements and the reported amounts of revenues and expenses during reporting periods. These estimates relate primarily to the carrying
amounts of accounts receivable and inventories, the realizability of certain long-term assets and the recorded balances of certain accrued
liabilities and reserves. Ultimate results could differ from these estimates.
Stock-Based Compensation
Compensation is recognized for all stock-based compensation arrangements by the Company, including employee and non-employee stock
options granted. The estimated grant date fair value of each stock-based award is recognized in income over the requisite service period, which is
generally the vesting period. The estimated fair value of each option is calculated using the Black-Scholes option-pricing model for time-based
vesting awards and a Monte Carlo valuation model for market-based vesting awards. Non-vested share awards are recorded as compensation
cost over the requisite service periods based on the fair value on the date of grant.
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board issued Revenue from Contracts with Customers, Topic 606 (Accounting
Standards Update (ASU) No. 2014-09), which provides a framework for the recognition of revenue, with the objective that recognized revenues
properly reflect amounts an entity is entitled to receive in exchange for goods and services. This guidance, which includes additional disclosure
requirements regarding revenue, cash flows and obligations related to contracts with customers, will be effective for interim and annual reporting
periods beginning after December 15, 2016. We are currently evaluating the impact of adopting ASU 2014-09 on our consolidated financial
statements.
(3) Property and Equipment
Property and equipment in the accompanying consolidated balance sheets consisted of the following:
Land and improvements
Buildings and improvements
Transmission and production equipment
Office and warehouse equipment
Computer hardware, software and telephone equipment
Distribution Center Expansion - Construction in Process
Leasehold improvements
Less — Accumulated depreciation
$
—
5-40
5-10
3-15
3-7
3-40
3-5
Estimated
Useful Life
(In Years) January 31, 2015 February 1, 2014
3,437,000
23,737,000
6,216,000
9,039,000
88,930,000
—
2,681,000
(109,088,000 )
24,952,000
3,394,000 $
24,215,000
5,424,000
9,298,000
89,615,000
16,151,000
2,681,000
(108,019,000 )
42,759,000 $
$
Depreciation expense in fiscal 2014, fiscal 2013 and fiscal 2012 was $8,854,000 , $8,589,000 and $9,376,000 , respectively.
50
EVINE Live INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(4) Intangible Assets
Intangible assets in the accompanying consolidated balance sheets consisted of the following:
Weighted
Average
Life
(Years)
January 31, 2015
February 1, 2014
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
Finite-lived intangible assets:
NBCU trademark license - second renewal
EVINE trademark
—
15
Total finite-lived intangible assets
Indefinite-lived intangible assets:
FCC broadcast license
$
$
— $
1,103,000
1,103,000 $
— $
6,830,000 $
(18,000 )
(18,000 ) $
—
6,830,000 $
(6,830,000 )
—
(6,830,000 )
$
12,000,000
$
12,000,000
The Company annually reviews its FCC television broadcast license for impairment in the fourth quarter, or more frequently if an
impairment indicator is present. As of January 31, 2015 and as of February 1, 2014 , the Company had an intangible FCC broadcasting license
with a carrying value and fair value of $12,000,000 and $13,100,000 , respectively. The Company estimates the fair value of its FCC television
broadcast license primarily by using income-based discounted cash flow models with the assistance of an independent outside fair value
consultant. The Company also considers comparable asset market and sales data for recent comparable market transactions for standalone
television broadcasting stations to assist in determining fair value.
During the Company's annual fiscal 2012 fair value assessment and utilizing independent market data, assumptions in the Company's
discounted cash flow models reflected declines in independent television station industry revenues and operating margins due to television
station rating declines and reduced advertising purchases on local broadcast television stations. As a result, cash flows from our discounted cash
flow model did not support recovery of the asset's carrying value and the Company recorded an $11.1 million non-cash impairment charge in the
fourth quarter of fiscal 2012. The discounted cash flow models utilize a range of assumptions including revenues, operating profit margin,
projected capital expenditures and an unobservable discount rate of 9.5% - 10.5% . The Company concluded that the inputs used in its intangible
FCC broadcasting license valuation at January 31, 2015 are Level 3 inputs related to this valuation.
While the Company believes that its estimates and assumptions regarding the valuation of the license are reasonable, different assumptions
or future events could materially affect its valuation. In addition, due to the illiquid nature of this asset, the Company's valuation for this license
could be materially different if it were to decide to sell it in the short term which, upon revaluation, could result in a future impairment of this
asset.
On November 18, 2014, the Company entered into an asset purchase agreement with Dollars Per Minute, Inc., a Delaware corporation
("DPM") to purchase certain assets of DPM, including the EVINE Live trademark. As consideration for the purchase of this trademark, the
Company issued 178,842 unregistered shares of our common stock, which represented an aggregate value of $1,044,000 based on the closing
price of our common stock on November 13, 2014, $20,000 in cash consideration and incurred $39,000 in professional fees associated with
acquiring the asset.
On January 31, 2014, ShopNBC and ShopNBC.com officially transitioned to the brand, ShopHQ and ShopHQ.com. On May 11, 2012, the
Company amended its trademark license agreement for the use of the ShopNBC brand name with NBCU, extending the term of the license
agreement through January 2014. As consideration for the amendment, the Company paid NBCU $4,000,000 upon execution and paid an
additional $2,830,000 on May 15, 2013.
Amortization expense in fiscal 2014, fiscal 2013 and fiscal 2012 was $18,000 , $3,997,000 and $3,879,000 , respectively. As of February 1,
2014 , the Company's trademark license agreement with NBCU was fully amortized.
(5) Accrued Liabilities
Accrued liabilities in the accompanying consolidated balance sheets consisted of the following:
51
Table of Contents
Accrued cable access fees
Accrued salaries and related
Reserve for product returns
Other
January 31, 2015 February 1, 2014
$ 14,669,000 $ 15,861,000
10,679,000
4,894,000
7,101,000
$ 36,683,000 $ 38,535,000
10,089,000
5,585,000
6,340,000
(6) EVINE Private Label Consumer Credit Card Program
The Company has a private label consumer credit card program (the "Program"). The Program is made available to all qualified consumers
for the financing of purchases of products from EVINE. The Program provides a number of benefits to customers including deferred billing
options and free or reduced shipping promotions throughout the year. Use of the EVINE credit card furthers customer loyalty, reduces total
credit card expense and reduces the Company’s overall bad debt exposure since the credit card issuing bank bears the risk of loss on EVINE
credit card transactions that do not utilize the Company's ValuePay installment payment program. In December 2011, the Company entered into
a Private Label Consumer Credit Card Program Agreement Amendment with Synchrony Financial, formerly known as GE Capital Retail Bank
extending the Program for an additional seven years until 2019. The Company received a $500,000 signing bonus as an incentive for the
Company to extend the Program. The signing bonus has been recorded as deferred revenue in the accompanying financial statements and is
being recognized as revenue over the seven -year term of the agreement.
Synchrony Financial, the issuing bank for the Program, is indirectly majority-owned by the General Electric Company ("GE"), which is
also the parent company of GE Equity. As of March 20, 2015 , GE Equity has an approximate 7% beneficial ownership in the Company and has
certain rights as further described in footnote 18, "Relationship with NBCU and GE Equity".
(7) Fair Value Measurements
GAAP utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels.
The fair value hierarchy gives the highest priority to observable quoted prices (unadjusted) in active markets for identical assets and liabilities
(Level 1 measurement), then priority to quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments
in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market (Level 2
measurement) and the lowest priority to unobservable inputs (Level 3 measurement).
As of January 31, 2015 and February 1, 2014 the Company had $ 2,100,000 in Level 2 investments in the form of bank certificates of deposit
which are used as cash collateral for the issuance of commercial letters of credit. The Company's investments in certificates of deposits were
measured using inputs based upon quoted prices for similar instruments in active markets and, therefore, were classified as Level 2 investments.
As of January 31, 2015 and February 1, 2014 the Company also had a long-term variable rate Credit Facility with carrying values of
$52,707,000 and $38,000,000 , respectively. As of January 31, 2015 and February 1, 2014 , $1,736,000 and $0 was classified as current. The fair
value of the variable rate Credit Facility approximates and is based on its carrying value. The Company has no Level 3 investments that use
significant unobservable inputs.
Non Financial Assets Measured at Fair Value - Nonrecurring Basis
As of January 31, 2015 and February 1, 2014 the Company had an intangible FCC broadcasting license asset with a carrying value of
$12,000,000 . The Company estimates the fair value of its FCC television broadcast license asset primarily by using income-based discounted
cash flow models with the assistance of an independent outside fair value consultant. The discounted cash flow models utilize a range of
assumptions including revenues, operating profit margin, projected capital expenditures and an unobservable input discount rates of 9.5% -
10.5% . The Company concluded that the inputs used in its intangible FCC broadcasting license asset valuation are Level 3 inputs.
The following table provides a reconciliation of the beginning and ending balances of non-financial assets measured at fair value on a
nonrecurring basis that use significant unobservable inputs (Level 3):
52
Table of Contents
Intangible FCC Broadcasting License Asset:
Beginning balance
Losses included in earnings (asset impairment)
Ending balance
(8) Credit Agreement
The Company's long-term credit facility consists of:
January 31,
2015
February 1,
2014
$
$
12,000,000
—
12,000,000
$
$
12,000,000
—
12,000,000
Credit Facility
Revolving loan
Term loan
Total long-term credit facility
Less current portion of long-term credit facility
Long-term credit facility, excluding current portion
January 31, 2015 February 1, 2014
$ 40,700,000 $ 38,000,000
—
38,000,000
—
$ 50,971,000 $ 38,000,000
12,007,000
52,707,000
(1,736,000 )
On February 9, 2012, the Company entered into a credit and security agreement (as amended to date, the "Credit Facility") with PNC Bank,
N.A. ("PNC"), a member of The PNC Financial Services Group, Inc., as lender and agent which was most recently amended on March 6, 2015.
The Credit Facility, which added The Private Bank to the facility, provides a revolving line of credit of $75 million and provides for a $15
million term loan on which the Company has drawn and may continue to draw to fund improvements at the Company's distribution facility in
Bowling Green, Kentucky. The amended Credit Facility also provides an accordion feature that would allow the Company to expand the size of
the revolving line of credit by another $15 million upon certain conditions being met.
All borrowings under the amended Credit Facility mature and are payable on May 1, 2018. Subject to certain conditions, the Credit Facility
also provides for the issuance of letters of credit in an aggregate amount up to $6 million which, upon issuance, would be deemed advances
under the Credit Facility. Maximum borrowings and available capacity under the revolving line of credit under the Credit Facility are equal to
the lesser of $75 million or a calculated borrowing base comprised of eligible accounts receivable and eligible inventory. The Credit Facility is
secured by substantially all of the Company’s personal property, as well as the Company’s real properties located in Eden Prairie, Minnesota and
Bowling Green, Kentucky. Under certain circumstances, the borrowing base may be adjusted if there were to be a significant deterioration in
value of the Company’s accounts receivable and inventory.
The revolving line of credit under the Credit Facility bears interest at LIBOR plus 3% per annum. The term loan bears interest at either (i) a
fixed rate based on the LIBOR Rate for interest periods of one , two , three or six months, or (ii) a daily floating alternate base rate (the “Base
Rate”), plus until January 31, 2015, a margin of 5% on the Base Rate and 6% on the LIBOR Rate and then the margin adjusts each fiscal year to
a rate consisting of between 4% and 5% on Base Rate term loans and 5% to 6% on LIBOR Rate term loans based on the Company’s leverage
ratio as demonstrated in its financial statements. As of January 31, 2015, the Company had borrowings of $40.7 million under its revolving
credit facility. Remaining capacity under the revolving credit facility as of January 31, 2015 is $19.3 million , of which $7.3 million is earmarked
for our distribution facility expansion, provides liquidity for working capital and general corporate purposes. The Credit Facility also provides
for a $15 million term loan on which the Company draws to fund an expansion at the Company's distribution facility in Bowling Green,
Kentucky. As of January 31, 2015 , there were $12.0 million of borrowings under the Credit Facility term loan of which $1.7 million was
classified as current in the accompanying balance sheet.
Principal borrowings under the term loan are to be payable in monthly installments over an 84 month amortization period commencing on
January 1, 2015 and are also subject to mandatory prepayment in certain circumstances, including, but not limited to, upon receipt of certain
proceeds from dispositions of collateral. Borrowings under the term loan are also subject to mandatory prepayment starting in the fiscal year
ending January 31, 2016 in an amount equal to fifty percent ( 50% ) of excess cash flow for such fiscal year, with any such payment not to
exceed $2,000,000 in any such fiscal year. The Credit Facility is subject to mandatory prepayment in certain circumstances. In addition, if the
total Credit Facility is terminated prior to maturity, the Company would be required to pay an early termination fee of 1.0% if terminated on or
before May 1, 2015; 0.5% if terminated on or before May
53
EVINE Live INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
1, 2016; and no fee if terminated after May 1, 2016. Interest expense recorded under the Credit Facility's revolving line of credit was
$1,554,000 , $1,435,000 and $ 1,503,000 for fiscal 2014 , fiscal 2013 and fiscal 2012 , respectively.
The Credit Facility contains customary covenants and conditions, including, among other things, maintaining a minimum of unrestricted
cash plus facility availability of $10 million at all times and limiting annual capital expenditures. As our unused line availability is greater than
$10 million at January 31, 2015 , no additional cash is required to be restricted. Certain financial covenants, including minimum EBITDA levels
(as defined in the Credit Facility) and a minimum fixed charge coverage ratio, become applicable only if unrestricted cash plus facility
availability falls below $16 million or upon an event of default. In addition, the Credit Facility places restrictions on the Company’s ability to
incur additional indebtedness or prepay existing indebtedness, to create liens or other encumbrances, to sell or otherwise dispose of assets, to
merge or consolidate with other entities, and to make certain restricted payments, including payments of dividends to common shareholders.
Costs incurred to obtain amendments to the Credit Facility of approximately $718,000 and unamortized costs incurred to obtain the
original Credit Facility totaling $466,000 have been deferred and are being expensed as additional interest over the five -year term of the Credit
Facility. In connection with a previous term loan refinancing, the Company was required to pay an early termination fee of $500,000 , which was
recorded as a loss on debt extinguishment in the accompanying statement of operations for the year ending February 2, 2013 .
The aggregate maturities of the Company's long-term Credit Facility is as follows:
Fiscal year
2015
2016
2017
2018
2019
Credit Facility
Term loan
Revolving loan
$
1,736,000 $
1,736,000
1,736,000
6,799,000
—
— $
—
—
40,700,000
—
$
12,007,000 $
40,700,000 $
Total
1,736,000
1,736,000
1,736,000
47,499,000
—
52,707,000
(9) Shareholder's Equity
Common Stock
The Company currently has authorized 100,000,000 shares of undesignated capital stock, of which 56,448,663 shares were issued and
outstanding as common stock as of January 31, 2015 . The board of directors may establish new classes and series of capital stock by resolution
without shareholder approval; however, approval of GE Equity is required in certain circumstances.
Dividends
The Company has never declared or paid any dividends with respect to its capital stock. Under the terms of the amended and restated
shareholder agreement between the Company and GE Equity, the Company is prohibited from paying dividends on its common stock without
GE Equity’s prior consent. The Company is further restricted from paying dividends on its stock by its Credit Facility.
Warrants
In June 2014, GE Equity exercised its common stock warrants in a cashless exercise acquiring 5,058,741 shares of our common stock. The
warrants were issued in connection with the issuance of the Company’s Series B Redeemable Preferred Stock in February 2009. As of
January 31, 2015 , the Company had no outstanding warrants.
Stock-Based Compensation - Stock Options
Compensation is recognized for all stock-based compensation arrangements by the Company. Stock-based compensation expense for fiscal
2014, fiscal 2013 and fiscal 2012 related to stock option awards was $2,537,000 , $2,405,000 and $1,682,000 , respectively. The Company has
not recorded any income tax benefit from the exercise of stock options due to the uncertainty of realizing income tax benefits in the future.
As of January 31, 2015 , the Company had one omnibus stock plan for which stock awards can be currently granted: the 2011 Omnibus
Incentive Plan that provides for the issuance of up to 6,000,000 shares of the Company's stock. The 2004 Omnibus
54
EVINE Live INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Stock Plan expired on June 22, 2014. No further awards may be made under the 2004 Omnibus Plan, but any award granted under the
2004 Omnibus Plan and outstanding on June 22, 2014 will remain outstanding in accordance with its terms. The 2001 Omnibus Stock Plan
expired on June 21, 2011. The 2011 plan is administered by the human resources and compensation committee of the board of directors and
provides for awards for employees, directors and consultants. All employees and directors of the Company and its affiliates are eligible to
receive awards under the plan. The types of awards that may be granted under this plan include restricted and unrestricted stock, restricted stock
units, incentive and nonstatutory stock options, stock appreciation rights, performance units, and other stock-based awards. Incentive stock
options may be granted to employees at such exercise prices as the human resources and compensation committee may determine but not less
than 100% of the fair market value of the underlying stock as of the date of grant. No incentive stock option may be granted more than 10 years
after the effective date of the respective plan's inception or be exercisable more than 10 years after the date of grant. Options granted to outside
directors are nonstatutory stock options with an exercise price equal to 100% of the fair market value of the underlying stock as of the date of
grant. With the exception of market-based options, options granted generally vest over three years in the case of employee stock options and vest
immediately on the date of grant in the case of director options, and have contractual terms of 10 years from the date of grant.
The fair value of each time-based vesting option award is estimated on the date of grant using the Black-Scholes option pricing model that
uses assumptions noted in the following table. Expected volatilities are based on the historical volatility of the Company's stock. Expected term
is calculated using the simplified method taking into consideration the option's contractual life and vesting terms. The Company uses the
simplified method in estimating its expected option term because it believes that historical exercise data cannot be accurately relied upon at this
time to provide a reasonable basis for estimating an expected term due to the extreme volatility of its stock price and the resulting
unpredictability of its stock option exercises. The risk-free interest rate for periods within the contractual life of the option is based on the
U.S. Treasury yield curve in effect at the time of grant. Expected dividend yields were not used in the fair value computations as the Company
has never declared or paid dividends on its common stock and currently intends to retain earnings for use in operations.
Expected volatility
Expected term (in years)
Risk-free interest rate
Market-Based Stock Option Awards
Fiscal 2014
Fiscal 2012
Fiscal 2013
97% - 99%
98% - 100%
88% - 98%
5 - 6 years
6 years
5 - 6 years
1.5% - 2.2% 1.1% - 2.1% 1.0% - 1.4%
On October 3, 2012, the Company granted 2,125,000 non-qualified market-based stock options to its executive officers as part of the
Company's long-term executive compensation program. The options were granted with an exercise price of $4.00 and each option will become
exercisable in three tranches, as follows, on the dates when the Company's average closing stock price for 20 consecutive trading days equals or
exceeds the following prices: Tranche 1 ( 50% of the shares subject to the option at $6.00 per share); Tranche 2 ( 25% at $8.00 per share); and
Tranche 3 ( 25% at $10.00 per share). On August 14, 2013, 50% of this stock option grant (Tranche 1) vested and as a result, the vesting of the
second and third tranches can occur any time on or before the fifth anniversary of the grant date. As of January 31, 2015 , 1,715,000 market-
based stock option awards were outstanding. The total grant date fair value was estimated to be $1,998,000 and is being amortized over the
derived service periods for each tranche. Grant date fair values and derived service periods for each tranche were determined using a Monte
Carlo valuation model based on assumptions, which included a weighted average risk-free interest rate of 0.38% , a weighted average expected
life of 3.3 years and an implied volatility of 78% and were as follows for each tranche:
Tranche 1 ($6.00/share)
Tranche 2 ($8.00/share)
Tranche 3 ($10.00/share)
Fair Value
(Per Share)
$0.93
$0.95
$0.95
Derived Service Period
15 months
20 months
24 months
55
EVINE Live INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
A summary of the status of the Company’s stock option activity as of January 31, 2015 and changes during the year then ended is as
follows:
Balance outstanding,
February 1, 2014
Granted
Exercised
Forfeited or canceled
Balance outstanding,
January 31, 2015
Options Exercisable at:
January 31, 2015
February 1, 2014
February 2, 2013
2011
Incentive
Stock
Option
Plan
Weighted
Average
Exercise
Price
2004
Incentive
Stock
Option
Plan
Weighted
Average
Exercise
Price
2001
Incentive
Stock
Option
Plan
Weighted
Average
Exercise
Price
Other Non-
Qualified
Stock
Options
Weighted
Average
Exercise
Price
3,083,000 $
232,000 $
(222,000 ) $
(630,000 ) $
4.03
4.65
2.89
4.43
6.25
2,104,000 $
5.66
107,000 $
(665,000 ) $
2.50
(340,000 ) $ 11.76
1,121,000 $
6.05
— $
—
(260,000 ) $
2.34
(35,000 ) $ 13.67
500,000 $
— $
(50,000 ) $
— $
4.24
—
1.82
—
2,463,000 $
4.09
1,206,000 $
6.71
826,000 $
6.89
450,000 $
4.51
1,322,000 $
1,229,000 $
50,000 $
4.05
3.78
2.29
1,179,000 $
2,037,000 $
1,965,000 $
6.76
6.21
6.14
826,000 $
1,121,000 $
1,151,000 $
6.89
6.05
5.69
380,000 $
397,000 $
363,000 $
4.60
4.11
3.90
The following table summarizes information regarding stock options outstanding at January 31, 2015 :
Option Type
2011 Incentive:
2004 Incentive:
2001 Incentive:
Non-Qualified:
Number of
Shares
2,463,000 $
1,206,000 $
826,000 $
450,000 $
Options Outstanding
Weighted
Average
Remaining
Contractual
Life
(Years)
Weighted
Average
Exercise
Price
4.09
6.71
6.89
4.51
8.1
4.6
3.5
5.4
Aggregate
Intrinsic
Value
$ 5,228,000
493,000
$
518,000
$
798,000
$
Options Vested or Expected to Vest
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life
(Years)
4.14
6.67
6.89
4.52
8.1
4.6
3.5
5.4
Aggregate
Intrinsic
Value
$ 5,161,000
489,000
$
518,000
$
782,000
$
Number of
Shares
2,424,000 $
1,203,000 $
826,000 $
443,000 $
The weighted average grant-date fair value of options granted in fiscal 2014, fiscal 2013 and fiscal 2012 was $3.92 , $3.96 and $1.03 ,
respectively. The total intrinsic value of options exercised during fiscal 2014, fiscal 2013 and fiscal 2012 was $6,099,000 , $469,000 and
$146,000 , respectively. As of January 31, 2015 , total unrecognized compensation cost related to stock options was $1,633,000 and is expected
to be recognized over a weighted average period of approximately 2.0 years.
Stock Option Tax Benefit
The exercise of certain stock options granted under the Company’s stock option plans give rise to compensation, which is included in the
taxable income of the applicable employees and deductible by the Company for federal and state income tax purposes. Such compensation
results from increases in the fair market value of the Company’s common stock subsequent to the date of grant of the applicable exercised stock
options and these increases are not recognized as an expense for financial accounting purposes, as the options were originally granted at the fair
market value of the Company’s common stock on the date of grant. The related tax benefits will be recorded as additional paid-in capital if and
when realized, and totaled $1,129,000 , $174,000 and $52,000 in fiscal 2014, fiscal 2013 and fiscal 2012 , respectively. The Company has not
recorded any income tax benefit from the exercise of stock options through paid in capital in these fiscal years, due to the uncertainty of realizing
income tax benefits in the future. These benefits are expected to be recorded in the applicable future periods.
56
EVINE Live INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Restricted Stock
Compensation expense recorded in fiscal 2014, fiscal 2013 and fiscal 2012 relating to restricted stock grants was $1,323,000 , $812,000
and $1,575,000 , respectively. As of January 31, 2015 , there was $2,616,000 of total unrecognized compensation cost related to non-vested
restricted stock granted. That cost is expected to be recognized over a weighted average period of 2.1 years. The total fair value of restricted
stock vested during fiscal 2014, fiscal 2013 and fiscal 2012 was $1,136,000 , $2,800,000 and $874,000 , respectively.
On November 17, 2014, the Company granted 199,790 shares of market-based restricted stock units to its chief executive officer and
79,916 shares of market-based restricted stock units to its chief strategy officer in conjunction with the hiring of these positions. As of
January 31, 2015 , these market-based restricted stock awards were outstanding. The total grant date fair value was estimated to be $1,373,000 ,
or $4.91 per share, and is being amortized over the three-year performance period. Grant date fair values were determined using a Monte Carlo
valuation model based on assumptions, which included a weighted average risk-free interest rate of 1.03% , a weighted average expected life of
3 years and an implied volatility of 60% . Each restricted stock award will vest if at any time during the three-year performance period the
closing price of the Company's stock equals or exceeds, for ten consecutive trading days, the following cumulative total shareholder return
("TSR") thresholds:
Cumulative TSR Thresholds
Below 25%
25% to 32%
33% to 39%
40% to 49%
50% or Above
Percentage of
Units Vested
0%
25%
50%
75%
100%
On June 18, 2014, the Company granted a total of 56,000 shares of restricted stock to seven non-management board members as part of the
Company's annual director compensation program. Each restricted stock award vests on the day immediately preceding the next annual meeting
of shareholders following the date of grant. The aggregate market value of the restricted stock at the date of the award was $281,000 and is being
amortized as director compensation expense over the twelve -month vesting period.
On March 13, 2014, the Company granted a total of 53,000 shares of restricted stock to certain key employees as part of the Company's
long-term incentive program. The restricted stock will vest in three equal annual installments beginning March 13, 2015. The aggregate market
value of the restricted stock at the date of the award was $290,000 and is being amortized as compensation expense over the three -year vesting
period. During the first quarter of fiscal 2014, the Company also granted a total of 4,000 shares of restricted stock to two new non-management
board members as part of the Company's annual director compensation program. Each restricted stock award vests on the day immediately
preceding the next annual meeting of shareholders following the date of grant. The aggregate market value of the restricted stock at the date of
the award was $23,500 and was amortized as director compensation expense through June 2014.
On November 25, 2013, the Company granted a total of 436,000 shares of restricted stock to certain key employees as part of the
Company's long-term incentive program. The restricted stock will vest in three equal annual installments beginning November 25, 2014. The
aggregate market value of the restricted stock at the date of the award was $2,426,000 and is being amortized as compensation expense over the
three -year vesting period.
During the first half of fiscal 2013, the Company granted a total of 44,000 shares of restricted stock to six non-management board members
as part of the Company's annual director compensation program. Each restricted stock award vests on the day immediately preceding the next
annual meeting of shareholders following the date of grant. The aggregate market value of the restricted stock at the date of the award was
$228,000 and was amortized as director compensation expense over the twelve -month vesting period.
57
EVINE Live INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
On October 3, 2012, the Company granted 300,000 shares of market-based restricted stock to certain key employees as part of the
Company's long-term incentive program. Each restricted stock award will vest in three tranches, as follows, on the dates when the Company's
average closing stock price for 20 consecutive trading days equals or exceeds the following prices: Tranche 1 ( 50% of the shares subject to the
award at $6.00 per share); Tranche 2 ( 25% at $8.00 per share); and Tranche 3 ( 25% at $10.00 per share). On August 14, 2013, 50% of this
restricted stock grant (Tranche 1) vested and as a result, the vesting of the second and third tranches can occur any time on or before the fifth
anniversary of the grant date. Net shares received upon the vesting of these market-based stock restricted awards (after shares are potentially
withheld to cover applicable withholding taxes) may not be sold for a period of one year from the date of vesting. As of January 31, 2015 ,
133,000 market-based restricted stock awards were outstanding. The total grant date fair value was estimated to be $425,000 and was amortized
over the derived service periods for each tranche.
Grant date fair values and derived service periods for each tranche were determined using a Monte Carlo valuation model based on
assumptions, which included a weighted average risk-free interest rate of 0.32% , a weighted average expected life of 2.8 years and an implied
volatility of 78% and were as follows for each tranche:
Tranche 1 ($6.00/share)
Tranche 2 ($8.00/share)
Tranche 3 ($10.00/share)
Fair Value
(Per Share)
$1.48
$1.39
$1.31
Derived Service
Period
15 months
20 months
24 months
On June 13, 2012, the Company granted a total of 50,000 shares of restricted stock to five non-management board members as part of the
Company's annual director compensation program. These restricted stock awards vested on June 18, 2013. The aggregate market value of the
restricted stock at the date of the award was $85,000 and was amortized as director compensation expense over the twelve-month vesting period.
A summary of the status of the Company’s non-vested restricted stock activity as of January 31, 2015 and changes during the twelve-
month period then ended is as follows:
Non-vested outstanding, February 1, 2014
Granted
Vested
Forfeited
Non-vested outstanding, January 31, 2015
(10) Business Segments and Sales by Product Group
Weighted
Average
Grant Date
Fair Value
$4.49
$5.01
$5.51
$4.15
$4.54
Shares
641,000
392,000
(205,000 )
(124,000 )
704,000
The Company has only one reporting segment, which encompasses digital commerce retailing. The Company markets, sells and distributes
its products to consumers primarily through its digital commerce television and online website, evine.com, platforms. The Company's television
shopping and online operations have similar economic characteristics with respect to products, product sourcing, vendors, marketing and
promotions, gross margins, customers, and methods of distribution. In addition, the Company believes that its television shopping program is a
key driver of traffic to the evine.com website whereby many of the online sales originate from customers viewing the Company's television
program and then place their orders online. All of the Company's sales are made to customers residing in the United States. The chief operating
decision maker is the Chief Executive Officer of the Company.
58
EVINE Live INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Information on net sales by significant product groups are as follows (in thousands):
Jewelry & Watches
Home & Consumer Electronics
Beauty, Health & Fitness
Fashion & Accessories
All other (primarily shipping & handling revenue)
Total
(11) Income Taxes
For the Years Ended
January 31,
2015
February 1,
2014
February 2,
2013
$
$
256,217 $
179,221
85,649
94,409
59,122
674,618 $
253,358 $
193,601
75,132
62,465
55,933
640,489 $
282,275
146,838
73,247
42,240
42,220
586,820
The Company records deferred taxes for differences between the financial reporting and income tax bases of assets and liabilities,
computed in accordance with tax laws in effect at that time. The deferred taxes related to such differences as of January 31, 2015 and February 1,
2014 were as follows (in thousands):
Accruals and reserves not currently deductible for tax purposes
Inventory capitalization
Differences in depreciation lives and methods
Differences in basis of intangible assets
Differences in investments and other items
Net operating loss carryforwards
Valuation allowance
Net deferred tax liability
The provision from income taxes consisted of the following (in thousands):
Current
Deferred
January 31,
2015
February 1,
2014
$
7,420 $
1,459
2,866
(1,968 )
215
112,318
(124,258 )
$
(1,948 ) $
5,066
966
2,811
(1,180 )
(141 )
113,229
(121,909 )
(1,158 )
For the Years Ended
January 31,
2015
February 1,
2014
February 2,
2013
$
$
(31 ) $
(788 )
(819 ) $
(15 ) $
(1,158 )
(1,173 ) $
(20 )
—
(20 )
A reconciliation of the statutory tax rates to the Company’s effective tax rate is as follows:
Taxes at federal statutory rates
State income taxes, net of federal tax benefit
Non-cash stock option vesting expense
Other
FCC license deferred tax liability
Valuation allowance and NOL carryforward benefits
Effective tax rate
59
For the Years Ended
January 31,
2015
February 1,
2014
February 2,
2013
35.0 %
(11.2 )
(158.6 )
(2.4 )
(133.4 )
124.0
(146.6 )%
35.0 %
(5.3 )
(43.3 )
(0.6 )
(81.5 )
8.4
(87.3 )%
35.0 %
1.8
(3.8 )
0.1
—
(33.2 )
(0.1 )%
EVINE Live INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Based on the Company’s recent history of losses, the Company has recorded a full valuation allowance for its net deferred tax assets as of
January 31, 2015 and February 1, 2014 in accordance with GAAP, which places primary importance on the Company’s most recent operating
results when assessing the need for a valuation allowance. The ultimate realization of these deferred tax assets depends on the ability of the
Company to generate sufficient taxable income in the future, as well as the timing of such income. The Company intends to maintain a full
valuation allowance for its net deferred tax assets until sufficient positive evidence exists to support reversal of the allowance. As of January 31,
2015 , the Company has federal net operating loss carryforwards (NOL's) of approximately $298 million and state NOL's of approximately $188
million which are available to offset future taxable income. The Company's federal NOLs expire in varying amounts each year from 2023
through 2034 in accordance with applicable federal tax regulations and the timing of when the NOLs were incurred. During the first quarter of
fiscal 2011, the Company had a change in ownership (as defined in Section 382 of the Internal Revenue Code) as a result of the issuance of
common stock coupled with the redemption of all the Series B preferred stock held by GE Equity. Sections 382 and 383 limit the annual
utilization of certain tax attributes, including NOL carryforwards incurred prior to a change in ownership. The limitations imposed by Sections
382 and 383 are not expected to impair the Company's ability to fully realize its NOL's; however, the annual usage of NOL's incurred prior to the
change in ownership will be limited.
For the year ended January 31, 2015 and the year ended February 1, 2014 , the income tax provision included non-cash tax charges of
approximately $788,000 and $1,158,000 , respectively, relating to changes in the Company's long-term deferred tax liability related to the tax
amortization of the Company's indefinite-lived intangible FCC license asset that is not available to offset existing deferred tax assets in
determining changes to the Company's income tax valuation allowance.
As of January 31, 2015 and February 1, 2014 , there were no unrecognized tax benefits for uncertain tax positions. Accordingly, a tabular
reconciliation from beginning to ending periods is not provided. Further, to date, there have been no interest or penalties charged or accrued in
relation to unrecognized tax benefits. The Company will classify any future interest and penalties as a component of income tax expense if
incurred. The Company does not anticipate that the amount of unrecognized tax benefits will change significantly in the next twelve months.
The Company is subject to U.S. federal income taxation and the taxing authorities of various states. The Company’s tax years for 2011,
2012, and 2013 are currently subject to examination by taxing authorities. With limited exceptions, the Company is no longer subject to
U.S. federal, state, or local examinations by tax authorities for years before 2011.
(12) Commitments and Contingencies
Cable and Satellite Affiliation Agreements
As of January 31, 2015 , the Company has entered into affiliation agreements that represent approximately 1,854 cable systems along with
the satellite companies DIRECTV and DISH that require each to offer the Company’s television shopping programming on a full-time basis over
their systems. The terms of the affiliation agreements typically range from one to five years. During the fiscal year, certain agreements with
cable, satellite or other distributors may expire. Under certain circumstances, the television operators or the Company may cancel the agreements
prior to their expiration. Additionally, the Company may elect not to renew distribution agreements whose terms result in sub-standard or
negative contribution margins. The affiliation agreements generally provide that the Company will pay each operator a monthly access fee and in
some cases a marketing support payment based on the number of homes receiving the Company's programming. For fiscal 2014, fiscal 2013 and
fiscal 2012 , respectively, the Company expensed approximately $98,581,000 , $92,473,000 and $110,984,000 under these affiliation
agreements.
Over the past years, each of the material cable and satellite distribution agreements up for renewal has been renegotiated and renewed with
no reduction to the Company’s distribution footprint. Failure to maintain the cable agreements covering a material portion of the Company’s
existing cable households on acceptable financial and other terms could adversely affect future growth, sales revenues and earnings unless the
Company is able to arrange for alternative means of broadly distributing its television programming. Cable operators serving a large majority of
cable households offer cable programming on a digital basis. The use of digital compression technology provides cable companies with greater
channel capacity. While greater channel capacity increases the opportunity for distribution and, in some cases, reduces access fees paid by us, it
also may adversely impact the Company's ability to compete for television viewers to the extent it results in less desirable channel positioning
for us, placement of the Company's programming in separate programming tiers, the broadcast of additional competitive channels or viewer
fragmentation due to a greater number of programming alternatives.
The Company has entered into, and will continue to enter into, affiliation agreements with other television operators providing for full- or
part-time carriage of the Company’s television shopping programming.
Future cable and satellite affiliation cash commitments at January 31, 2015 are as follows:
60
EVINE Live INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Fiscal Year
2015
2016
2017
2018
2019 and thereafter
Employment Agreements
$
Amount
81,626,000
53,106,000
41,288,000
—
—
The Company has entered into employment agreements with its on-air hosts with original terms of 12 months with auto annual renewals
and its chief executive officer of the Company with an original term of 36 months . These agreements specify, among other things, the term and
duties of employment, compensation and benefits, termination of employment (including for cause, which would reduce the Company’s total
obligation under these agreements), severance payments and non-disclosure and non-compete restrictions. The aggregate commitment for future
base compensation related to these agreements at January 31, 2015 was approximately $3,501,000 .
On November 17, 2014, the Company entered into an executive employment and severance agreement with Mr. Bozek, the Company's
Chief Executive Officer. Among other things, the employment agreement provides for a three-year initial term, followed by automatic one-year
renewals, an initial base salary of $625,000 , annual bonus stipulations, a temporary living expense allowance and participation in the Company's
executive relocation program. In conjunction with the employment agreement, the Company granted Mr. Bozek an award of performance
restricted stock units under the Company's 2011 Omnibus Incentive Plan with a fair value of $1.0 million . The chief executive officer’s
employment agreement also provides for severance in the event of employment termination of 1.5 times the sum of his (i) base salary plus (ii)
the average of the annual cash incentive plan payments made in the three fiscal years immediately preceding the fiscal year in which the
termination date occurs. In the event of a change of control, as defined in the agreement, the multiplier shall be 2 times.
The Company has established guidelines regarding severance for its senior executive officers, whereby, up to 12 months of the executive's
highest annual rate of base salary plus 1 times the target annual incentive bonus determined from such base salary may become payable in the
event of terminations without cause under specified circumstances. Senior executive officers are also eligible for 1.5 times the executive's
highest annual rate of base salary, plus 1.5 times the target annual incentive bonus determined from such base salary if, within a two-year period
commencing on the date of a change in control, the senior executive is terminated without cause under specified circumstances.
Operating Lease Commitments
The Company leases certain property and equipment under non-cancelable operating lease agreements. Property and equipment covered
by such operating lease agreements include offices and warehousing facilities at subsidiary locations, satellite transponder, office equipment and
certain tower site locations.
Future minimum lease payments at January 31, 2015 are as follows:
Future Minimum Lease Payments:
2015
2016
2017
2018
2019 and thereafter
Amount
$ 1,456,000
793,000
113,000
—
—
Total rent expense under such agreements was approximately $2,140,000 in fiscal 2014 , $2,015,000 in fiscal 2013 and $1,715,000 in
fiscal 2012 .
Capital Lease Commitments
The Company leases certain computer equipment and software licenses under noncancelable capital leases and includes these assets in
property and equipment in the accompanying consolidated balance sheets. The capitalized cost of leased assets was approximately $155,000 at
January 31, 2015 .
Future minimum lease payments for assets under capital leases at January 31, 2015 are as follows:
61
EVINE Live INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Future Minimum Lease Payments:
2015
2016
2017
2018
2019 and thereafter
Total minimum lease payments
Less: Amounts representing interest
Less: Current portion
Long-term capital lease obligation
Retirement and Savings Plan
Amount
$
$
55,000
36,000
—
—
—
91,000
(3,000 )
88,000
(52,000 )
36,000
The Company maintains a qualified 401(k) retirement savings plan covering substantially all employees. The plan allows the Company’s
employees to make voluntary contributions to the plan. The Company’s contribution, if any, is determined annually at the discretion of the board
of directors. Starting in fiscal 2014 , the Company elected to make matching contributions to the plan and matched $0.50 for every $1.00
contributed by eligible participants up to a maximum of 6% of eligible compensation. Company plan contributions totaling approximately
$1,062,000 and $921,000 were accrued during fiscal 2014 and fiscal 2013 , respectively, and were contributed to the plan in February of the
following fiscal year. The Company did not make any matching contributions to the plan during fiscal 2012.
(13) Litigation
The Company is involved from time to time in various claims and lawsuits in the ordinary course of business. In the opinion of
management, none of the claims and suits, either individually or in the aggregate will have a material adverse effect on the Company's operations
or consolidated financial statements.
(14) Supplemental Cash Flow Information
Supplemental cash flow information and noncash investing and financing activities were as follows:
Supplemental Cash Flow Information:
Interest paid
Income taxes paid
Supplemental non-cash investing and financing activities:
Common stock purchase warrants forfeited
Deferred issuance costs included in accrued liabilities
Property and equipment purchases included in accounts payable
Intangible asset purchase included in accrued liabilities
Non-cash warrant exercise
Issuance of 178,842 shares of common stock for trademark purchase
For the Years Ended
January 31, 2015 February 1, 2014 February 2, 2013
$
$
$
$
$
$
$
$
1,470,000 $
30,000 $
1,259,000 $
16,000 $
1,959,000
27,000
— $
— $
2,016,000 $
— $
533,000 $
1,044,000 $
— $
20,000 $
521,000 $
— $
— $
— $
34,000
—
48,000
2,830,000
—
—
(15) Distribution Facility Expansion
During fiscal 2014, we began a significant operational expansion initiative with respect to overall warehousing capacity and new
equipment and system upgrades at our Bowling Green, Kentucky distribution facility. The expansion project includes the construction of a new
building which, when completed, will expand our current 262,000 square foot facility to an approximately
62
EVINE Live INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
600,000 square foot facility. The physical building expansion project is expected to be completed in the first half of fiscal 2015. The updated
facilities will also include a new Intelligrated high-speed parcel shipping and item sortation system coupled with a new Manhattan Associates
warehouse system to support our increased level of shipments and units and a new call center facility to better serve our customers. The new
sortation and warehouse management system is expected to be phased into production during the summer and fall of fiscal 2015. Total cost of
the expansion is estimated to be approximately $25 million and is being financed with our expanded PNC revolving line of credit and a $15
million PNC term loan. Construction started in the second quarter of fiscal 2014. As of January 31, 2015 , we have expended approximately $15
million in cash relating to the Bowling Green expansion initiative with additional cash commitments of approximately $10 million expected
during the first half of fiscal 2015 funded from our PNC Credit Facility.
(16) Activist Shareholder Response Costs
I n October of 2013, the Company received a demand from an activist shareholder to call a special meeting of shareholders for the purpose,
among other things, of voting on a new slate of directors and amending certain of the Company’s bylaws. The Company retained a team of
advisers, including a financial adviser, proxy solicitor, investor relations firm and legal counsel, to assist in responding to the demand and the
solicitation of proxies. In conjunction with such activities, the Company recorded charges to income in fiscal 2014 and fiscal 2013 totaling
$3,518,000 and $2,133,000 , respectively, which includes $750,000 as reimbursement for a portion of the activist shareholder’s expenses in
fiscal 2014 . As previously disclosed, the activist shareholder requested that the Company reimburse it for certain of its expenses relating to the
proxy contest. In exchange for paying certain activist shareholder expenses, the Company obtained a customary standstill agreement from the
activist shareholder. The process of responding to the initial demand concluded with the Company’s annual shareholder meeting on June 18,
2014.
(17) Executive Transition Costs
On June 22, 2014, Keith R. Stewart resigned as a member of the Company's board of directors and as Chief Executive Officer of the
Company. In conjunction with Mr. Stewart's resignation and separation agreement, as well as other executive terminations made subsequent to
June 22, 2014, the Company recorded charges to income of $5,520,000 in fiscal 2014, relating primarily to the following: severance payments
which Mr. Stewart is entitled to receive in accordance with the terms of his employment agreement; severance payments related to the
termination of our Chief Operating and Chief Merchandising Officers; and other direct costs associated with the Company's 2014 executive
transition. Following Mr. Stewart's resignation, the Company's board of directors appointed Mr. Mark Bozek as Chief Executive Officer of the
Company effective June 22, 2014. The Company filed an 8-K on June 25, 2014 disclosing the specific terms of the resignation, separation
agreement and new appointment of its chief executive officer.
(18) Relationship with NBCU, Comcast and GE Equity
Relationship with GE Equity, Comcast and NBCU
In March 1999, we entered into an alliance with GE Capital Equity Investments, Inc. (“GE Equity”) and NBCUniversal Media, LLC
("NBCU"), pursuant to which we issued Series A redeemable convertible preferred stock and common stock warrants, and entered into a
shareholder agreement, a registration rights agreement and certain other agreements. On February 25, 2009, we entered into an exchange
agreement with the same parties, pursuant to which GE Equity exchanged all outstanding shares of our Series A preferred stock for (i)
4,929,266 shares of our Series B redeemable preferred stock, (ii) a warrant to purchase up to 6,000,000 shares of our common stock at an
exercise price of $0.75 per share and (iii) a cash payment in the amount of $3.4 million . In connection with the exchange, the parties also
amended and restated the 1999 shareholder agreement and registration rights agreement as further described below. In April 2011, we redeemed
all of the outstanding Series B preferred stock for $40.9 million and paid accrued dividends of $6.4 million and in June 2014, GE Equity
exercised its common stock warrant described above in a cashless exercise acquiring 5,058,741 shares of our common stock.
In January 2011, General Electric Company ("GE") consummated a transaction with Comcast Corporation ("Comcast") pursuant to which
GE contributed all of its holdings in NBCU to NBCUniversal, LLC, a newly formed entity, whose common equity was initially beneficially
owned 51% by Comcast and 49% by GE. As a result of that transaction, NBCU is now a wholly owned subsidiary of NBCUniversal, LLC. In
March 2013, GE sold its remaining 49% common equity interest in NBCUniversal, LLC to Comcast pursuant to an agreement reached in
February 2013. As of January 31, 2015 , the direct equity ownership of GE Equity in the Company consisted of 3,718,767 shares of common
stock, and the direct ownership of NBCU in the Company consists of 7,141,849 shares of common stock. The Company has a significant cable
distribution agreement with Comcast and believes that the terms of this agreement are comparable to those with other cable system operators.
63
EVINE Live INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
In connection with the January 2011 transfer of its ownership in NBCU to NBCUniversal, LLC, GE also agreed with Comcast that, for so
long as GE Equity is entitled to appoint two members of the Company's board of directors, NBCU will be entitled to retain a board seat provided
that NBCU beneficially owns at least 5% of the Company's adjusted outstanding common stock (as computed under the amended and restated
shareholders agreement described below). Furthermore, GE agreed to obtain the consent of NBCU prior to consenting to the Company's
adoption of any shareholders rights plan or certain other actions that would impede or restrict the ability of NBCU to acquire or dispose of shares
of the Company's voting stock or taking any action that would result in NBCU being deemed to be in violation of the Federal Communications
Commission multiple ownership regulations. As of March 20, 2015 GE Equity has an approximate 7% beneficial ownership in the Company and
has certain rights as further described in this section.
On June 24, 2014, GE Equity exercised its common stock purchase warrant in a cashless exercise acquiring 5,058,741 shares of the
Company's common stock. The warrant was issued in connection with the issuance of the Company's Series B Redeemable Preferred Stock in
February 2009.
Amended and Restated Shareholder Agreement
On February 25, 2009, the Company entered into an amended and restated shareholder agreement with GE Equity and NBCU, which
provides for certain corporate governance and standstill matters. The amended and restated shareholder agreement provides that GE Equity is
entitled to designate nominees for three members of the Company’s board of directors so long as the aggregate beneficial ownership of GE
Equity and NBCU (and their affiliates) is at least equal to 50% of their beneficial ownership as of February 25, 2009 (i.e., beneficial ownership
of approximately 8.7 million common shares), and two members of the Company's board of directors so long as their aggregate beneficial
ownership is at least 10% of the shares of "adjusted outstanding common stock," as defined in the amended and restated shareholder agreement.
In addition, the amended and restated shareholder agreement provides that GE Equity may designate any of its director-designees to be an
observer of the audit, human resources and compensation, and corporate governance and nominating committees of the Company's board of
directors. Neither GE Equity nor NBCU currently has any designees serving on our board of directors.
The amended and restated shareholder agreement requires the consent of GE Equity prior to the Company (i) exceeding certain thresholds
relating to the issuance of securities, the payment of dividends, the repurchase or redemption of common stock, acquisitions (including
investments and joint ventures) or dispositions, and the incurrence of debt; (ii) entering into any business different than what the Company and
its subsidiaries are currently engaged; and (iii) amending the Company’s articles of incorporation to adversely affect GE Equity and NBCU (or
their affiliates); provided, however, that these restrictions will no longer apply when both (1) GE Equity is no longer entitled to designate three
director nominees and (2) GE Equity and NBCU no longer hold any Series B preferred stock. The Company is also prohibited from taking any
action that would cause any ownership interest by the Company in television broadcast stations from being attributable to GE Equity, NBCU or
their affiliates.
The amended and restated shareholder agreement further provides that during the "standstill period" (as described below), subject to
certain limited exceptions, GE Equity and NBCU are prohibited from: (i) making any asset/business purchases from the Company in excess of
10% of the total fair market value of the Company’s assets; (ii) increasing their beneficial ownership above 39.9% of the Company's shares;
(iii) making or in any way participating in any solicitation of proxies; (iv) depositing any securities of the Company in a voting trust;
(v) forming, joining or in any way becoming a member of a "13D Group" with respect to any voting securities of the Company; (vi) arranging
any financing for, or providing any financing commitment specifically for, the purchase of any voting securities of the Company; or
(vii) otherwise acting, whether alone or in concert with others, to seek to propose to the Company any tender or exchange offer, merger, business
combination, restructuring, liquidation, recapitalization or similar transaction involving the Company, or nominating any person as a director of
the Company who is not nominated by the then incumbent directors, or proposing any matter to be voted upon by the Company’s shareholders.
If, during the standstill period, any inquiry has been made regarding a "takeover transaction" or "change in control," each as defined in the
amended and restated shareholder agreement, that has not been rejected by the Company’s board of directors, or the Company’s board of
directors pursues such a transaction, or engages in negotiations or provides information to a third party and the board of directors has not
resolved to terminate such discussions, then GE Equity or NBCU may propose to the Company a tender offer or business combination proposal.
In addition, unless GE Equity and NBCU beneficially own less than 5% or more than 90% of the adjusted outstanding shares of common
stock, GE Equity and NBCU shall not sell, transfer or otherwise dispose of any securities of the Company except for transfers: (i) to certain
affiliates who agree to be bound by the provisions of the amended and restated shareholder agreement, (ii) that have been consented to by the
Company, (iii) subject to certain exceptions, pursuant to a third-party tender offer, (iv) pursuant to a merger, consolidation or reorganization to
which the Company is a party, (v) in an underwritten public offering pursuant to an effective registration statement, (vi) pursuant to Rule 144 of
the Securities Act of 1933, or (vii) in a private sale or pursuant to Rule 144A of the Securities Act of 1933; provided, that in the case of any
transfer pursuant to clause (v), (vi) or (vii), the transfer does not result in, to the knowledge of the transferor after reasonable inquiry, any other
person acquiring, after giving effect to such transfer, beneficial ownership, individually or in the aggregate with that person’s affiliates, of more
than 10% (or
64
EVINE Live INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
20% in the case of a transfer by NBCU) of the adjusted outstanding shares of the common stock, as determined in accordance with the amended
and restated shareholder agreement.
The standstill period will terminate on the earliest to occur of (i) the ten -year anniversary of the amended and restated shareholder
agreement, (ii) the Company entering into an agreement that would result in a "change in control" (as defined in the amended and restated
shareholders agreement and subject to reinstatement), (iii) an actual "change in control" (subject to reinstatement), (iv) a third-party tender offer
(subject to reinstatement), or (v) six months after GE Equity can no longer designate any nominees to the Company’s board of directors.
Following the expiration of the standstill period pursuant to clause (i) above and two years in the case of clause (v) above, GE Equity and
NBCU’s beneficial ownership position may not exceed 39.9% of the Company’s adjusted outstanding shares of common stock, except pursuant
to issuances or exercises of any warrants or pursuant to a 100% tender offer for the Company.
Registration Rights Agreement
On February 25, 2009, the Company entered into an amended and restated registration rights agreement providing GE Equity, NBCU and
their affiliates and any transferees and assigns, an aggregate of four demand registrations and unlimited piggy-back registration rights. In
addition, NBCU was subsequently granted one additional demand registration right pursuant to the second amendment of the now expired
NBCU trademark license agreement.
(19) Related Party Transactions
Relationship with GE Equity and NBCU
In January 2011, General Electric Company ("GE") consummated a transaction with Comcast Corporation ("Comcast") pursuant to which
GE contributed all of its holdings in NBCU to NBCUniversal, LLC, a newly formed entity beneficially owned 51% by Comcast and 49% by GE.
As a result of that transaction, NBCU is now a wholly owned subsidiary of NBCUniversal, LLC. In March 2013, GE sold its remaining 49%
common equity interest in NBCUniversal, LLC to Comcast pursuant to an agreement reached in February 2013. As of January 31, 2015 , the
direct equity ownership of GE Equity in the Company consists of 3,718,767 shares of common stock and the direct ownership of NBCU in the
Company consists of 7,141,849 shares of common stock. The Company has a significant cable distribution agreement with Comcast and believes
that the terms of this agreement are comparable to those with other cable system operators.
In connection with the January 2011 transfer of its ownership in NBCU to NBCUniversal, LLC, GE also agreed with Comcast that, for so
long as GE Equity is entitled to appoint two members of the Company's board of directors, NBCU will be entitled to retain a board seat provided
that NBCU beneficially owns at least 5% of the Company's adjusted outstanding common stock. Furthermore, GE agreed to obtain the consent
of NBCU prior to consenting to the Company's adoption of any shareholders right plan or certain other actions that would impede or restrict the
ability of NBCU to acquire or dispose of shares of t he Company's voting stock or taking any action that would result in NBCU being deemed to
be in violation of the Federal Communications Commission multiple ownership regulations. For additional information regarding the Company's
arrangements with Comcast, GE, GE Equity and NBCU, see Note 18 above.
Asset Acquisition of Dollars Per Minute, Inc.
On November 18, 2014, the Company entered into an asset purchase agreement with Dollars Per Minute, Inc., a Delaware corporation
("DPM") to purchase certain assets of DPM, including the EVINE brand and trademark.
The principal stockholders of DPM are Mark Bozek, the Company's Chief Executive Officer, and Russell Nuce, who became the
Company's Chief Strategy Officer effective November 17, 2014. At the time of the transaction, DPM had debt outstanding under certain
convertible bridge notes issued to several individuals, including Thomas Beers, one of the Company's directors and a trust for which Russell
Nuce has a contingent pecuniary interest. As consideration for the purchase of these assets, primarily related to intellectual property, the
Company issued 178,842 unregistered shares of our common stock, which represented an aggregate value of $1,044,000 based on the closing
price of our common stock on November 13, 2014 and paid $20,000 in cash consideration and incurred $39,000 in professional fees associated
with acquiring the asset.
65
Table of Contents
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
As of the end of the period covered by this report, management conducted an evaluation, under the supervision and with the participation
of our chief executive officer and chief financial officer of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15
(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")). Based on this evaluation, the chief executive officer and
chief financial officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by
us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in
Securities and Exchange Commission's rules and forms, and to ensure that information required to be disclosed by us in the reports we file or
submit under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial
officers, as appropriate to allow timely decisions regarding required disclosures.
66
Table of Contents
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of EVINE Live Inc. is responsible for establishing and maintaining adequate internal control over financial reporting as
defined in Rules 13a-15(f) under the Securities Exchange Act 1934. Our company’s internal control system was designed 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.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be
effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of its inherent
limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Management assessed the effectiveness of our company’s internal control over financial reporting as of January 31, 2015 . In making this
assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal
Control — Integrated Framework (2013).
Based on management’s evaluation under the framework in Internal Control — Integrated Framework (2013), management concluded that
our internal control over financial reporting was effective as of January 31, 2015 .
Our independent registered public accounting firm, Deloitte & Touche LLP, has issued an attestation report on our company’s internal
control over financial reporting as of January 31, 2015 . The Deloitte & Touche LLP attestation report is set forth below.
/s/ MARK BOZEK
Mark Bozek
Chief Executive Officer
(Principal Executive Officer)
/s/ WILLIAM MCGRATH
William McGrath
Executive Vice President, Chief Financial Officer
(Principal Financial Officer)
March 26, 2015
Changes in Internal Controls over Financial Reporting
Management, with the participation of the chief executive officer and chief financial officer, performed an evaluation as to whether any
change in the internal controls over financial reporting (as defined in Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934)
occurred during the year ended January 31, 2015 . Based on that evaluation, the chief executive officer and chief financial officer concluded that
no change occurred in the internal controls over financial reporting during the period covered by this report that materially affected, or is
reasonably likely to materially affect, the internal controls over financial reporting.
67
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
EVINE Live Inc. and Subsidiaries
Eden Prairie, Minnesota
We have audited the internal control over financial reporting of EVINE Live Inc. (formerly ValueVision Media, Inc.) and subsidiaries (the
"Company") as of January 31, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's
internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.
A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive
and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and
other personnel 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. A company's internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the
financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management
override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any
evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 31, 2015, based
on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated
financial statements and financial statement schedule as of and for the year ended January 31, 2015 of the Company and our report dated
March 26, 2015 expressed an unqualified opinion on those consolidated financial statements and financial statement schedule.
Minneapolis, Minnesota
March 26, 2015
/s/ DELOITTE & TOUCHE LLP
68
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Item 9B. Other Information
None.
69
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
Information in response to this item with respect to certain information relating to our executive officers is contained in Item 1 under the
heading "Executive Officers of the Registrant" and with respect to other information relating to our executive officers and directors and our audit
and other committees is incorporated herein by reference to the sections titled "Proposal 1 — Election of Directors," "Corporate Governance"
and "Section 16(a) Beneficial Ownership Reporting Compliance" in our definitive proxy statement to be filed pursuant to Regulation 14A within
120 days after the end of the fiscal year covered by this Form 10-K.
Code of Business Conduct and Ethics
We have adopted a code of business conduct and ethics applicable to all of our directors and employees, including our principal executive
officer, principal financial officer, principal accounting officer, controller and other employees performing similar functions. A copy of this code
of business conduct and ethics is available on our website at evine.com, under "Investor Relations — Business Ethics Policy." In addition, we
have adopted a code of ethics policy for our senior financial management; this policy is also available on our website at evine.com, under
"Investor Relations — Code of Ethics Policy for Chief Executive and Senior Financial Officers."
We intend to satisfy the disclosure requirements under Form 8-K regarding an amendment to, or waiver from, a provision of our code of
business conduct and ethics by posting such information on our website at the address specified above.
Item 11. Executive Compensation
Information in response to this item is incorporated herein by reference to the sections titled "Director Compensation for Fiscal 2014 ,"
"Executive Compensation" and "Corporate Governance" in our definitive proxy statement to be filed pursuant to Regulation 14A within
120 days after the end of the fiscal year covered by this Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
Information in response to this item is incorporated herein by reference to the section titled "Security Ownership of Principal Shareholders
and Management" in our definitive proxy statement to be filed pursuant to Regulation 14A within 120 days after the end of the fiscal year
covered by this Form 10-K.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information in response to this item is incorporated herein by reference to the section titled "Certain Transactions" and "Corporate
Governance" in our definitive proxy statement to be filed pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by
this Form 10-K.
Item 14. Principal Accountant Fees and Services
Information in response to this item is incorporated herein by reference to the section titled "Proposal 2 — Ratification of the Independent
Registered Public Accounting Firm" in our definitive proxy statement to be filed pursuant to Regulation 14A within 120 days after the end of the
fiscal year covered by this Form 10-K.
70
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PART IV
Item 15. Exhibits and Financial Statement Schedule
1. Financial Statements
• Report of Independent Registered Public Accounting Firm
• Consolidated Balance Sheets as of January 31, 2015 and February 1, 2014
• Consolidated Statements of Operations for the Years Ended January 31, 2015 , February 1, 2014 and February 2, 2013
• Consolidated Statements of Shareholders’ Equity for the Years Ended January 31, 2015 , February 1, 2014 and February 2,
2013
• Consolidated Statements of Cash Flows for the Years Ended January 31, 2015 , February 1, 2014 , and February 2, 2013
• Notes to Consolidated Financial Statements
2. Financial Statement Schedule
EVINE Live Inc. AND SUBSIDIARIES
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
Column B
Column C
Additions
Balances at
Charged to
Beginning of
Year
Costs and
Expenses
Column D
Deductions
Column E
Balance at
End of Year
$
$
$
$
$
$
6,446,000
4,894,000
13,007,000
74,454,000
(12,747,000 ) (1) $
(73,763,000 ) (2) $
6,706,000
5,585,000
6,214,000
5,854,000
12,762,000
70,620,000
(12,530,000 ) (1) $
(71,580,000 ) (2) $
6,446,000
4,894,000
5,638,000
4,544,000
11,792,000
64,497,000
(11,216,000 ) (1) $
(63,187,000 ) (2) $
6,214,000
5,854,000
Column A
For the year ended January 31, 2015:
Allowance for doubtful accounts
Reserve for returns
For the year ended February 1, 2014:
Allowance for doubtful accounts
Reserve for returns
For the year ended February 2, 2013:
Allowance for doubtful accounts
Reserve for returns
_______________________________________
Write off of uncollectible receivables, net of recoveries.
(1)
(2) Refunds or credits on products returned.
3. Exhibits
The exhibits filed with this report are set forth on the exhibit index filed as a part of this report immediately following the signatures to this
report.
71
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized on March 26, 2015 .
EVINE Live Inc.
(Registrant)
By: /s/ MARK BOZEK
Mark Bozek
Chief Executive Officer
72
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Each of the undersigned hereby appoints Mark Bozek and William McGrath, and each of them (with full power to act alone), as attorneys
and agents for the undersigned, with full power of substitution, for and in the name, place and stead of the undersigned, to sign and file with the
Securities and Exchange Commission under the Securities Act of 1934, any and all amendments and exhibits to this annual report on Form 10-K
and any and all applications, instruments, and other documents to be filed with the Securities and Exchange Commission pertaining to this
annual report on Form 10-K or any amendments thereto, with full power and authority to do and perform any and all acts and things whatsoever
requisite and necessary or desirable. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the registrant and in the capacities indicated on March 26, 2015 .
Name
Title
/s/ MARK BOZEK
Mark Bozek
/s/ WILLIAM MCGRATH
William McGrath
/s/ BOB ROSENBLATT
Bob Rosenblatt
/s/ THOMAS BEERS
Thomas Beers
/s/ JOHN D. BUCK
John D. Buck
/s/ RONALD FRASCH
Ronald Frasch
/s/ LANDEL C. HOBBS
Landel C. Hobbs
/s/ LOWELL W. ROBINSON
Lowell W. Robinson
/s/ FRED SIEGEL
Fred Siegel
Chief Executive Officer and Director
(Principal Executive Officer)
Executive Vice President, Chief Financial Officer
(Principal Financial Officer)
Chairman of the Board
Director
Director
Director
Director
Director
Director
73
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EXHIBIT INDEX
Exhibit No.
3.1
3.2
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
Description
Amended and Restated Articles of Incorporation
Amended and Restated By-Laws, as amended through June 18, 2014
2001 Omnibus Stock Plan of the Registrant
Amendment No. 1 to the 2001 Omnibus Stock Plan of the Registrant
Form of Incentive Stock Option Agreement under the 2001 Omnibus Stock Plan of
the Registrant
Form of Nonstatutory Stock Option Agreement under the 2001 Omnibus Stock Plan
of the Registrant
Amended and Restated 2004 Omnibus Stock Plan
Form of Stock Option Agreement (Employees) under 2004 Omnibus Stock Plan
Form of Stock Option Agreement (Executive Officers) under 2004 Omnibus Stock
Plan
Form of Stock Option Agreement (Executive Officers) under 2004 Omnibus Stock
Plan
Form of Stock Option Agreement (Directors - Annual Grant) under 2004 Omnibus
Stock Plan
Form of Stock Option Agreement (Directors - Other Grants) under 2004 Omnibus
Stock Plan
Form of Restricted Stock Agreement (Directors) under 2004 Omnibus Stock Plan
2011 Omnibus Incentive Plan of the Registrant
Form of Incentive Stock Option Award Agreement under the 2011 Omnibus Incentive
Plan
Form of Non-Statutory Stock Option Award Agreement under the 2011 Omnibus
Incentive Plan
Form of Performance Stock Option Award Agreement under the 2011 Omnibus
Incentive Plan
Form of Option Agreement between the Registrant and John D. Buck
10.16
10.17 Amended and Restated Employment Agreement between the Registrant and Keith R.
10.18
Stewart dated February 19, 2010
Second Amended and Restated Employment Agreement between the Registrant and
Keith R. Stewart dated April 1, 2014
10.19 ValueVision Media, Inc. Executives’ Severance Benefit Plan
10.20
Separation Agreement by and between the Registrant and Keith R. Stewart dated June
22, 2014
Executive Employment and Severance Agreement by and between the Registrant and
Mark C. Bozek dated November 17, 2014
Performance Restricted Stock Unit Award Agreement by and between the Registrant
and Mark Bozek under the 2011 Omnibus Incentive Plan
Performance Restricted Stock Unit Award Agreement by and between the Registrant
and Russell Nuce under the 2011 Omnibus Incentive Plan
10.21
10.22
10.23
Method of Filing
Incorporated by reference(A)
Incorporated by reference(B)
Incorporated by reference(C)†
Incorporated by reference(D)†
Incorporated by reference(E)†
Incorporated by reference(F)†
Incorporated by reference(G)†
Incorporated by reference(H)†
Incorporated by reference(I)†
Incorporated by reference(J)†
Incorporated by reference(K)†
Incorporated by reference(L)†
Incorporated by reference(M)†
Incorporated by reference(N)†
Incorporated by reference(O)†
Incorporated by reference(P)†
Incorporated by reference(Q)†
Incorporated by reference(R)†
Incorporated by reference(S)†
Incorporated by reference(T)†
Incorporated by reference(U)†
Incorporated by reference(V)†
Incorporated by reference(W)†
Incorporated by reference(X)†
Incorporated by reference(Y)†
10.24 Description of Annual Cash Incentive Plan
10.25 Description of Director Compensation Program
10.26 Amended and Restated Shareholder Agreement dated February 25, 2009 between the
Registrant, GE Capital Equity Investments, Inc. and NBC Universal, Inc.
Filed herewith†
Filed herewith†
Incorporated by reference(Z)
10.27 Amended and Restated Registration Rights Agreement dated February 25, 2009
Incorporated by reference(AA)
10.28
between the Registrant, GE Capital Equity Investments, Inc. and NBC Universal, Inc.
Revolving Credit and Security Agreement dated February 9, 2012 among the
Registrant, as the lead borrower, certain of its subsidiaries party thereto as borrowers,
PNC Bank National Association, as lender and agent.
Incorporated by reference(BB)
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Exhibit No.
10.29
10.30
10.31
10.32
Description
First Amendment to Revolving Credit and Security Agreement, dated May 1, 2013,
among the Registrant, as the lead borrower, certain of its subsidiaries party thereto as
borrowers, PNC Bank National Association, as lender and agent.
Second Amendment to Revolving Credit and Security Agreement, dated July 30,
2013, among the Registrant, as the lead borrower, certain of its subsidiaries party
thereto as borrowers, PNC Bank, National Association, as agent for the lenders.
Third Amendment to Revolving Credit and Security Agreement, dated January 31,
2014, among the Registrant, as the lead borrower, certain of its subsidiaries party
thereto as borrowers, PNC Bank National Association, as lender and agent.
Fourth Amendment to Revolving Credit and Security Agreement, dated March 6,
2015, among the Registrant, as the lead borrower, certain of its subsidiaries party
thereto as borrowers, PNC Bank National Association, as lender and agent for the
lenders and certain other lenders.
Form of Indemnification Agreement with Directors and Officers of the Registrant
10.33
10.34 Asset Purchase Agreement by and between Dollars Per Minute, Inc. and the
Registrant, dated November 17, 2014
Form of Non-Plan Option Agreement
Form of Performance Stock Unit Award Agreement under the 2011 Omnibus
Incentive Plan
Significant Subsidiaries of the Registrant
Consent of Independent Registered Public Accounting Firm
Powers of Attorney
Certification of the Chief Executive Officer
Certification of the Chief Financial Officer
Section 1350 Certification of Chief Executive Officer and Chief Financial Officer
10.35
10.36
21
23
24
31.1
31.2
32
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema
101.CAL XBRL Taxonomy Extension Calculation Linkbase
101.DEF XBRL Taxonomy Extension Definition Linkbase
101.LAB XBRL Taxonomy Extension Label Linkbase
101.PRE XBRL Taxonomy Extension Presentation Linkbase
_______________________________________
Method of Filing
Incorporated by reference(CC)
Incorporated by reference(DD)
Incorporated by reference(EE)
Incorporated by reference(FF)
Incorporated by reference(GG)†
Incorporated by reference(HH)
Incorporated by reference(II)†
Filed herewith†
Filed herewith
Filed herewith
Included with signature pages
Filed herewith
Filed herewith
Filed herewith
Filed herewith
Filed herewith
Filed herewith
Filed herewith
Filed herewith
Filed herewith
†
A
B
C
D
E
F
Management compensatory plan/arrangement.
Incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K dated November
17, 2014 filed on November 18, 2014, File No. 0-20243.
Incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K dated June 17,
2014, filed on June 20, 2014, File No. 0-20243.
Incorporated herein by reference to Exhibit 99(a) to the Registrant’s Registration Statement on Form S-8 filed on
January 25, 2002, File No. 333-81438.
Incorporated herein by reference to Appendix B to the Registrant’s Proxy Statement in connection with its annual
meeting of shareholders held on June 20, 2002, filed on May 23, 2002, File No. 0-20243.
Incorporated herein by reference to Exhibit 10.7 to the Registrant’s Annual Report on Form 10-K for the fiscal
year ended January 31, 2003 and filed on April 30, 2003, File No. 0-20243.
Incorporated herein by reference to Exhibit 10.8 to the Registrant’s Annual Report on Form 10-K for the fiscal
year ended January 31, 2003 and filed on April 30, 2003, File No. 0-20243.
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G
H
I
J
K
L
M
N
O
P
Q
R
S
T
U
V
W
X
Y
Z
AA
BB
CC
DD
EE
FF
Incorporated herein by reference to Annex A to the Registrant’s Proxy Statement in connection with its annual
meeting of shareholders held on June 21, 2006, filed on May 23, 2006, File No. 0-20243.
Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated January 14,
2005, filed on January 14, 2005, File No. 0-20243.
Incorporated herein by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated January 14,
2005, filed on January 14, 2005, File No. 0-20243.
Incorporated herein by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K dated January 14,
2005, filed on January 14, 2005, File No. 0-20243.
Incorporated herein by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K dated January 14,
2005, filed on January 14, 2005, File No. 0-20243.
Incorporated herein by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K dated January 14,
2005, filed on January 14, 2005, File No. 0-20243.
Incorporated herein by reference to Exhibit 10 to the Registrant’s Current Report on Form 8-K dated June 21,
2006, filed on June 26, 2006, File No. 0-20243.
Incorporated herein by reference to Appendix A to the Registrant’s Proxy Statement in connection with its annual
meeting of shareholders held on June 15, 2011, filed on May 5, 2011, File No. 0-20243.
Incorporated herein by reference to Exhibit 10.13 to the Registrant’s Annual Report on Form 10-K for the fiscal
year ended January 28, 2012 and filed on April 5, 2012, File No. 0-20243.
Incorporated herein by reference to Exhibit 10.14 to the Registrant’s Annual Report on Form 10-K for the fiscal
year ended January 28, 2012 and filed on April 5, 2012, File No. 0-20243.
Incorporated herein by reference to Exhibit 10.13 to the Registrant’s Annual Report on Form 10-K for the fiscal
year ended January 28, 2012, filed on April 5, 2012, File No. 0-20243.
Incorporated herein by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated August 25,
2008, filed on August 28, 2008, File No. 0-20243.
Incorporated herein by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K dated February
19, 2010, filed on February 23, 2010, File No. 0-20243.
Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the period
ended May 3, 2014 and filed on June 6, 2014, File No. 0-20243.
Incorporated herein by reference to Exhibit 10.2 to the Registrant’s Form 10-Q for the period ended May 3, 2014
and filed on June 6, 2014, File No. 0-20243.
Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated June 22,
2014, filed June 25, 2014, File No. 0-20243.
Incorporated herein by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated November
17, 2014, filed November 18, 2014, File No. 0-20243.
Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 10-Q for the period ended November 1,
2014 and filed on December 5, 2014, File No. 0-20243.
Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 10-Q for the period ended November 1,
2014 and filed on December 5, 2014, File No. 0-20243.
Incorporated herein by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated February 25,
2009, filed on February 26, 2009, File No. 0-20243.
Incorporated herein by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated February
25, 2009, filed on February 26, 2009, File No. 0-20243.
Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated February
10, 2012, filed on February 10, 2012, File No. 0-20243.
Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated May 7,
2013, filed on May 7, 2013, File No. 0-20243.
Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q dated
September 6, 2013, filed on September 6, 2013, File No. 0-20243.
Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated February 5,
2014, filed on February 5, 2014, File No. 0-20243.
Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated March 6,
2015, filed on March 9, 2015, File No. 0-20243.
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GG
HH
II
Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated September
27, 2010, filed on September 27, 2010, File No. 0-20243.
Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated November
17, 2014, filed on November 18, 2014, File No. 0-20243.
Incorporated herein by reference to Exhibit 4.9 to the Registration’s Registration Statement on Form S-8 filed on
July 1, 2011, File No. 333-175320.
77
Fiscal Year 2015 Annual Cash Incentive Plan of EVINE Live Inc.
Exhibit 10.24
Similar to prior years, our board of directors has adopted, through our compensation committee, an annual cash incentive plan for fiscal
year 2015 that covers executive officers, officers and certain other key employees. The plan is designed to encourage and reward this group for
making decisions that improve performance as measured by Adjusted EBITDA and individual performance measures. The plan is designed to
produce sustained shareholder value by establishing a direct link between these measures and incentive compensation. This annual incentive to
the officers is administered by our compensation committee.
Targets are established annually for the company as a whole and are designed to motivate continuous improvement to achieve payouts at or
above target for the fiscal year. The company's and an individual’s performance determines the amount, if any, of awards earned by each plan
participant, under the annual cash incentive compensation plan. The awards are based on performance relative to the established target and
performance measures.
For fiscal 2015, a payout is achieved when a defined minimum level of Adjusted EBITDA is reached. Executive officer's cash incentive
opportunity is based 80% - 100% on Adjusted EBITDA performance and 0% - 20% on individual performance measures. Officers and all other
key employees' incentive opportunities are based on achieving EBITDA performance and individual performance measures.
Actual incentive payments each year are scalable once the minimum Adjusted EBITDA threshold has been achieved. This annual
performance-based incentive opportunity is established each year as a percentage of the employee's annual base salary and is targeted at
approximately the 50th percentile of our previously determined competitive market with the opportunity to earn more for above-target
performance or less for below-target performance. For fiscal 2015, each senior executive officer is eligible for a target cash incentive opportunity
equal to 60% to 100% of their respective base salary, while the incentive opportunity for officers and all other key employees range from 10% to
40% of their respective salary. For a given year, a payout at 100 percent of target annual incentive compensation is achieved when company
performance achieves the performance measures. Actual incentive payments for 2015 could range from 50 to 200 percent of the targeted
incentive opportunity based on corporate performance and/or an individual’s performance.
The decision to make cash incentive payments is made annually by our compensation committee. Payment amounts are determined by the
compensation committee and are made in cash in the first quarter of the following fiscal year. A participant must be employed at the time of
payment and have an adequate performance rating in order to receive any pay out under the plan. The compensation committee retains authority
to adjust performance goals to exclude the impact of charges, gains or other factors that the compensation committee believes are not
representative of the underlying financial or operational performance of our company.
EVINE Live Inc.
Compensation of Directors*
Exhibit 10.25
1.
Compensation for service on the Board:
• $65,000 per annum cash compensation
• Annual grant of 8,000 shares of restricted stock (vesting on the day immediately prior the next following annual shareholders
meeting after the date of grant); grant is made immediately following each annual shareholders meeting
• New directors receive a one-time grant of 30,000 stock options upon joining the Board.
2.
Additional Compensation for Chairman of the Board:
• Additional cash compensation of $65,000 per annum
• Annual grant of 20,000 stock options per annum, with the option grant made immediately following the annual shareholders
meeting
3.
Additional Cash Compensation for service on Committees of the Board:
• $12,000 per annum for serving as Chairman of Compensation, Finance or Governance Committee
• $20,000 per annum for serving as Chairman of Audit Committee
• $10,000 for other members of the Audit Committee
• Fees as determined by the Board for service on special committees that may be established from time to time and other
assignments, as required
4.
Miscellaneous
• Stock Ownership Guidelines: Non-Management Directors are expected to hold four times (4x) their annual cash retainer and
the committee fees paid by the company, to be obtained within five years from April 2011.
Indemnification Agreement
•
5.
Per Meeting Fees:
• No per meeting fees
______________________________________________________________________
*Directors who are a member of EVINE Live Inc. management do not receive any compensation for their service on the Board of Directors or
the Committees thereof.
EVINE LIVE INC.
Performance Stock Unit Award Agreement
Under the 2011 Omnibus Incentive Plan
Exhibit 10.36
EVINE Live Inc. (the “Company”), pursuant to its 2011 Omnibus Incentive Plan (the “Plan”), hereby grants to you, the Grantee named
below, the number of units relating to the Company’s common stock set forth in the table below (the “Performance Stock Units”). This Award of
Performance Stock Units (“Performance Stock Unit Award”) shall be subject to the terms and conditions set forth in this Agreement, consisting
of this cover page and the Performance Stock Unit Terms and Conditions on the following pages, and in the attached Plan document. Unless the
context indicates otherwise, terms that are not defined in this Agreement shall have the meaning set forth in the Plan as it currently exists or as it
is amended in the future.
Name of Grantee:**____________ **
Target No. of Performance Stock Units Granted:**[TBD]
Performance Period: February 1, 2015 - January 31, 2018
Grant Date: March 20, 2015
Vesting Date: March 20, 2018
Vesting Schedule: On the Vesting Date, the number of Performance Stock Units that will vest will be determined by the extent to
which the Relative TSR Performance Goal set forth below has been achieved during the Performance Period, provided the Grantee
continues to be a Service Provider until March 20, 2018:
Performance Goal
Relative TSR 100 th Percentile
Relative TSR 50 th Percentile
Relative TSR 33 rd Percentile
Relative TSR Less than 33 rd Percentile
Number of Performance
Stock Units Which Vest*
150% (“Maximum”)
100% (“Target”)
50% (“Threshold”)
0%
*Vesting percentages for performance between Performance Goal data
points will be based on a linear interpolation. Relative TSR and related
terms are defined in Section 2(b).
By signing below or otherwise evidencing your acceptance of this Agreement in a manner approved by the Company, you agree to all
of the terms and conditions contained in this Agreement and in the Plan document. You acknowledge that you have reviewed these documents
and that they set forth the entire agreement between you and the Company regarding your rights and obligations in connection with this
Performance Stock Unit Award.
GRANTEE: EVINE LIVE INC.
________________________________ Title:______________________________
By:________________________________
EVINE Live Inc.
2011 Omnibus Incentive Plan
Performance Stock Unit Award Agreement
Performance Stock Unit Terms and Conditions
1.
Award of Performance Stock Units . The Company hereby grants to you, as of the Grant Date, the number of Performance
Stock Units (PSUs) identified on the cover page of this Agreement, subject to the restrictions and other terms and conditions set forth herein and
in the Plan.
2.
Timing of Vesting . Subject to Section 6 of this Agreement, so long as your Service (as defined in the Plan) to the Company
and its Affiliates has not ended, the PSUs will vest and become non-forfeitable as provided in this Section 2. If your Service ends for any reason
prior to the Vesting Date, then this Agreement shall terminate and all of the PSUs shall be forfeited, except to the extent the Committee exercises
discretion as permitted by Section 3(b)(2) of the Plan or except as provided by Section 6 of this Agreement.
(a)
Scheduled Vesting . This Performance Stock Unit Award will vest on the Vesting Date as to the number of Performance
Stock Units specified in the Vesting Schedule on the cover page to this Agreement, which number shall be determined by the degree to
which the Performance Goal (as set forth on the cover page and further explained in subsection (b) below) has been achieved during the
Performance Period.
(b)
Definition of Total Shareholder Return (or TSR), Relative Total Shareholder Return and Related Terms. For purposes of
this Agreement:
(i)
“TSR” means the cumulative total return over the Performance Period on a company’s common stock, as measured
by the change in the company’s stock price (on the registered national securities exchange that is then the principal exchange on
which such company’s stock is traded) from the beginning of the Performance Period to the end of the Performance Period and
taking into account the assumed reinvestment of all dividends paid during the Performance Period, and will be calculated by
dividing (i) the Closing Average Share Value by (ii) the Opening Average Share Value and subtracting one from the quotient.
(ii)
“Relative TSR” means the percentile ranking of the Company compared to a group of “Peer Companies”
comprised of the companies in the “Global Industry Classification Standard (or GICS) Internet & Catalog Retail Group” as of the
Grant Date, and determined by ranking the Company and the Peer Companies from highest to lowest according to their respective
TSRs, with the Company’s percentile ranking determined in accordance with the following formula:
P = 1 - R - 1
N - 1
where P = the percentile ranking (rounded to the nearest whole percentile), N = the number of Peer Companies plus the
Company, and R = the Company’s ranking among the Peer Companies. For example: if there are 24 Peer Companies, and the
Company ranked 7 th , the performance would be at the 75 th percentile: 75% = 1 - ((7-1)/(25-1)). The group of Peer Companies may
be adjusted as provided below if any of the following events occur during the Performance Period:
(A)
In the event of a business combination transaction of a Peer Company with another Peer Company, the
surviving entity will remain a Peer Company.
(B)
In the event of a business combination transaction of a Peer Company with an entity that is not a Peer
Company where the Peer Company is the surviving entity and remains publicly traded, the surviving entity will remain a Peer
Company.
(C)
In the event of a business combination transaction of a Peer Company with an entity that is not a Peer
Company and the Peer Company is not the surviving entity, a “going private” transaction involving a Peer Company or the
liquidation of a Peer Company, the company shall no longer be a Peer Company.
(D)
In the event of a bankruptcy of a Peer Company, or if a Peer Company delists, such Peer Company shall
remain a Peer Company, but will be allocated a TSR at the lowest position in the final calculation
of the percentile rankings.
(E)
In the event of a stock distribution from a Peer Company consisting of the shares of a new publicly-
traded company (a “spin-off”), the Peer Company shall remain a Peer Company and the spin-off shall be treated as a dividend
from the Peer Company based on the closing price of the shares of the spun-off company on its first day of trading. The
performance of the shares of the spun-off company will not thereafter be tracked for purposes of calculating TSR.
(iii)
“Opening Average Share Value” means the average, over the Opening Average Period, of the closing market
price of a company’s stock multiplied by the company’s Accumulated Shares for each trading day during the Opening Average
Period.
(iv)
Period.
“Opening Average Period” means the 20 trading days immediately preceding the first day of the Performance
(v)
“Closing Average Share Value” means the average, over the Closing Average Period, of the closing market price
of a company’s stock multiplied by the company’s Accumulated Shares for each trading day during the Closing Average Period.
(vi)
“Closing Average Period” means the last 20 trading days of the Performance Period.
(vii)
“Accumulated Shares” for any company means, for a given trading day, the sum of (i) one share and (ii) a
cumulative number of shares of that company’s common stock purchased with dividends declared on that company’s common
stock, assuming same day reinvestment of the dividends in the common stock of the company at the closing market price on the ex-
dividend date, for ex-dividend dates durign the Opening Average Period for purposes of the Opening Average Share Value or
during the Performance Period for purposes of the Closing Average Share Value.
(c)
Limitation on Scheduled Vesting . Upon the Vesting Date, any Performance Stock Units that are not vested shall be
forfeited in their entirety.
(d)
Adjustments . The number of Performance Stock Units subject to this Performance Stock Unit Award and/or Relative TSR
percentile goals shall be subject to equitable adjustment by the Committee under the circumstances specified in Section 12(a) of the
Plan.
3.
(a)
Issuance of Company Common Stock (“Shares”) .
Issuance following Vesting . Promptly following the Vesting Date, the Committee shall certify the degree to which the
Performance Goal has been achieved. After the Committee’s certification, the Company shall issue to you a number of Shares equal to
the number of Performance Stock Units that have vested, as evidenced by issuance of a stock certificate without restrictive legend, by
electronic delivery of such Shares to a brokerage account designated by you, or by an unrestricted book-entry registration of such
Shares with the Company’s transfer agent. Such Shares shall be issued under the Plan, and shall be covered by a registration statement
filed with the Securities and Exchange Commission.
(b)
Delay for Specified Employee . Notwithstanding the foregoing, if (i) the Performance Stock Units become vested as a
result of your separation from service (within the meaning of Code Section 409A), and (ii) you are a “specified employee” (within the
meaning of Code Section 409A) as of the date of such separation from service, then to the extent required by Code Section 409A, the
settlement of such vested Performance Stock Units shall occur on the date that is six (6) months after the date of your separation from
service.
(c)
Stock Certificate Restrictions . The Company shall not be liable to you for damages relating to any delays in issuing any
stock certificates hereunder to you, in the electronic delivery of Shares to a brokerage account designated by you or in making an
appropriate book entry, any loss of any such certificates, or any mistakes or errors in the issuance of such certificates, in such
certificates themselves or in the electronic delivery or the making of the book entry; provided that the Company shall correct any such
errors caused by it. Any such certificate or certificates or book entry shall be subject to such stop transfer orders and other restrictions as
the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange
Commission, any stock exchange upon which such Shares are listed, and any applicable Federal or state laws, and the Committee may
cause a legend or legends to be put on any such certificates or an appropriate book entry notation to make appropriate reference to such
restrictions.
(d)
Securities Laws . Upon the acquisition of any Shares pursuant to this Agreement, you agree that you will make or enter into
such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable
securities laws or with this Agreement.
4.
Dividends and Voting Rights . You shall not have voting rights, and shall not be entitled to receive cash dividends or other
distributions, with respect to the Shares underlying the Performance Stock Units unless and until such Shares are reflected as issued and
outstanding shares on the Company’s stock ledger.
5.
Withholding Taxes . You hereby authorize the Company (or any Affiliate) to withhold from payroll or other amounts
payable to you any sums required to satisfy any federal, state, local or foreign withholding taxes that may be due as a result of the vesting of the
Performance Stock Units or the issuance of Shares hereunder, and the Company may defer the release to you of any and all Shares until you
have made arrangements acceptable to the Company for payment of all such withholding taxes in accordance with the provisions of Section 14
of the Plan. If you wish to satisfy some or all of such withholding tax obligations by delivering Shares you already own or by having the
Company withhold a portion of the Shares that would otherwise be issued to you hereunder, you must make such a request prior to the Vesting
Date, which shall be subject to approval by the Committee.
6.
Change in Control . The following provisions apply to this Performance Stock Unit Award in the event of a Change in
Control.
(a)
Continuation, Assumption or Replacement of Award . If this Performance Stock Unit Award is continued, assumed or
replaced in connection with a Change in Control as contemplated by Section 12(b)(1) of the Plan (for Corporation Transactions) or
Section 12(c) of the Plan, then if you experience an involuntary termination of Service for reasons other than Cause within one year
after the effective time of the Change in Control, such termination of employment will be treated as the “Vesting Date” and you will
receive a number of Shares to the extent the Performance Goal has been achieved as of such date.
(b)
Corporate Transactions Where Award Not Continued, Assumed or Replaced . If this Performance Stock Unit Award is not
continued, assumed or replaced in connection with a Corporate Transaction as contemplated by Section 12(b)(1) of the Plan, then the
effective time of such Corporate Transaction will be treated as the “Vesting Date” and you will receive a number of Shares to the extent
the Performance Goal has been achieved as of such date. Alternatively, the Committee may provide for the cancellation of this
Performance Stock Unit Award at or immediately prior to the effective time of the Corporate Transaction in exchange for a payment to
you calculated in the manner described in Section 12(b)(3) of the Plan, except that the calculation of such payment shall be based only
upon that number of Performance Stock Units that would have vested on the date of the Corporate Transaction, after giving effect to
any acceleration of vesting called for by this Section 6(b).
7.
Restrictions on Transfer . You may not sell, transfer, or otherwise dispose of or pledge or otherwise hypothecate or assign
the Performance Stock Units. Any such attempted sale, transfer,disposition, pledge, hypothecation or assignment shall be null and void.
8.
Governing Plan Document . This Agreement is subject to all the provisions of the Plan, and to all interpretations, rules and
regulations which may, from time to time, be adopted and promulgated by the Committee pursuant to the Plan. If there is any conflict between
the provisions of this Agreement and the Plan, the provisions of the Plan will govern.
9.
Choice of Law . This Agreement will be interpreted and enforced under the laws of the state of Minnesota (without regard
to its conflicts or choice of law principles).
10.
Binding Effect . This Agreement will be binding in all respects on your heirs, representatives, successors and assigns, and
on the successors and assigns of the Company.
11.
Discontinuance of Service . This Agreement does not give you a right to continued Service with the Company or any
Affiliate, and the Company or any such Affiliate may terminate your Service at any time and otherwise deal with you without regard to the effect
it may have upon you under this Agreement.
12.
Notices . Every notice or other communication relating to this Agreement shall be in writing and shall be mailed to or
delivered to the party for whom it is intended at such address as may from time to time be designated by it in a notice mailed or delivered to the
other party as herein provided. Unless and until some other address is so designated, all notices or communications by you to the Company shall
be mailed or delivered to the Company at its office at 6740 Shady Oak Road, Eden Prairie, MN 55344, and all notices or communications by the
Company to you may be given to you personally or may be mailed to you at the address indicated in the Company's records as your most recent
mailing address.
By signing the cover page of this Agreement or otherwise accepting this Performance Stock Unit Award in a manner approved by the
Company, you agree to all the terms and conditions contained in this Agreement and in the Plan document.
All of the Company's subsidiaries listed below are wholly owned.
SUBSIDIARIES OF THE REGISTRANT
Exhibit 21
Name
State of Incorporation or Organization
ValueVision Interactive, Inc.
VVI Fulfillment Center, Inc.
ValueVision Media Acquisitions, Inc.
ValueVision Retail, Inc.
Norwell Television, LLC
Minnesota
Minnesota
Delaware
Delaware
Delaware
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement Nos. 333-81438, 333-125183, 333-139597, 333-175319, 333-175320
and 333-190982 on Form S-8 of our reports dated March 26, 2015 , relating to the consolidated financial statements and financial statement
schedule of EVINE Live Inc. (formerly ValueVision Media, Inc.) and subsidiaries, and the effectiveness of EVINE Live Inc. and subsidiaries’
internal control over financial reporting, appearing in this Annual Report on Form 10-K of EVINE Live Inc. and subsidiaries for the year ended
January 31, 2015.
Exhibit 23
Minneapolis, Minnesota
March 26, 2015
I, Mark C. Bozek, certify that:
1. I have reviewed this report on Form 10-K of EVINE Live Inc.;
CERTIFICATION
Exhibit 31.1
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(s) 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(s) 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 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 controls over financial reporting.
Date: March 26, 2015
/s/ Mark C. Bozek
Mark C. Bozek
Chief Executive Officer
(Principal Executive Officer)
I, William McGrath, certify that:
CERTIFICATION
1.
I have reviewed this report on Form 10-K of EVINE Live Inc.;
Exhibit 31.2
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(s) 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(s) 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 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 controls over financial reporting.
Date: March 26, 2015
/s/ William McGrath
William McGrath
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
CERTIFICATION OF THE CHIEF EXECUTIVE AND FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32
In connection with the Annual Report on Form 10-K of EVINE Live Inc., a Minnesota corporation (the "Company"), for the year ended
January 31, 2015 , as filed with the Securities and Exchange Commission on or about the date hereof (the "Report"), the undersigned officers of
the Company certify pursuant to 18 U.S.C. Section 1350, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to their knowledge:
•
•
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company
and furnished to the Securities and Exchange Commission or its staff upon request.
Date: March 26, 2015
Date: March 26, 2015
/s/ Mark C. Bozek
Mark C. Bozek
Chief Executive Officer
/s/ William McGrath
William McGrath
Executive Vice President and Chief Financial Officer