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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________
Form 10-K
 
 
 
þ
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the Fiscal Year Ended January 30, 2016
or
o
 
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the transition period from          to          
Commission file number 001-37495
____________________________________________
EVINE Live Inc.
(Exact name of Registrant as Specified in Its Charter)
 
 
 
Minnesota
(State or Other Jurisdiction of Incorporation or Organization)
 
41-1673770
(I.R.S. Employer Identification No.)
6740 Shady Oak Road, Eden Prairie, MN
(Address of Principal Executive Offices)
 
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 o     No þ
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 o     No þ
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 þ     No o
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 þ     No o
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.  o
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 o
Accelerated filer þ
Non-accelerated filer o
Smaller reporting company o
 
(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 o     No þ
As of March 28, 2016, 57,170,245 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 July 31, 2015, 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 July 31, 2015 was approximately $99,849,546. 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 30, 2016 are incorporated by reference in Part III of this annual report on Form 10-K.



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EVINE Live Inc.
ANNUAL REPORT ON FORM 10-K

For the Fiscal Year Ended

January 30, 2016
TABLE OF CONTENTS


 
 
 
 
 
Page
 
 
 
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
 
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
 
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
 
Item 15.
 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 (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, estimates, intends, predicts, hopes, should, plans, will 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 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 credit facilities 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, including without limitation, regulations of the Federal Communications Commission, and adverse outcomes from regulatory proceedings; litigation or governmental proceedings affecting our operations; 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; our ability to obtain and retain key executives and employees; our ability to attract new customers and retain existing customers; changes in shipping costs; our ability to offer new or innovative products and customer acceptance of the same; changes in customer viewing habits or television programming; and the risks identified under Item 1A (Risk Factors) in this annual report on Form 10-K. 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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PART I

Item 1. Business
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 2015, ended on January 30, 2016, and consisted of 52 weeks. Fiscal 2014 ended on January 31, 2015 and consisted of 52 weeks. Fiscal 2013 ended on February 1, 2014 and consisted of 52 weeks.

A. General
We are a digital commerce company that offers a mix of proprietary, exclusive and name brands directly to consumers in an engaging and informative shopping experience through TV, online and mobile devices. We operate a 24-hour television shopping network, EVINE Live, which is distributed primarily on cable and satellite systems, through which we offer proprietary, exclusive and name brand products in the categories of jewelry & watches; home & consumer electronics; beauty; 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, we announced that we had changed our corporate name to EVINE Live Inc. from ValueVision Media, Inc. Effective November 20, 2014, our NASDAQ trading symbol also changed to EVLV from VVTV. We transitioned from doing business as "ShopHQ" and rebranded to "EVINE Live" and evine.com on February 14, 2015.
In May 2013, we previously announced a rebranding of our 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 online-only products. Consolidated net sales, including shipping and handling revenues, totaled $693.3 million, $674.6 million and $640.5 million for fiscal 2015, fiscal 2014 and fiscal 2013, 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 media channel platforms include jewelry & watches, home & consumer electronics, beauty, and fashion & accessories. Historically jewelry & watches has been our largest merchandise category. 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 & watches remained our largest merchandise category in fiscal 2015. We are focused on diversifying our merchandise assortment both among our existing product categories as well as with potentially new product categories, including proprietary, exclusive and name brands, in an effort to increase revenues and to grow our new and active customer base. 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. Certain fiscal 2014 and 2013 product category percentages in the accompanying table have been reclassified to conform to our fiscal 2015 product group hierarchy:
Merchandise Category
 
Fiscal 2015
 
Fiscal 2014
 
Fiscal 2013
Jewelry & Watches
 
39%
 
42%
 
43%
Home & Consumer Electronics
 
31%
 
30%
 
35%
Beauty
 
14%
 
12%
 
11%
Fashion & Accessories
 
16%
 
16%
 
11%

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Jewelry & Watches.  We feature a broad assortment of jewelry from fine to fashion, silver to gold, genuine gemstones to simulated diamonds. In addition, we offer an extensive collection of men’s and women’s watches from classic to modern designs.
Home & Consumer Electronics.  We feature home décor, bed and bath textiles, cookware, kitchen electrics, mattresses, tabletop accessories, and home furnishings. With consumer electronics, we offer the latest technology trends and solutions for today's consumer, from some of the world's most recognized brands.
Beauty.  Our beauty assortment features a variety of skincare, cosmetics, hair care and bath & body products.
Fashion & Accessories.  We offer 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, exclusive and name brand merchandise using online, mobile, social media and our commerce infrastructure, which includes television access to approximately 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 investing in new brands and offering a more diverse assortment of proprietary, exclusive (i.e., brands that are not readily available elsewhere) and name brand merchandise, 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 a focus on expanding and strengthening our relationships with the brands, personalities and vendors with whom we do business.
In addition to offering our customers a more diverse assortment of proprietary, exclusive and name brand merchandise, we are focusing on increasing awareness of the EVINE Live brand and our Shop.Share.Smile platform while at the same time augmenting our distribution footprint, with the goal of expanding our customer base. 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.
Priorities for fiscal 2016 that we believe will ultimately drive sustainable profitability are: improving our discipline around offering the most popular and profitable merchandise mix that our customers prefer; careful attention to gross profit and our cost structure; capitalizing on our expertise in video-based ecommerce; sensibly broadening our distribution base; improving channel adjacencies and placement; exploiting new technologies in mobile and logistics; increasing customer penetration; improving customer and 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 and exclusive brands along with an improved program distribution footprint 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 Online Operations
Net sales from our television shopping business, inclusive of shipping and handling revenues, totaled $368 million, $374 million, and $343 million, representing 53%, 55% and 54% of consolidated net sales for fiscal 2015, fiscal 2014 and fiscal 2013, respectively. Net sales from our online and mobile business, inclusive of shipping and handling revenues, totaled $325 million, $301 million, and $297 million, representing 47%, 45% and 46% of consolidated net sales for fiscal 2015, fiscal 2014 and fiscal 2013, respectively. Our online 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 platforms. 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. Pursuant 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 30, 2016, we have entered into distribution agreements with cable operators, direct-to-home satellite providers and telecommunications companies to distribute our television network over their systems. The terms

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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 2015, there were approximately 120 million homes in the United States with at least one television set. Of those homes, there were approximately 56 million cable television subscribers, approximately 33 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 annual average number of subscriber homes that receive our network.
During fiscal 2015, our television shopping network was available to approximately 88.1 million average full time equivalent subscribers ("FTEs"), compared with approximately 87.5 million average FTEs, during fiscal 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. We currently provide closed captioning on full-length programming redistributed over the internet and a limited amount 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. We cannot predict 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
We are a party to an amended and restated shareholder agreement, dated February 25, 2009 (the "GE/NBCU Shareholder Agreement"), with GE Capital Equity Investments, Inc. (“GE Equity”) and NBCUniversal Media, LLC ("NBCU"), which provides for certain corporate governance and standstill matters (as described further below). NBCU is an indirect subsidiary of Comcast Corporation ("Comcast"). We believe that as of January 30, 2016, the direct equity ownership of GE Equity in the Company

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consisted of 3,545,049 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 the agreement are comparable to those with other cable system operators.
General Electric Company (“GE”), the parent company of GE Equity, has 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 shareholder agreement described below. Furthermore, GE has also 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 January 30, 2016 GE Equity has an approximate 6% beneficial ownership in the Company.
In an SEC filing made on August 18, 2015, GE Equity disclosed that on August 14, 2015, it and ASF Radio, L.P. ("ASF Radio"), an independent third party to us, entered into a Stock Purchase Agreement pursuant to which GE Equity agreed to sell 3,545,049 shares of the Company's common stock, which is all of the shares GE Equity currently owns, to ASF Radio for $2.15 per share. The closing of the sale is subject to certain conditions and was scheduled for October 15, 2015. According to the SEC filing, ASF Radio is an affiliate of Ardian, an independent private equity investment company. As of March 28, 2016, the sale has not yet closed.
Amended and Restated Shareholder Agreement
The GE/NBCU 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) (the "50% Ownership Condition"), 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 GE/NBCU Shareholder Agreement (the "10% Ownership Condition"). In addition, the GE/NBCU 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 or committees. Upon the closing of the GE/ASF Radio Sale, the 50% Ownership Condition will no longer be met; however, we expect that the 10% Ownership Condition will continue to be met and therefore, following the closing of the GE/ASF Radio Sale, NBCU and its affiliates will continue to be entitled to designate nominees for two members of our board of directors.
The GE/NBCU Shareholder Agreement requires that we obtain the consent of GE Equity before we (i) exceed 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) enter into any business different than the business in which we and our subsidiaries are currently engaged; and (iii) amend 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. We redeemed all of the Series B preferred stock in April 2011 and, upon the closing of the GE/ASF Radio Sale, the 50% Ownership Condition will no longer be met. Therefore, GE Equity will no longer be entitled to these consent rights following the closing of the GE/ASF Radio Sale.
The GE/NBCU 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 GE/NBCU 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 may not sell, transfer or otherwise dispose of any securities of the Company subject to limited exceptions for (i) transfers to affiliates, (ii) third party tender offers, (iii) mergers, consolidations and reorganizations and (iv) transfers pursuant to underwritten public offerings or transfers exempt from registration under the Securities Act (provided, in the case of (iii), such transfers do not result in the transferee acquiring beneficial ownership in excess of 10% (or 20% in the case of a transfer by NBCU)). As discussed above, we believe that NBCU owns more than 5% but less than 90% of the adjusted outstanding shares of our common stock and therefore, NBCU will remain subject to these restrictions following the consummation of the GE/ASF Radio Sale.
The standstill period will terminate on the earliest to occur of (i) the ten-year anniversary of the GE/NBCU Shareholder Agreement, (ii) our entering into an agreement that would result in a "change in control" (as defined in the GE/NBCU Shareholder 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.
2015 Letter Agreement with GE Equity
On July 9, 2015, we entered into a letter agreement with GE Equity pursuant to which GE Equity consented to our adoption of a Shareholder Rights Plan in consideration for our agreement to provide GE Equity, NBCU and certain of their respective affiliates with exemptions from the Shareholder Rights Plan. GE’s consent was required pursuant to the terms of the GE/NBCU Shareholder Agreement. This discussion is a summary of the terms of the letter agreement. For more information about the Shareholder Rights Plan see Item 5 below.
In the letter agreement, we agreed that if any of GE Equity, NBCU or any of their respective affiliates that holds shares of our common stock from time to time (each a “Grandfathered Investor”) sells or otherwise transfers shares of our common stock currently owned by such Grandfathered Investor to any third party identified to us in writing (any such third party, a “Exempt Purchaser”), we will take all actions necessary under the Shareholder Rights Plan so that such third party will not be deemed an Acquiring Person (as defined in the Shareholder Rights Plan) by virtue of the acquisition of such shares. We further agreed that, subject to certain limitations, upon request of any Grandfathered Investor or Exempt Purchaser, and in connection with a transfer by such Grandfathered Investor or Exempt Purchaser of shares of our common stock to an Exempt Purchaser, we will enter into an agreement with the acquiring Exempt Purchaser granting such acquiring Exempt Purchaser substantially the same rights as set forth above with respect to any sale of our outstanding shares of common stock to any other third party. Additionally, we agreed that without the consent of any Grandfathered Investor that is an affiliate of GE Equity and any Grandfathered Investor that is an affiliate of NBCU, we will not (i) amend the Shareholder Rights Plan in any material respect, other than to accelerate the Expiration Date or the Final Expiration Date, (ii) adopt another shareholders' rights plan or (iii) amend the letter agreement.
The foregoing summaries of the GE/NBCU Shareholder Agreement, the Registration Rights Agreement and the 2015 letter agreement with GE Equity do not purport to be complete and are qualified in their entirety by reference to the full text of such agreements, which have been filed as exhibits to this Annual Report on Form 10-K and are incorporated herein by reference.


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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 promotion that features a 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 and exclusive brands, which generally have higher margins than branded merchandise, across multiple product categories.
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 2018. 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 instant purchase credits 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 2015 and 2014, customer use of the private label consumer credit card accounted for approximately 18% of our television and online sales.
Synchrony Financial, the issuing bank for the Program, was previously indirectly majority-owned by the General Electric Company ("GE"), which is also the parent company of GE Equity. We believe as of January 30, 2016, GE Equity had an approximate 6% beneficial ownership in us and has certain rights as further described under "Relationship with GE Equity, Comcast and NBCU".
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 2015, 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 third party 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.
We own a 600,000 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 began a significant operational expansion initiative with respect to overall warehousing capacity and new equipment and system technology upgrades at our Bowling Green, Kentucky distribution facility. During the first quarter of

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fiscal 2015 the new building was substantially completed and we expanded our 262,000 square foot facility to an approximately 600,000 square foot facility. Subsequently, during the second quarter of fiscal 2015, we finished the building expansion and moved out of our leased satellite warehouse space. The updated facilities and technology upgrade will include a new high-speed parcel shipping and item sortation system coupled with a new warehouse management 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 systems are expected to be phased into production through the first half of fiscal 2016.
During the first half fiscal 2015 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 allowed for additional capacity, during the construction of our expansion. The leased space was vacated during the first half of fiscal 2015 when the expanded facility was available for use and the lease expired.
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 71% to 77%. 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 30, 2016 and January 31, 2015, we had inventory balances of $65.8 million and $61.5 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.
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 20% in fiscal 2015 and 22% in fiscal 2014. 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, including High Definition bands and multi-channel carriage, than our programming. Multimedia Commerce Group, Inc., which operates Jewelry Television, also competes with us for customers in the jewelry category. Furthermore, on March 8, 2016, Amazon.com, Inc. ("Amazon") announced the premiere of a live television program, Style Code Live, which features products that viewers can order online. This program, and any additional similar programs that Amazon may offer in the future, may compete with us. 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 those of our competition. However, one of our strategies is to maintain our fixed distribution cost structure in order to leverage our profitability.
We anticipate continued 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 online retail industries, including telecommunications and cable companies, television networks, and other established retailers. We believe that our ability to be

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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 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 September 11, 2015, the FCC granted 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 Company is licensee to WWDP (TV), channel 10, a broadcast television station licensed to Norwell, Massachusetts and serving the Boston, MA television market.
In February 2012, Congress passed legislation that grants the FCC authority to conduct an auction of certain spectrum currently used by television broadcasters. On May 15, 2014, the FCC adopted a Report and Order (the “2014 Report”) establishing the framework for an incentive auction of broadcast television spectrum. The 2014 Report created a two part incentive auction framework (the “Incentive Auction”). First, the FCC would conduct a reverse auction by which a television broadcaster may volunteer, in return for payment, to relinquish all or a part of its station’s spectrum by (i) surrendering its license, (ii) relinquishing a portion of its spectrum and thereafter sharing spectrum with another station, or (iii) modifying a UHF channel license to a VHF channel license. Second, the FCC would conduct a forward auction of the relinquished spectrum to new users. The FCC must complete the reverse auction and the forward auction by September 30, 2022. Applications to participate in the Incentive Auction were due by January 12, 2016 with bidding scheduled to begin on March 29, 2016. Completion of both parts of the Incentive Auction (reverse and forward) is expected to take up to one year. WWDP(TV) is a high VHF station and has elected to participate in the Incentive Auction.
To accommodate the spectrum reallocation to new users, the FCC may require that television stations that do not participate in the auction (or that participate but are not selected to sell their spectrum) modify their transmission facilities. The FCC is required to use “reasonable efforts” to preserve a station’s coverage area and population served, and this prevents the FCC from requiring that a station involuntarily move from the UHF band to the VHF band or from the high VHF band to the low VHF band. The underlying legislation authorizes the FCC to reimburse stations for reasonable relocation costs up to a total across all stations of $1.75 billion. If we choose to channel share or if we are required to change the frequency WWDP(TV) uses, we could incur

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conversion costs that may not be fully reimbursed, or our ability to provide high definition programming and additional program streams, including mobile video services, could be constrained.
As a high VHF station, the Company could chose to either relinquish its spectrum or relocate to a low VHF frequency. Such relocation may result in additional expenses and if the Company relinquishes its spectrum, it will have to replace distribution in the Boston, MA market by negotiating with distributors that may not agree to carry the network in the market.
We cannot predict the likelihood, timing or outcome of any court, Congressional or FCC regulatory action with respect to the Incentive Auction, or repacking of broadcast television spectrum, nor the impact of any such changes upon our business.
The foregoing does not purport to be a complete summary of the Communications Act, other applicable statutes, or the FCC’s rules, regulations or policies. Proposals for additional or revised regulations and requirements are pending before, are being considered by, and may in the future be considered by, Congress and federal regulatory agencies from time to time. We cannot predict the effect of any existing or proposed federal legislation, regulations or policies on our business. Also, several of the foregoing matters are now, or may become, the subject of litigation, and we cannot predict the outcome of any such litigation or the effect on our business.
Product Marketing
We offer our customers a broad range of merchandise through television, online and mobile. The manner in which we promote and sell our merchandise, including claims and representations made in connection with these efforts, is regulated by a wide variety of federal, state and local laws, regulations, rules, policies and procedures. Some examples of these that affect the manner in which we sell and promote merchandise or otherwise operate our businesses include, but are not limited to, the following:
The Food and Drug Administration’s regulations regarding marketing claims that can be made about cosmetic beauty products and over-the-counterdrugs, which include products for treating acne or medical products, and claims that can be made about food products;
Regulations related to product safety issues and product recalls including, but not limited to, the Consumer Product Safety Act, the Consumer Product Safety Improvement Act of 2008, the Federal Hazardous Substance Act, the Flammable Fabrics Act and regulations promulgated pursuant to these acts; and
Laws governing the collection, use, retention, security and transfer of personally-identifiable information about our customers.
These laws, regulations, rules, policies and procedures are subject to change at any time. Unfavorable changes applicable to us could decrease demand for merchandise offered by us, increase costs which we may not be able to offset, subject us to additional liabilities and/or otherwise adversely affect our businesses.

I. Intellectual Property
We regard our trademarks, service marks, copyrights, patents, domain names, trade dress, trade secrets, proprietary technologies, and similar intellectual property as critical to our success, and we rely on trademark, copyright and patent law, trade-secret protection, and confidentiality and/or license agreements with our employees, customers, vendors, partners, and others to protect our proprietary rights. We have registered, or applied for the registration of a number of U.S. domain names, trademarks and service marks.

J. 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.

K. Employees
At January 30, 2016, we had approximately 1,300 employees, the majority of whom are employed in customer service, order fulfillment and television production. Approximately 13% of our employees work part-time. We are not a party to any collective bargaining agreement with respect to our employees.

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L. Executive Officers of the Registrant
Set forth below are the names, ages and titles of the persons serving as our executive officers.
Name
 
Age
 
Position(s) Held
Robert Rosenblatt
 
58
 
Chairman & Interim Chief Executive Officer
Timothy A. Peterman
 
48
 
Executive Vice President — Chief Financial Officer
Damon E. Schramm
 
47
 
Senior Vice President — General Counsel and Secretary
Jean-Guillaume Sabatier
 
46
 
Senior Vice President — Sales & Product Planning and Programming
Nicholas J. Vassallo
 
52
 
Senior Vice President — Corporate Controller
Jaime B. Nielsen
 
39
 
Senior Vice President — Human Resources
Robert Rosenblatt joined the Company in June 2014 as Chairman of the Board. In February 2016, he was appointed Interim Chief Executive Officer. Previously, Mr. Rosenblatt served as Chief Executive Officer of Rosenblatt Consulting, LLC, a private company he formed in 2006, which specializes in helping investment firms determine value in both public and private consumer companies as well as helping retail firms bring their product to market. From 2012 to 2013, Mr. Rosenblatt served as the interim President of ideeli Inc., a members-only e-retailer that sells women's fashion and décor items during limited-time sales.  From 2004 to 2006, he was Group President and Chief Operating Officer of Tommy Hilfiger Corp., a worldwide apparel and retail company. He co-managed the process that culminated in the successful sale of Tommy Hilfiger Corp. to Apax Partners in 2006. From 1997 to 2004, Mr. Rosenblatt was an executive at HSN, Inc., a multi-channel retailer and television network specializing in home shopping.  He served as Chief Financial Officer from 1997 to 1999, Chief Operating Officer from 2000 to 2001 and President from 2001 to 2004. Previously, from 1983 to 1996, he was an executive at Bloomingdale's, an upscale chain of department stores owned by Macy's Inc., and served as Chief Financial Officer and Vice President of Stores.  He has been and is currently serving on several public and private boards in the retail and technology industry including Newgistics, Inc., RetailNext, debShops, PepBoys (NYSE: PBY) and I.Predictus. Bob also served on the Board of Directors of the Electronic Retailing Association. Mr. Rosenblatt holds a BS in Accounting from of Brooklyn College.
Timothy A. Peterman joined the Company as Chief Financial Officer in March 2015. Most recently, Mr. Peterman served as the Chief Operating Officer and Chief Financial Officer for The J. Peterman Company, an ecommerce apparel brand since 2011 until he joined the Company in March 2015. From 2009 to 2011, he served as Chief Operating Officer and Chief Financial Officer of Synacor, a media technology company. Previously, Mr. Peterman served almost six years at The E.W. Scripps Company in various senior roles, including Senior Vice President of Corporate Development. From 1999 to 2002, he was Chief Operating Officer and Chief Financial Officer of IAC’s broadcasting and cable divisions, which included USA Network & Sci-Fi Channel. Mr. Peterman also spent almost six years in senior financial roles at Tribune Company. Mr. Peterman began his career at KPMG in Chicago in 1989, is a CPA and is a graduate of the University of Kentucky.
Damon E. Schramm was hired as Associate General Counsel in September 2015, and served in that capacity until he was promoted to Senior Vice President, General Counsel and Secretary in February 2016. Most recently, Mr. Schramm served as Vice President, General Counsel and Secretary at Lakes Entertainment, a publicly traded casino gaming company, from 2005 until he joined the Company in September 2015. Previously, he has served as a Partner at the law firm Gray Plant Mooty. He has also held board seats with the Make-A-Wish Foundation and the Animal Humane Society, among others. Mr. Schramm holds a BA from the University of Minnesota-Duluth and a JD from William Mitchell College of Law.
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 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. Mr. Sabatier holds a BS and MBA from West Chester University in Pennsylvania.
Nicholas J. Vassallo has served as Vice President and Corporate Controller since 2000, and was promoted to Senior Vice President in October 2015. He first joined the Company as director of financial reporting in October 1996. 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

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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.
Jaime B. Nielsen has served as Vice President, Human Resources since May 2014, and was promoted to Senior Vice President in October 2015. She first joined the Company as director of human resources in February 2012. Prior to joining the Company, she served as the Senior Human Resources Director with Aimia, Inc., from September 2009 to February 2012. Ms. Nielsen began her career with Carlson Companies where she spent over ten years in various roles within human resources including executive compensation, talent management, organizational effectiveness & organizational design and received a Bachelors of Science degree with an emphasis in Human Resources Management from Kennedy Western University.

M. Segments and Geographic Information
We have only one reporting segment, which encompasses digital commerce retailing, and our operations are conducted primarily in the United States. The segment and geographic information required herein is contained in Note 10, "Business Segments and Sales by Product Group", in the notes to our consolidated financial statements.

N. Available Information
Our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, proxy and information statements, and amendments to these reports if applicable, are available, without charge, on our investor relations website as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. 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. The information found on our website is not part of this or any other report we file with, or furnish to, the SEC.
You may also read and copy these materials at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements and other information regarding us and other companies that file materials with the SEC electronically.
 
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.
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 $(8.7) million, $1.0 million and $0.1 million in fiscal 2015, fiscal 2014 and fiscal 2013, respectively. We reported net losses of $(12.3) million, $(1.4) million and $(2.5) million in fiscal 2015, fiscal 2014 and fiscal 2013, 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 adversely affected.
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.

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As of January 30, 2016, we had approximately $11.9 million in unrestricted cash, with an additional $0.5 million of restricted cash and investments. 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. 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 October 8, 2015, we entered into a fifth amendment to our revolving credit, term loan and security agreement with PNC, as previously amended (as amended, the "PNC Credit Facility") that, among other things, increased the size of the revolving line of credit from $75.0 million to $90.0 million. The PNC Credit Facility, which includes The Private Bank as part of the facility, provides a revolving line of credit of $90.0 million and provides for a $15.0 million term loan which we have drawn to fund improvements at our distribution facility in Bowling Green, Kentucky. The PNC Credit Facility also provides an accordion feature that would allow us to expand the size of the revolving line of credit by an additional $25.0 million at the discretion of the lenders and upon certain conditions being met. All borrowings under the PNC Credit Facility mature and are payable on May 1, 2020. Maximum borrowings and available capacity under the amended revolving Credit Facility are equal to the lesser of $90 million or a calculated borrowing base comprised of eligible accounts receivable and eligible inventory. Remaining capacity under the amended Credit Facility, was $29.7 million as of January 30, 2016. On March 10, 2016, we entered into the sixth amendment to the PNC Credit Facility authorizing us to enter into the GACP Credit Agreement (as defined below).
On March 10, 2016, we entered into a five-year term loan credit and security agreement (the "GACP Credit Agreement") with GACP Finance Co., LLC ("GACP") for a term loan of $17 million. Proceeds from the term loan under the GACP Credit Agreement (the "GACP Term Loan") will be used to provide for working capital and for general corporate purposes. The GACP Credit Agreement matures on March 9, 2021. The GACP Term Loan bears interest at a fixed rate based on the greater of LIBOR for interest periods of one, two or three months or 1% plus a margin of 11.0%.
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 the PNC Credit Facility. Based on our current projections for fiscal 2016, 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, the GE/NBCU Shareholder Agreement 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, the PNC Credit Facility includes certain restrictions on our 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, 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 stock price has experienced a significant decline, which could further adversely affect the market price of our stock, our ability to raise additional capital and/or cause us to be subject to securities class action litigation.
The market price of our common stock has experienced and may continue to experience a significant decline. In 2015, the sales price of our common stock, as reported on the NASDAQ Global Market, declined from a high of $6.99 in the first quarter of 2015 to a low of $1.19 in the fourth quarter of 2015. Most recently, on March 28, 2016, the market price of our common stock, as reported on The NASDAQ Global Market, closed at a price of $0.99 per share. Our progress in developing and commercializing our products, our quarterly operating results, announcements of new products by us or our competitors, our perceived prospects, changes in securities’ analysts’ recommendations or earnings estimates, changes in general conditions in the economy or the financial markets, adverse events related to our strategic relationships, significant sales of our common stock by existing stockholders and other developments affecting us or our competitors could cause the market price of our common stock to fluctuate substantially. Our financial position, our cash flows and our results of operations could be materially adversely affected if our stock price does not improve or declines further. In addition, in recent years the stock market has experienced extreme price and volume fluctuations. This volatility has had a significant effect on the market prices of securities issued by many companies for reasons unrelated to their operating performance. These market fluctuations, regardless of the cause, may materially and adversely affect our stock price, regardless of our operating results. In addition, we may be subject to securities class action litigation as a result of volatility in the price of our common stock, which could result in substantial costs and diversion of management’s attention and resources and could harm our stock price, business, prospects, results of operations and financial condition.
If our common stock continues to trade below $1.00 per share, we could cease to be in compliance with the continued listing standards set forth by NASDAQ.
On March 21, 2016, we received a letter from the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market (“Nasdaq”) informing us that because the closing bid price for our common stock listed on Nasdaq was below $1.00 for 30 consecutive trading days, we do not comply with the minimum closing bid price requirement for continued listing on the Nasdaq

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Global Market under Nasdaq Marketplace Rule 5450(a)(1) (the “Rule”). The notification has no immediate effect on the listing of our common stock. In accordance with Nasdaq’s Marketplace Rule 5810(c)(3)(A), we have a period of 180 calendar days, or until September 19, 2016, to regain compliance with the Rule. If at any time before September 19, 2016, the bid price of our common stock closes at or above $1.00 per share for a minimum of 10 consecutive business days, Nasdaq will provide written notification that we have achieved compliance with the Rule. The letter also disclosed that in the event we do not regain compliance with the Rule by September 19, 2016, we may be eligible for additional time. To qualify for additional time, we would be required to transfer to the Nasdaq Capital Market and meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement, and would need to provide written notice of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split if necessary. If an application for transfer were approved, we would have an additional 180 calendar days to comply in order for our common stock to remain listed on the Nasdaq Capital Market. If we are not eligible for the second compliance period, then the Staff will provide notice that our securities will be subject to delisting. We are currently evaluating our alternatives to resolve the listing deficiency. There is no assurance, however, that we will be eligible for an additional compliance period or that our common stock will not be delisted from Nasdaq. To the extent that we are unable to resolve the listing deficiency, there is a risk that our common stock may be delisted from NASDAQ. If we were delisted, the market liquidity of our common stock could be adversely affected and the market price of our common stock could decrease. A delisting could also adversely affect our ability to obtain financing for the continuation of our operations and could result in a loss of confidence by investors, suppliers and employees. In addition, our shareholders’ ability to trade or obtain quotations on our shares could be severely limited because of lower trading volumes and transaction delays. These factors could contribute to lower prices and larger spreads in the bid and ask price for our common stock.
Covenants in our debt agreements restrict our business in many ways.
The PNC Credit Facility and the GACP Credit Agreement contain various covenants that limit our ability and/or our subsidiaries' ability to, among other things, 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. In addition, certain financial covenants, including minimum EBITDA levels and a minimum fixed charge coverage ratio, become applicable if unrestricted cash plus facility availability falls below $18.0 million or upon an event of default. Please refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Financial Condition, Liquidity and Capital Resources-Sources of Liquidity” below for a discussion of the PNC Credit Facility and GACP Credit Agreement. Upon the occurrence of an event of default under the PNC Credit Facility or GACP Credit Agreement, the lenders could elect to declare all amounts outstanding under the PNC Credit Facility and GACP Credit Agreement to be immediately due and payable and terminate all commitments to extend further credit. If we were unable to repay those amounts, the lenders could proceed against the collateral granted to them to secure that indebtedness. The PNC Credit Facility and GACP Credit Agreement are 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. If the lenders and counter parties under the PNC Credit Facility and GACP Credit Agreement accelerate the repayment of obligations, we may not have sufficient assets to repay such obligations. Our borrowings under the PNC Credit Facility and GACP Credit Agreement are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness will also increase even though the amount borrowed remains the same, and our net income would decrease.
Our inability to recruit and retain key employees, including a permanent Chief Executive Officer, 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. In recent years, we have experienced significant management turnover, including the resignation of Mark C. Bozek as our Chief Executive Officer and as a member of our board of directors and the appointment of Bob Rosenblatt as interim Chief Executive Officer, effective February 8, 2016. Our board of directors have initiated a formal search process to identify a new, permanent Chief Executive Officer. The 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, including a permanent Chief Executive Officer. In addition, turnover of senior management can adversely impact our stock price, our results of operations and our client relationships and may make recruiting for future management positions more difficult. Further we may incur significant expenses related to any executive transition costs that may impact our operating results. For example, in fiscal 2015 and fiscal 2014, the Company recorded charges to income of $3.5 million and $5.5 million, respectively, related to severance payments to which our former Chief Executive Officer, Keith Stewart, and certain other terminated executive officers received. In addition, we expect to incur $1.9 million of expenses in the first quarter of fiscal 2016 due to the resignation of our Chief Executive Officer and Chief Strategy Officer, who both resigned on February 8, 2016.

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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 GE/NBCU 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 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 18.7% 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;
impeding a merger, consolidation, takeover or other business combination involving us; or
discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.

In an SEC filing made on August 18, 2015, GE Equity disclosed that on August 14, 2015, it and ASF Radio, an unaffiliated third party to us, entered into a Stock Purchase Agreement pursuant to which GE Equity agreed to sell 3,545,049 shares of our common stock to ASF Radio for $2.15 per share (the “GE /ASF Radio Sale”). The closing of the GE /ASF Radio Sale is subject to certain conditions and, as of March 28, 2016, the sale has not yet closed. According to the SEC filing, ASF Radio is an affiliate of Ardian, an unaffiliated private equity investment company.
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 positions than we have. Furthermore, on March 8, 2016, Amazon announced the premiere of a live television program, Style Code Live, which features products that viewers can order online. This program, and any additional similar programs that Amazon may offer in the future, may compete with us. In addition, there are a number of smaller niche players and startups in the television shopping arena who compete with us. 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 3.7 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 30, 2016, 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

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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. We also require that our vendors fully indemnify us for such 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.
Our ValuePay installment payment program could lead to significant unplanned credit losses if our credit loss rate materially deteriorates.
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 30, 2016, we had approximately $108.9 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 with which we do business, 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, our 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 protect our customer information. The expenses associated with complying with a patchwork of state laws imposing differing

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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.
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 adversely affect sales. We received an approved ROC on July 30, 2015.
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, establish and maintain 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 could 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 2015, 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 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 of 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.

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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 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, and the House of Representatives proposed a competing bill (the "Remote Transactions Parity Act") in the summer of 2015 that, if passed, would have a similar impact on remote sellers. 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.
If the implementation and installation of our new warehouse management system is further delayed or not successful, we could have potential shipping delays resulting in slower shipments to our customers and increased costs, both of which could have a negative effect on our overall operating results.
In conjunction with our Bowling Green, Kentucky distribution center expansion initiative, 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 through the first half of fiscal 2016. Although 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 continued delay or problematic implementation could include the following: extended shipping inefficiencies which would further increase our variable and other costs especially during our high-volume holiday season; 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 if the new system were not to work properly upon conversion. If the implementation and installation of our new warehouse management system is further delayed, not successful or does 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 canceled orders or a negative impact on our service reputation, among other things. For these reasons, any extended 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.
It may be difficult for a third party to acquire us, even if doing so may be beneficial to our stockholders.
During the second quarter of fiscal 2015, we adopted a Shareholder Rights Plan to preserve the value of certain deferred tax benefits, including those generated by net operating losses, as described further below under Part II, Item 5 below. The Shareholder Rights Plan may have anti-takeover effects. The provisions of the Shareholder Rights Plan could have the effect of delaying,

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deferring, or preventing a change of control of us and could discourage bids for our common stock at a premium over the market price of our common stock.

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, call center operations and administrative offices. We own a 600,000 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. Our owned real property in Eden Prairie, Minnesota and Bowling Green, Kentucky is currently pledged as collateral under our bank credit facilities.
During fiscal 2014, we began a significant operational expansion initiative with respect to overall warehousing capacity and new equipment and system technology upgrades at our Bowling Green, Kentucky distribution facility. During the first quarter of fiscal 2015 the new building was substantially completed and we expanded our 262,000 square foot facility to an approximately 600,000 square foot facility. Subsequently, during the second quarter of fiscal 2015, we finished the building expansion and moved out of our expired leased satellite warehouse space. The updated facilities and technology upgrade will include a new high-speed parcel shipping and item sortation system coupled with a new warehouse management 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 systems are expected to be phased into production through the first half of fiscal 2016.
During fiscal 2015 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 allowed for additional capacity, during the construction of our expansion. We vacated the leased space during the first half of fiscal 2015 when the expanded facility was 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 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.
 
 
High
 
Low
Fiscal 2015
 
 
 
 
     First Quarter
 
$
6.99

 
$
5.61

     Second Quarter
 
6.14
 
2.11
     Third Quarter
 
3.16
 
1.92
     Fourth Quarter
 
3.14
 
1.19
Fiscal 2014
 
 
 
 
     First Quarter
 
$
6.60

 
$
4.38

     Second Quarter
 
5.27

 
4.20

     Third Quarter
 
5.82

 
4.43

     Fourth Quarter
 
7.00

 
5.32

Holders
As of March 28, 2016, we had approximately 700 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 GE/NBCU Shareholder Agreement, 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 the PNC 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 by or on behalf of us or any affiliated purchaser for shares of any class of our equity securities in any fiscal month within the fourth quarter of fiscal 2015, except as disclosed in the table below:
Period
 
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
November 1, 2015 through November 28, 2015
 
22,102

 
$
1.92

 

 
$

November 29, 2015 through January 2, 2016
 

 
N/A
 

 
$

January 3, 2015 through January 30, 2016
 

 
N/A
 

 
$

      Total
 
22,102

 
$
1.92

 

 
$


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(1) The purchases in this column include 22,102 shares that were repurchased by the Company to satisfy tax withholding obligations related to vesting of restricted stock.
Sale of Unregistered Securities
During the past three fiscal years, we did not sell any equity securities that were not registered under the Securities Act, that were not previously reported in a quarterly report on Form 10-Q or in a current report on Form 8-K.
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 29, 2011 to January 30, 2016 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 29, 2011, and reinvestment of all dividends. You should not consider shareholder return over the indicated period to be indicative of future shareholder returns.
The following performance graph and related information shall not be deemed "soliciting material" or to be "filed" with the SEC, nor shall such information be incorporated by reference into any of our future filings under the Securities Act or Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporate it by reference into such filing.
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 29, 2011
ASSUMES DIVIDENDS REINVESTED
FISCAL YEAR ENDING JANUARY 30, 2016
 
 
January 29,
2011
 
January 28,
2012
 
February 2, 2013
 
February 1, 2014
 
January 31, 2015
 
January 30, 2016
EVINE Live Inc.
 
$
100.00

 
$
23.88

 
$
43.10

 
$
95.66

 
$
97.21

 
$
18.91

NASDAQ Composite Index
 
$
100.00

 
$
105.87

 
$
121.07

 
$
158.35

 
$
180.99

 
$
182.27

S&P 500 Retailing Index
 
$
100.00

 
$
113.42

 
$
144.15

 
$
180.63

 
$
216.93

 
$
253.36

Morningstar Specialty Retail Index
 
$
100.00

 
$
107.30

 
$
139.25

 
$
164.84

 
$
171.85

 
$
180.59


24

Table of Contents

Equity Compensation Plan Information
The following table provides information as of January 30, 2016 for our compensation plans under which securities may be issued:
Plan Category
 
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 (excluding securities reflected in 1st column)
 
 
Equity Compensation Plans Approved by Security Holders
 
2,622,800

 
 
 
$5.31
 
2,914,800

 
(1)
 
 
 
 
 
 
 
 
 
 
 
Equity Compensation Plans Not Approved by Security Holders
 

 

 
N/A
 

 
 
Total
 
2,622,800

 
 
 
$5.31
 
2,914,800

 
 
_______________________________________

(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: 2,914,800 shares under the 2011 Omnibus Stock Plan.
Shareholder Rights Plan
During the second quarter of fiscal 2015, we adopted a Shareholder Rights Plan to preserve the value of certain deferred tax benefits, including those generated by net operating losses. On July 10, 2015, we declared a dividend distribution of one purchase right (a “Right”) for each outstanding share of our common stock to shareholders of record as of the close of business on July 23, 2015 and issuable as of that date, and on July 13, 2015, we entered into a Shareholder Rights Plan (the “Rights Plan”) with Wells Fargo Bank, N.A., a national banking association, with respect to the Rights. Except in certain circumstances set forth in the Rights Plan, each Right entitles the holder to purchase from us one one-thousandth of a share of Series A Junior Participating Cumulative Preferred Stock, $0.01 par value, of the Company (“Preferred Stock” and each one one-thousandth of a share of Preferred Stock, a “Unit”) at a price of $9.00 per Unit.
The Rights initially trade together with the common stock and are not exercisable. Subject to certain exceptions specified in the Rights Plan, the Rights will separate from the common stock and become exercisable following (i) the tenth calendar day after a public announcement or filing that a person or group has become an “Acquiring Person,” which is defined as a person who has acquired, or obtained the right to acquire, beneficial ownership of 4.99% or more of the common stock then outstanding, subject to certain exceptions, or (ii) the tenth calendar day (or such later date as may be determined by the board of directors) after any person or group commences a tender or exchange offer, the consummation of which would result in a person or group becoming an Acquiring Person. If a person or group becomes an Acquiring Person, each Right will entitle its holders (other than such Acquiring Person) to purchase one Unit at a price of $9.00 per Unit. A Unit is intended to give the shareholder approximately the same dividend, voting and liquidation rights as would one share of common stock, and should approximate the value of one share of common stock. At any time after a person becomes an Acquiring Person, the board of directors may exchange all or part of the outstanding Rights (other than those held by an Acquiring Person) for shares of common stock at an exchange rate of one share of common stock (and, in certain circumstances, a Unit) for each Right. We will promptly give public notice of any exchange (although failure to give notice will not affect the validity of the exchange).
The Rights will expire upon certain events described in the Rights Plan, including the close of business on the earlier of the first anniversary of the date of the Rights Plan or the date of our 2016 annual meeting of shareholders, if the Rights Plan has not been approved by our shareholders, or the close of business on the date of the third annual meeting of shareholders following the last annual meeting of our shareholders at which the Rights Plan was most recently approved by shareholders, unless the Rights Plan is re-approved by shareholders at that third annual meeting of shareholders.  However, in no event will the Rights Plan expire later than the close of business on July 13, 2025. Until the close of business on the tenth calendar day after the day a public announcement or a filing is made indicating that a person or group has become an Acquiring Person, we may in our sole and absolute discretion amend the Rights or the Rights Plan agreement without the approval of any holders of the Rights or shares of common stock in any manner, including without limitation, amendments that increase or decrease the purchase price or redemption price or accelerate or extend the final expiration date or the period in which the Rights may be redeemed. We may also amend the Rights Plan after the close of business on the tenth calendar day after the day such public announcement or filing is made to cure ambiguities, to correct defective or inconsistent provisions, to shorten or lengthen time periods under the Rights Plan or in any other manner that does not adversely affect the interests of holders of the Rights. No amendment of the Rights Plan may extend its expiration date.

25

Table of Contents

The foregoing summary of the Rights Plan does not purport to be complete and is qualified in its entirety by reference to the full text of the Rights Plan agreement, which has been filed as an exhibit to this Annual Report on Form 10-K and is incorporated herein by reference.

Item 6. Selected Financial Data
The selected financial data for the five years ended January 30, 2016 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 30, 2016(a)
 
January 31, 2015(b)
 
February 1, 2014(c)
 
February 2, 2013(d)
 
January 28, 2012(e)
 
 
(In thousands, except per share data)
Statement of Operations Data:
 
 

 
 

 
 

 
 

 
 

   Net sales
 
$
693,312

 
$
674,618

 
$
640,489

 
$
586,820

 
$
558,394

   Gross profit
 
238,480

 
245,048

 
230,024

 
212,372

 
204,095

   Operating income (loss)
 
(8,738
)
 
1,003

 
77

 
(23,297
)
 
(16,838
)
   Net loss
 
(12,284
)
 
(1,378
)
 
(2,515
)
 
(27,676
)
 
(48,064
)
 
 
 
 
 
 
 
 
 
 
 
Per Share Data:
 
 

 
 

 
 

 
 

 
 

   Net loss per common share
 
$
(0.22
)
 
$
(0.03
)
 
$
(0.05
)
 
$
(0.57
)
 
$
(1.03
)
   Net loss per common share — assuming dilution
 
$
(0.22
)
 
$
(0.03
)
 
$
(0.05
)
 
$
(0.57
)
 
$
(1.03
)
   Weighted average shares outstanding:
 
 

 
 

 
 

 
 

 
 

     Basic
 
57,004

 
53,459

 
49,505

 
48,875

 
46,451

     Diluted
 
57,004

 
53,459

 
49,505

 
48,875

 
46,451


 
 
January 30, 2016
 
January 31, 2015
 
February 1, 2014
 
February 2, 2013
 
January 28, 2012
 
 
(In thousands)
Balance Sheet Data:
 
 

 
 

 
 

 
 

 
 

   Cash
 
$
11,897

 
$
19,828

 
$
29,177

 
$
26,477

 
$
32,957

   Restricted cash and investments
 
450

 
2,100

 
2,100

 
2,100

 
2,100

   Current assets
 
199,049

 
200,943

 
195,857

 
170,712

 
163,271

   Property, equipment and other assets
 
66,714

 
56,748

 
37,848

 
41,387

 
55,189

   Total assets
 
265,763

 
257,691

 
233,705

 
212,099

 
218,460

   Current liabilities
 
115,349

 
119,961

 
115,916

 
96,400

 
91,364

   Other long-term obligations
 
73,435

 
53,202

 
39,581

 
38,420

 
25,507

   Shareholders’ equity
 
76,979

 
84,528

 
78,208

 
77,279

 
101,589


 
 
Year Ended
 
 
January 30, 2016
 
January 31, 2015
 
February 1, 2014
 
February 2, 2013
 
January 28, 2012
 
 
(In thousands, except statistical data)
Other Data:
 
 

 
 

 
 

 
 

 
 

   Gross profit
 
34.4
%
 
36.3
%
 
35.9
%
 
36.2
%
 
36.6
%
   Working capital
 
$
83,700

 
$
80,982

 
$
79,941

 
$
74,312

 
$
71,907

   Current ratio
 
1.7

 
1.7

 
1.7

 
1.8

 
1.8

   Adjusted EBITDA (as defined)(f)
 
$
9,206

 
$
22,773

 
$
18,012

 
$
4,494

 
$
996

 
 
 
 
 
 
 
 
 
 
 
Cash Flows:
 
 

 
 

 
 

 
 

 
 

   Operating
 
$
(9,411
)
 
$
(1,315
)
 
$
13,953

 
$
(8,482
)
 
$
(12,949
)
   Investing
 
$
(20,364
)
 
$
(25,178
)
 
$
(11,077
)
 
$
(10,055
)
 
$
(7,819
)
   Financing
 
$
21,844

 
$
17,144

 
$
(176
)
 
$
12,057

 
$
7,254

________________


26

Table of Contents

(a)
Results of operations for fiscal 2015 includes executive and management transition costs of approximately $3.5 million, distribution facility consolidation and technology upgrade costs of $1.3 million and Shareholder Rights Plan costs of $446,000.
(b)
Results of operations for fiscal 2014 includes activist shareholder response charges of approximately $3.5 million and executive transition costs of $5.5 million.
(c)
Results of operations for fiscal 2013 includes activist shareholder response charges of approximately $2.1 million.
(d)
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 Note 2 to the consolidated financial statements.
(e)
Results of operations for fiscal 2011 includes a $25.7 million total charge related to the early debt extinguishment of preferred stock.
(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 and management transition costs; distribution facility consolidation and technology upgrade costs; Shareholder Rights Plan 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 more 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.

27

Table of Contents

A reconciliation of Adjusted EBITDA to its comparable GAAP measurement, net loss, follows:
 
 
Year Ended
 
 
January 30, 2016
 
January 31, 2015
 
February 1, 2014
 
February 2, 2013
 
January 28, 2012
 
 
(In thousands)
Adjusted EBITDA
 
$
9,206

 
$
22,773

 
$
18,012

 
$
4,494

 
$
996

Less:
 
 

 
 

 
 

 
 

 
 

     Executive and management transition costs
 
(3,549
)
 
(5,520
)
 

 

 

Distribution facility consolidation and technology upgrade costs
 
(1,347
)
 

 

 

 

     Activist shareholder response costs
 

 
(3,518
)
 
(2,133
)
 

 

     Shareholder Rights Plan costs
 
(446
)
 

 

 

 

     Debt extinguishment
 

 

 

 
(500
)
 
(25,679
)
     Non-operating gains (losses)
 

 

 

 
100

 

     FCC license impairment
 

 

 

 
(11,111
)
 

     Non-cash share-based compensation expense
 
(2,275
)
 
(3,860
)
 
(3,217
)
 
(3,257
)
 
(5,007
)
EBITDA (as defined)
 
$
1,589

 
$
9,875

 
$
12,662

 
$
(10,274
)
 
$
(29,690
)
A reconciliation of EBITDA to net loss is as follows:
 
 

 
 

 
 

 
 

 
 

EBITDA (as defined)
 
$
1,589

 
$
9,875

 
$
12,662

 
$
(10,274
)
 
$
(29,690
)
Adjustments:
 
 

 
 

 
 

 
 

 
 

     Depreciation and amortization
 
(10,327
)
 
(8,872
)
 
(12,585
)
 
(13,423
)
 
(12,827
)
     Interest income
 
8

 
10

 
18

 
11

 
64

     Interest expense
 
(2,720
)
 
(1,572
)
 
(1,437
)
 
(3,970
)
 
(5,527
)
     Income taxes
 
(834
)
 
(819
)
 
(1,173
)
 
(20
)
 
(84
)
Net loss
 
$
(12,284
)
 
$
(1,378
)
 
$
(2,515
)
 
$
(27,676
)
 
$
(48,064
)



28

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 Concerning 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, estimates, expects, intends, predicts, hopes, should, plans, will 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, 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 credit facilities 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; including without limitation, regulations of the Federal Communications Commission, and adverse outcomes from regulatory proceedings; litigation or governmental proceedings affecting our operations; 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; our ability to obtain and retain key executives and employees; our ability to attract new customers and retain existing customer; changes in shipping costs; our ability to offer new or innovative products and customer acceptance of the same; changes in customer viewing habits or television programming; and the risks identified under Item 1A (Risk Factors) in this report on Form 10-K. 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 offers a mix of proprietary, exclusive and name brands directly to consumers in an engaging and informative shopping experience through TV, online and mobile devices. We operate a 24-hour television shopping network, EVINE Live, which is distributed primarily on cable and satellite systems, through which we offer proprietary, exclusive and name brand merchandise in the categories of jewelry & watches; home & consumer electronics; beauty; 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, we announced that we had changed our corporate name to EVINE Live Inc. from ValueVision Media, Inc. Effective November 20, 2014, our NASDAQ trading symbol also changed to EVLV from VVTV. We transitioned from doing business as "ShopHQ" and rebranded to "EVINE Live" and evine.com on February 14, 2015.
In May 2013, we previously announced a rebranding of our 24-hour television shopping network and digital commerce internet website from ShopNBC and ShopNBC.com to ShopHQ and ShopHQ.com, respectively.

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Table of Contents

Products and Customers
Products sold on our media channel platforms include jewelry & watches, home & consumer electronics, beauty, and fashion & accessories. Historically jewelry & watches has been our largest merchandise category. 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 & watches remained our largest merchandise category in fiscal 2015. We are focused on diversifying our merchandise assortment both among our existing product categories as well as with potentially new product categories, including proprietary, exclusive and name brands, in an effort to increase revenues and to grow our new and active customer base. 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. Certain fiscal 2014 and 2013 product category percentages in the accompanying table have been reclassified to conform to our fiscal 2015 product group hierarchy:
 
 
For the Years Ended
 
 
January 30,
2016
 
January 31,
2015
 
February 1,
2014
Merchandise Category
 
 
 
 
 
 
Jewelry & Watches
 
39%
 
42%
 
43%
Home & Consumer Electronics
 
31%
 
30%
 
35%
Beauty
 
14%
 
12%
 
11%
Fashion & Accessories
 
16%
 
16%
 
11%
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, exclusive and name brand merchandise using online, mobile, social media and our commerce infrastructure, which includes television access to approximately 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 investing in new brands and offering a more diverse assortment of proprietary, exclusive (i.e., brands that are not readily available elsewhere) and name brand merchandise, 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 a focus on expanding and strengthening our relationships with the brands, personalities and vendors with whom we do business.
In addition to offering our customers a more diverse assortment of proprietary, exclusive and name brand merchandise, we are focusing on increasing awareness of the EVINE Live brand and our Shop.Share.Smile platform while at the same time augmenting our distribution footprint, with the goal of expanding our customer base. 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.
Priorities for fiscal 2016 that we believe will ultimately drive sustainable profitability are: improving our discipline around offering the most popular and profitable merchandise mix that our customers prefer; careful attention to gross profit and our cost structure; capitalizing on our expertise in video-based ecommerce; sensibly broadening our distribution base; improving channel adjacencies and placement; exploiting new technologies in mobile and logistics; increasing customer penetration, improving customer and 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 and exclusive brands along with an improved program distribution footprint 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 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.

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Table of Contents

 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, including High Definition bands and multi-channel carriage, than our programming. Multimedia Commerce Group, Inc., which operates Jewelry Television, also competes with us for customers in the jewelry category. Furthermore, on March 8, 2016, Amazon announced the premiere of a live television program, Style Code Live, which features products that viewers can order online. This program, and any additional similar programs that Amazon may offer in the future, may compete with us. 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 those of our competition. However, one of our strategies is to maintain our fixed distribution cost structure in order to leverage our profitability.
We anticipate continued 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 online 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 2015, 2014 and 2013
Consolidated net sales in fiscal 2015 were $693.3 million compared to $674.6 million in fiscal 2014, a 3% increase. Consolidated net sales in fiscal 2014 were $674.6 million compared to $640.5 million in fiscal 2013, a 5% increase. Results of operations for fiscal 2015 include executive and management transition costs of $3.5 million and distribution facility consolidation and technology upgrade costs of $1.3 million. We reported an operating loss of $8.7 million and a net loss of $12.3 million for fiscal 2015. 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 include executive and management 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.
GACP Credit Agreement & PNC Credit Facility Amendment
On March 10, 2016, the Company entered into a five-year term loan credit and security agreement (the "GACP Credit Agreement") with GACP Finance Co., LLC ("GACP") for a term loan of $17 million. Proceeds from the term loan under the GACP Credit Agreement (the "GACP Term Loan") will be used to provide for working capital and for general corporate purposes of the Company. The GACP Credit Agreement matures on March 9, 2021. The GACP Term Loan bears interest at a fixed rate based on the greater of LIBOR for interest periods of one, two or three months or 1% plus a margin of 11.0%. On the same day, we entered into the sixth amendment to the PNC Credit Facility authorizing the Company to enter into the GACP Credit Agreement.
Executive & Management Transition Costs
On February 8, 2016, subsequent to the end of fiscal 2015, Mark Bozek resigned as a member of the Company's board of directors and as Chief Executive Officer. In addition, on February 8, 2016, Russell Nuce resigned as Chief Strategy Officer and Interim General Counsel. We expect to record a $1.9 million charge to income in the first quarter of fiscal 2016 relating primarily to severance payments to be made in conjunction with the resignations. In addition, we expect to cut our full year operating expenses through reductions in corporate overhead and other operating costs.
On March 26, 2015, we announced the termination and departure of three executive officers, namely our Chief Financial Officer, our Senior Vice President and General Counsel, and President. In addition, during the first quarter of fiscal 2015, we also announced the hiring of a new Chief Financial Officer and a new Chief Merchandising Officer. In conjunction with these executive changes as well as other management terminations made during fiscal 2015, we recorded charges to income of $3.5 million, which relate primarily to severance payments made as a result of the executive officer terminations and other direct costs associated with our 2015 executive and management transition.
On June 22, 2014, Keith R. Stewart resigned as a member of our board of directors and as our Chief Executive Officer. In conjunction with Mr. Stewart's resignation and separation agreement, as well as other executive terminations made subsequent to June 22, 2014, we recorded charges to income of $5.5 million during fiscal 2014, relating primarily to severance payments which Mr. Stewart was entitled to in accordance with the terms of his employment agreement; severance payments for the termination of our Chief Operating and Chief Merchandising Officers; and other direct costs associated with our executive and management

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Table of Contents

transition. Following Mr. Stewart's resignation, our board of directors appointed Mr. Mark Bozek as our Chief Executive Officer effective June 22, 2014.
Distribution Facility Expansion, Consolidation and Technology Upgrade Costs
During fiscal 2014, we began a significant operational expansion initiative with respect to overall warehousing capacity and new equipment and system technology upgrades at our Bowling Green, Kentucky distribution facility. During the first quarter of fiscal 2015 the new building was substantially completed and we expanded our 262,000 square foot facility to an approximately 600,000 square foot facility. Subsequently, during the second quarter of fiscal 2015, we finished the building expansion and moved out of our expired leased satellite warehouse space. The updated facilities and technology upgrade will include a new high-speed parcel shipping and item sortation system coupled with a new warehouse management 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 systems are expected to be phased into production through the first half of fiscal 2016. The total cost of the physical building expansion, new sortation equipment and call center facility was approximately $25 million and was financed with our expanded PNC revolving line of credit and a $15 million PNC term loan.
As a result of our distribution facility expansion, consolidation and technology upgrade initiative, we incurred approximately $1.3 million in incremental expenses during fiscal 2015, relating primarily to increased labor, inventory and other warehousing transportation costs, training costs and increased equipment rental costs associated with: the move into the new expanded warehouse building, the move out of previously leased warehouse space and the preparation of our expanded facility for the new high-speed parcel shipping and item sortation system and upgraded warehouse management system.
Activist Shareholder Response Costs
In October of 2013, we 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 our bylaws. We 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, we 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.

Results of Operations
The following table sets forth, for the periods indicated, certain statement of operations data expressed as a percentage of net sales.
 
 
Year Ended (a)
 
 
January 30,
2016
 
January 31,
2015
 
February 1,
2014
Net sales
 
100.0
 %
 
100.0
 %
 
100.0
 %
Gross margin
 
34.4
 %
 
36.3
 %
 
35.9
 %
Operating expenses:
 
 
 
 
 
 
Distribution and selling
 
30.3
 %
 
30.0
 %
 
30.0
 %
General and administrative
 
3.5
 %
 
3.6
 %
 
3.7
 %
Depreciation and amortization
 
1.2
 %
 
1.3
 %
 
1.9
 %
Executive and management transition costs
 
0.5
 %
 
0.8
 %
 
 %
Distribution facility consolidation and technology upgrade costs
 
0.2
 %
 
 %
 
 %
Activist shareholder response costs
 
 %
 
0.5
 %
 
0.3
 %
Total operating expenses
 
35.7
 %
 
36.2
 %
 
35.9
 %
Operating income (loss)
 
(1.3
)%
 
0.1
 %
 
 %
Interest expense, net
 
(0.4
)%
 
(0.2
)%
 
(0.2
)%
Loss before income taxes
 
(1.7
)%
 
(0.1
)%
 
(0.2
)%
Income taxes
 
(0.1
)%
 
(0.1
)%
 
(0.2
)%
Net loss
 
(1.8
)%
 
(0.2
)%
 
(0.4
)%


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Table of Contents

Key Operating Metrics
 
 
Year Ended (a)
 
 
January 30, 2016
 
Change
 
January 31, 2015
 
Change
 
February 1, 2014
Program Distribution
 
 
 
 
 
 
 
 
 
 
Total homes (average 000's)
 
88,105

 
1%
 
87,481

 
2%
 
86,120

Merchandise Metrics
 
 
 
 
 
 
 
 
 
 
   Gross margin %
 
34.4
%
 
(190) bps
 
36.3
%
 
40 bps
 
35.9
%
   Net shipped units (000's)
 
9,853

 
9%
 
9,055

 
27%
 
7,152

   Average selling price
 
$64
 
(4)%
 
$67
 
(17)%
 
$81
   Return rate
 
19.8
%
 
(170) bps
 
21.5
%
 
(80) bps
 
22.3
%
   Online net sales % (b)
 
46.9
%
 
230 bps
 
44.6
%
 
(60) bps
 
45.2
%
   Total Customers - 12 Month Rolling (000's)
 
1,436

 
(1)%
 
1,446

 
7%
 
1,357

(a) The Company’s most recently completed fiscal year, fiscal 2015, ended on January 30, 2016, and consisted of 52 weeks. Fiscal 2014 ended on January 31, 2015 and consisted of 52 weeks. Fiscal 2013 ended on February 1, 2014 and consisted of 52 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.
Program Distribution
Average homes reached, or full time equivalent ("FTE") subscribers, grew 1% in fiscal 2015, resulting in a 624,000 increase in average homes reached versus fiscal 2014. The fiscal 2015 increase was driven primarily by organic subscriber growth of our distribution platforms. Average FTE subscribers grew 2% in fiscal 2014, resulting in a 1.4 million increase in average homes reached compared to fiscal 2013. The fiscal 2014 annual increase was driven primarily by an increase in our footprint as we expanded into more widely distributed digital tiers of service. We have 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. We distribute the networks' HD feed in selected markets 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 to distribute 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.
As of January 30, 2016, 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 2015 increased 9% from fiscal 2014 to 9.9 million from 9.1 million. The number of net shipped units during fiscal 2014 increased 27% from fiscal 2013 to 9.1 million from 7.2 million. The increase in units shipped during fiscal 2015 was driven by the strong performances of our beauty and fashion & accessories product categories and from a decreased ASP in our home & consumer electronics product category from increased markdowns taken during fiscal 2015.

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Average Selling Price
Our average selling price, or ASP, per net unit was $64 in fiscal 2015, a 4% decrease from fiscal 2014. The decrease in the ASP during fiscal 2015, was primarily due to markdowns taken in our home & consumer electronics product category and strong sales growth within our beauty and fashion & accessories product categories, which typically have lower average selling prices. These ASP decreases contributed to our increase in net shipped units by 9%. For fiscal 2014, the ASP was $67, a 17% decrease over fiscal 2013. The decrease in the fiscal 2014 ASP was driven primarily by strong growth within our fashion & accessories and beauty categories, which typically have lower average selling prices, as well as a general shift to lower price points in other merchandise categories. Decreasing our ASP has been a key component in our customer acquisition efforts, however, we are planning to migrate our merchandising mix to achieve a more ideal balance between ASP and gross margin productivity.
Return Rates
Our return rate was 19.8% in fiscal 2015 as compared to 21.5% in fiscal 2014, a 170 basis point ("bps") decrease. The decrease in the return rate was driven by rate decreases across all our merchandise categories, as well as a reduction in our jewelry sales mix, which typically has higher return rates. The decreases in the category return rates were driven by the decreases in ASP as described above and improvements in the execution of our returns policy. Our return rate was 21.5% in fiscal 2014 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, watch and consumer electronics merchandise categories. We continue to monitor our return rates in an effort to keep our overall return rates in line and commensurate with our current product mix and our average selling price levels.
Total Customers
Total customers purchasing over the last twelve months decreased 1% to 1,436,000 during fiscal 2015 from 1,446,000 in fiscal 2014. The slight decrease was driven by a reduction in new customers over the prior year, partially offset by an increase in our retention of current customers. Total customers purchasing increased 7% to 1,446,000 during fiscal 2014 from 1,357,000 in fiscal 2013. We believe the increase in total customers was primarily due to broadening of our product assortment at lower price points.
Net Sales
Consolidated net sales, inclusive of shipping and handling revenue, for fiscal 2015 were $693.3 million, a 3% increase over consolidated net sales of $674.6 million for fiscal 2014. The increase in consolidated net sales was driven primarily by strong growth in our beauty, fashion & accessories and home & consumer electronics product categories and increased customer purchase frequency. These increases were offset by a net sales decrease in our jewelry & watches category as we shifted our product mix from jewelry in favor of home & consumer electronics, beauty and fashion & accessories. In addition, we also experienced a decrease in shipping and handling revenue due to increased promotional shipping offers made to remain competitive. Our online 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 46.9% in fiscal 2015 as compared to 44.6% in fiscal 2014. Overall, we continue to deliver strong online sales penetration. We believe the increase in penetration during the periods was driven by higher mobile sales as a result of our new mobile site and application launched late in fiscal 2014. Our mobile penetration increased to 42.3% of total online sales during fiscal 2015 versus 33.5% of total online sales during fiscal 2014. We believe that the increase experienced in our mobile penetration during fiscal 2015 was due to the rollout of our new mobile site and application launched late in fiscal 2014 and the overall increase in consumers' use of tablets on mobiles devices for retail purchases since 2014.
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 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.


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Table of Contents

Gross Profit
Gross profit for fiscal 2015 was $238.5 million, a decrease of 3%, compared to $245.0 million for fiscal 2014. The decrease in the gross profits experienced during fiscal 2015 was primarily driven by lower gross margin percentages experienced across our product categories. Gross margin percentages for fiscal 2015, fiscal 2014 and fiscal 2013 were 34.4%, 36.3% and 35.9% respectively, representing a 190 bps decrease from fiscal 2014 to fiscal 2015, and a 40 bps increase from fiscal 2013 to fiscal 2014. The decrease in the gross margin percentage experienced in fiscal 2015 reflects the following: a 110 basis point margin decrease attributable to reduced gross profit rates within the jewelry & watches and home product categories and other markdowns taken fiscal 2015; a 30 basis point margin decrease attributable to reduced margins due to a shift in product mix from jewelry & watches in favor of consumer electronics, which typically have a lower margin, partially offset by a positive mix into beauty and fashion; a 20 basis point margin decrease attributable to reduced shipping and handling margin due to increased shipping promotions (as discussed above); and a 20 basis point margin decrease attributable to increased fulfillment depreciation due to the expansion and upgrades made to our Bowling Green facility and placed in service during fiscal 2015. The increase in the gross margin percentage experienced in fiscal 2014 reflects an increased sales mix of fashion & accessories and beauty, which typically carry higher margin percentages, as well as margin rate improvements in beauty, partially offset by increased levels of shipping and handling promotional activity during the year.
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.
Operating Expenses
Total operating expenses were $247.2 million, $244.0 million and $229.9 million for fiscal 2015, fiscal 2014 and fiscal 2013 respectively, representing an increase of $3.2 million or 1% from fiscal 2014 to fiscal 2015, and an increase of $14.1 million, or 6% from fiscal 2013 to fiscal 2014. Total operating expenses as a percentage of net sales were 35.7%, 36.2% and 35.9% for fiscal 2015, fiscal 2014 and fiscal 2013, respectively. Total operating expense for fiscal 2015 includes executive and management transition costs of $3.5 million and distribution facility consolidation and technology upgrade costs of $1.3 million. 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 executive and management transition costs, distribution facility consolidation and technology upgrade costs and shareholder activist response, total operating expenses as a percentage of net sales were 35.0%, 34.8% and 35.6% for fiscal 2015, fiscal 2014 and fiscal 2013, respectively.
Distribution and selling expense for fiscal 2015 increased $6.7 million, or 3%, to $209.3 million or 30.3% of net sales compared to $202.6 million or 30.0% of net sales in fiscal 2014. Distribution and selling expense increased during fiscal 2015 due to increased program distribution expense of $2.3 million relating to a 1% increase in average homes reached during fiscal 2015 and investments made in the fourth quarter of fiscal 2015 to increase our HD channel carriage. The increase over the comparable period was also due to an increase in variable salaries and wages of $4.4 million, increased customer service and telecommunication expense of $1.1 million, increased online selling and search fees of $1.9 million, production expenses of $531,000 and rebranding expense of $260,000, offset by decreased accrued incentive compensation of $2.7 million, decreased share based compensation of $654,000 and decreased credit card processing fees and credit expenses of $304,000. Total variable expenses during fiscal 2015 were approximately 9.2% of total net sales versus 8.7% of total net sales for the prior year comparable period. The increase in variable expenses as a percentage of net sales was primarily due to a 9% increase in net shipped units compared with a 3% increase in consolidated net sales and the decline in our average selling price during fiscal 2015.
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 continue to increase as the number of our shipped units increase. Program distribution expense is primarily a fixed cost per

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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 position.
General and administrative expense for fiscal 2015 increased $0.5 million, or 2%, to $24.5 million, or 3.5% of net sales compared to $24.0 million or 3.6% of net sales in fiscal 2014. General and administrative expense increased from fiscal 2015 primarily as a result of increased costs associated with leased software, maintenance contracts and telecommunication of $940,000, costs incurred for the implementation of our Shareholder Rights Plan of $446,000, professional and legal fees of $419,000, personal property taxes of $222,000, executive travel expenses of $135,000 and reduced 2014 year to date expense of $135,000 related to a property easement payment received in fiscal 2014. These increases were offset by decreased share-based compensation expense of $1.0 million relating to our former chief executive officer's transition and new board member equity grants made in the second quarter of fiscal 2014 and decreased salary and accrued incentive compensation expenses of $861,000. 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.
Depreciation and amortization expense was $8.5 million, $8.4 million and $12.3 million for fiscal 2015, fiscal 2014 and fiscal 2013, respectively, representing an increase of $29,000, or 0.3% from fiscal 2014 to fiscal 2015 and a decrease of $3.9, or 31% from fiscal 2013 to fiscal 2014. Depreciation and amortization expense as a percentage of net sales was 1.2% for fiscal 2015, 1.3% for fiscal 2014 and 1.9% fiscal 2013. The marginal increase in depreciation and amortization expense of $29,000 during fiscal 2015 was primarily due to the amortization of the "EVINE Live" trademark and brand name intangible of $43,000. 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.
Operating Income (Loss)
We reported an operating loss of $8.7 million in fiscal 2015 compared to operating income of $1.0 million for fiscal 2014, representing a decrease of $9.7 million. Our operating results decreased during fiscal 2015 primarily as a result of decreased gross profit and an increase in distribution and selling and distribution facility consolidation and technology upgrade costs, offset by a decrease in executive and management transition costs and elimination of activist shareholder response costs (as noted above).
We reported operating income of $1.0 million for fiscal 2014 compared with an 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 response costs.
Net Loss
For fiscal 2015, we reported a net loss of $12.3 million or $0.22 per basic and dilutive share, on 57,004,321 weighted average common shares outstanding. 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. Net loss for fiscal 2015 includes executive and management transition costs of $3.5 million and distribution facility consolidation and technology upgrade costs of $1.3 million and interest expense of $2.7 million, relating primarily to interest on outstanding advances under the PNC Credit Facility and the amortization of fees paid to obtain the PNC Credit Facility, offset by interest income totaling $8,000 earned on our cash and restricted cash and investments. 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 the PNC Credit Facility and the amortization of fees paid to obtain the PNC 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 the PNC Credit Facility and the amortization of fees paid to obtain the PNC Credit Facility, offset by interest income totaling $18,000 earned on our cash and restricted cash and investments.
For fiscal 2015, net loss reflects an income tax provision of $834,000. The fiscal 2015 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 our 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 2015 income tax provision relates to state income taxes payable on certain income for which there is no loss carryforward benefit available. 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-

36

Table of Contents

term deferred tax liability related to the tax amortization of our 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 with 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 our indefinite-lived intangible FCC license and 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 2015, fiscal 2014 and fiscal 2013 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.
Quarterly Results
The following summarized unaudited results of operations for the quarters in fiscal 2015 and fiscal 2014 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.

37

Table of Contents

 
 
First
Quarter
 
Second
Quarter
 
Third
Quarter
 
Fourth
Quarter
 
Total
 
 
(In thousands, except percentages and per share amounts)
Fiscal 2015
 
 
 
 
 
 
 
 
 
 
   Net sales
 
$
158,451

 
$
161,061

 
$
162,258

 
$
211,542

 
$
693,312

   Gross profit
 
57,305

 
58,856

 
55,910

 
66,409

 
238,480

   Gross profit margin
 
36.2
%
 
36.5
%
 
34.5
%
 
31.4
%
 
34.4
%
   Operating expenses
 
61,232

 
61,032

 
60,192

 
64,762

 
247,218

   Operating income (loss) (a)
 
(3,927
)
 
(2,176
)
 
(4,282
)
 
1,647

 
(8,738
)
   Other expense, net
 
(596
)
 
(667
)
 
(688
)
 
(761
)
 
(2,712
)
   Income tax provision
 
(205
)
 
(205
)
 
(205
)
 
(219
)
 
(834
)
   Net income (loss) (a)
 
$
(4,728
)
 
$
(3,048
)
 
$
(5,175
)
 
$
667

 
$
(12,284
)
 
 
 
 
 
 
 
 
 
 
 
   Net income (loss) per share
 
$
(0.08
)
 
$
(0.05
)
 
$
(0.09
)
 
$
0.01

 
$
(0.22
)
   Net income (loss) per share — assuming dilution
 
$
(0.08
)
 
$
(0.05
)
 
$
(0.09
)
 
$
0.01

 
$
(0.22
)
   Weighted average shares outstanding:
 
 
 
 
 
 
 
 
 
 
      Basic
 
56,641

 
57,093

 
57,125

 
57,158

 
57,004

      Diluted
 
56,641

 
57,093

 
57,125

 
57,158

 
57,004

 
 
 
 
 
 
 
 
 
 
 
Fiscal 2014
 
 
 
 
 
 
 
 
 
 
   Net sales
 
$
159,701

 
$
156,587

 
$
157,106

 
$
201,224

 
$
674,618

   Gross profit
 
60,006

 
60,435

 
59,066

 
65,541

 
245,048

   Gross profit margin
 
37.6
%
 
38.6
%
 
37.6
%
 
32.6
%
 
36.3
%
   Operating expenses
 
58,954

 
64,142

 
59,263

 
61,686

 
244,045

   Operating income (loss) (b)
 
1,052

 
(3,707
)
 
(197
)
 
3,855

 
1,003

   Other expense, net
 
(391
)
 
(381
)
 
(404
)
 
(386
)
 
(1,562
)
   Income tax provision
 
(201
)
 
(201
)
 
(207
)
 
(210
)
 
(819
)
   Net income (loss) (b)
 
$
460

 
$
(4,289
)
 
$
(808
)
 
$
3,259

 
$
(1,378
)
 
 
 
 
 
 
 
 
 
 
 
   Net income (loss) per share
 
$
0.01

 
$
(0.08
)
 
$
(0.01
)
 
$
0.06

 
$
(0.03
)
   Net income (loss) per share — assuming dilution
 
$
0.01

 
$
(0.08
)
 
$
(0.01
)
 
$
0.06

 
$
(0.03
)
   Weighted average shares outstanding:
 
 
 
 
 
 
 
 
 
 
      Basic
 
49,844

 
52,200

 
55,433

 
56,357

 
53,459

      Diluted
 
56,341

 
52,200

 
55,433

 
57,598

 
53,459

(a) Net income (loss) and operating income (loss) for the second, third and fourth quarters of fiscal 2015 includes distribution facility consolidation and technology upgrade costs of approximately $972,000, $294,000 and $81,000, respectively. In addition, net loss and operating loss for the first, second and third quarters of fiscal 2015 includes executive and management transition costs of $2.6 million, $205,000 and $754,000, respectively.
(b) 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.

Financial Condition, Liquidity and Capital Resources
As of January 30, 2016, we had cash of $11.9 million and had restricted cash and investments of $450,000. Our restricted cash and investments are generally restricted for a period ranging from 30-60 days. In addition, under the PNC Credit Facility, we are required to maintain a minimum of $10 million of unrestricted cash and unused line availability at all times. As our unused

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line availability is greater than $10 million at January 30, 2016, no additional cash is required to be restricted. As of January 31, 2015, we had cash of $19.8 million and had restricted cash and investments of $2.1 million pledged primarily as collateral for our issuances of commercial letters of credit. During fiscal 2015, working capital increased $2.7 million to $83.7 million compared to working capital of $81.0 million for fiscal 2014. The current ratio (our total current assets over total current liabilities) was 1.7 at January 30, 2016 and 1.7 at January 31, 2015.
Sources of Liquidity
Our principal source of liquidity is our available cash of $11.9 million as of January 30, 2016, which was held in bank depository accounts primarily for the preservation of cash liquidity.
PNC Credit Facility
On February 9, 2012, we entered into the PNC Credit Facility, as lender and agent. The PNC Credit Facility was amended on October 8, 2015, to increase the size of the revolving line of credit from $75.0 million to $90.0 million. The Credit Facility, which includes The Private Bank as part of the facility, provides a revolving line of credit of $90.0 million and provides for a $15.0 million term loan on which the Company has drawn to fund improvements at the Company's distribution facility in Bowling Green, Kentucky. The PNC Credit Facility also provides for a new accordion feature that would allow the Company to expand the size of the revolving line of credit by an additional $25.0 million at the discretion of the lenders and upon certain conditions being met. On March 10, 2016, the Company entered into the sixth amendment to its Credit Facility with PNC authorizing the Company to enter into the GACP Credit Agreement (as defined below).
All borrowings under the PNC Credit Facility mature and are payable on May 1, 2020. Subject to certain conditions, the PNC Credit Facility also provides for the issuance of letters of credit in an aggregate amount up to $6.0 million which, upon issuance, would be deemed advances under the PNC Credit Facility. Maximum borrowings and available capacity under the revolving line of credit under the PNC Credit Facility are equal to the lesser of $90.0 million or a calculated borrowing base comprised of eligible accounts receivable and eligible inventory.
The revolving line of credit under the PNC Credit Facility bears interest at LIBOR plus 3% per annum. Beginning March 10, 2016, the revolving line of credit will bear interest at LIBOR plus a margin of between 3% and 4.5% based on the Company's trailing twelve-month reported EBITDA (as defined in the Credit Facility) measured quarterly in fiscal 2016 and semi-annually thereafter as demonstrated in its financial statements. 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 30, 2016, the Company had borrowings of $59.9 million under its revolving line of credit. As of January 30, 2016, the term loan under the PNC Credit Facility had $12.8 million outstanding, which was used to fund the expansion initiative of which $2.1 million was classified as current in the accompanying balance sheet. Remaining available capacity under the revolving credit facility as of January 30, 2016 was approximately $29.7 million, and provides liquidity for working capital and general corporate purposes. In addition, as of January 30, 2016, our unrestricted cash plus facility availability was $41.6 million and we were in compliance with applicable financial covenants of the PNC Credit Facility and expect to be in compliance with applicable financial covenants over the next twelve months.
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 current fiscal year ending January 30, 2016 in an amount equal to fifty percent (50%) of excess cash flow for such fiscal year, with any such payment not to exceed $2.0 million in any such fiscal year.
The PNC Credit Facility contains customary covenants and conditions, including, among other things, maintaining a minimum of unrestricted cash plus facility availability of $10.0 million at all times and limiting annual capital expenditures. Certain financial covenants, including minimum EBITDA levels (as defined in the PNC Credit Facility) and a minimum fixed charge coverage ratio of 1.1 to 1.0, become applicable only if unrestricted cash plus facility availability falls below $16.0 million (increasing to $18.0 million beginning March 10, 2016). In addition, the PNC Credit Facility places restrictions on our 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.
GACP Term Loan
On March 10, 2016, we entered into a term loan credit and security agreement (the "GACP Credit Agreement") with GACP Finance Co., LLC ("GACP") for a term loan of $17 million. Proceeds from the GACP Term Loan will be used for working capital and general corporate purposes and to help strengthen our total liquidity position which will allow us the flexibility to drive

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improved profitability. The term loan under the GACP Credit Agreement (the "GACP Term Loan") is secured on a first lien priority basis by the proceeds of any sale of our Boston television station FCC license and on a second lien priority basis by our accounts receivable, equipment, inventory and certain real estate as well as other assets as described in the GACP Credit Agreement. The GACP Credit Agreement matures on March 9, 2021. The GACP Term Loan bears interest at either (i) a fixed rate based on the greater of LIBOR for interest periods of one, two or three months or 1% plus a margin of 11.0%, or (ii) a daily floating Alternate Base Rate plus a margin of 10.0%. Principal borrowings under the GACP Term Loan are to be payable in consecutive monthly installments of $70,833 each, commencing on April 1, 2016, with a final installment due at the end of the five-year term equal to the aggregate principal amount of all loans outstanding on such date. The GACP Term Loan is also subject to mandatory prepayment in certain circumstances, including, but without limitation, from the proceeds of the sale of collateral assets and from 50% of annual excess cash flow as defined in the GACP Credit Agreement.
The GACP Credit Agreement contains customary covenants and conditions, which are consistent with the covenants and conditions under the PNC Credit Agreement, including, among other things, maintaining a minimum of unrestricted cash plus revolving line of credit availability under the PNC Credit Facility of $10.0 million at all times and limiting annual capital expenditures. Certain financial covenants, including minimum EBITDA levels (as defined in the GACP Credit Agreement) and a minimum fixed charge coverage ratio of 1.1 to 1.0, become applicable only if unrestricted cash plus revolving line of credit availability under the PNC Credit Facility falls below $18 million. In addition, the GACP Credit Agreement places restrictions on our 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.
Other
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. Please see "Cash Requirements" below for a discussion of our ValuePay installment program.
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 distribution, 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 technology upgrades at our Bowling Green, Kentucky distribution facility. During the first quarter of fiscal 2015 the new building was substantially completed and we expanded our 262,000 square foot facility to an approximately 600,000 square foot facility. Subsequently, during the second quarter of fiscal 2015, we completed the building expansion and moved out of our expired leased satellite warehouse space. The updated facilities and technology upgrade will include a new high-speed parcel shipping and item sortation system coupled with a new warehouse management 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 systems are expected to be phased into production through the first half of fiscal 2016. The total cost of the physical building expansion, new sortation equipment and call center facility was approximately $25 million and was financed with our expanded PNC revolving line of credit and a $15 million PNC term loan.
We also have significant future commitments for our cash, primarily payments for cable and satellite program distribution obligations and the eventual repayment of the PNC Credit Facility and GACP Credit Agreement. We believe that our existing cash balances and overall liquidity will be sufficient 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, and operating leases totaling approximately $329.7 million over the next five fiscal years.
For fiscal 2015, net cash used for operating activities totaled $9.4 million compared to net cash used for operating activities of $1.3 million in fiscal 2014 and net cash provided by operating activities of $14.0 million in fiscal 2013. Net cash used for

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operating activities for fiscal 2015 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 2015 reflects an increase in accounts receivable, inventories and prepaid expenses and a decrease 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 2016 sales growth initiatives. Accounts payable and accrued liabilities decreased during fiscal 2015 primarily due to a decrease in accounts payables related to customer shipments made directly by vendors in the fourth quarter which had shorter payment terms, a decrease in accrued incentive compensation and accrued severance.
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 investing activities totaled $20.4 million for fiscal 2015 compared to net cash used for investing activities of $25.2 million for fiscal 2014 and net cash used for investing activities of $11.1 million in fiscal 2013. Expenditures for property and equipment were $22.0 million in fiscal 2015 compared to $25.1 million in fiscal 2014 and $8.2 million in fiscal 2013. Expenditures for property and equipment during fiscal 2015, fiscal 2014 and fiscal 2013 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 decrease in the capital expenditures in fiscal 2015 and the increase in fiscal 2014 primarily relate to expenditures totaling $10.1 million and $14.9 million, respectively, made 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 expansion effort and related equipment improvements and technology upgrade 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 2015, we decreased our restricted cash and investment collateral balance by $1.7 million. During fiscal 2013, we also made a cash payment of $2.8 million in connection with the extension of our now expired NBCU trademark license.
Net cash provided by financing activities totaled $21.8 million in fiscal 2015 and related primarily to proceeds of the revolving loan under the PNC Credit Facility of $19.2 million, proceeds of the term loan under the PNC Credit Facility of $2.8 million and proceeds from the exercise of stock option of $2.5 million, partially offset by payments on the term loan of $2.1 million, payments for deferred debt issuance costs of $537,000 and capital lease payments of $52,000. Net cash provided by financing activities totaled $17.1 million in fiscal 2014 and related primarily to proceeds of the term loan under the PNC Credit Facility of $12.2 million, proceeds of the revolving loan under the PNC 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 $307,000, 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 the PNC Credit Facility, capital lease payments of $13,000, offset by cash proceeds of $227,000 from the exercise of stock options.

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Financial Covenants
The PNC 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 PNC Credit Facility) and a minimum fixed charge coverage ratio of 1.1 to 1.0, become applicable only if unrestricted cash plus facility availability falls below $16.0 million (increasing to $18.0 beginning on March 10, 2016) or upon an event of default. As of January 30, 2016, our unrestricted cash plus facility availability was $41.6 million and we were in compliance with applicable financial covenants of the PNC Credit Facility and expect to be in compliance with applicable financial covenants over the next twelve months. Under the PNC Credit Facility, we are required to maintain a minimum of $10 million of unrestricted cash and unused line availability at all times.
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.

Contractual Cash Obligations and Commitments
The following table summarizes our obligations and commitments as of January 30, 2016, and the effect these obligations and commitments are expected to have on our liquidity and cash flow in future periods:
 
 
Payments Due by Period
 
 
Total
 
Less than
1 Year
 
1-3 Years
 
3-5 Years
 
More than
5 Years
 
 
(In thousands)
Cable and satellite agreements (a)
 
$
167,373

 
$
77,780

 
$
89,593

 
$

 
$

Long term credit facilities
 
74,514

 
2,754

 
5,177

 
66,583

 

Operating leases
 
1,578

 
1,407

 
171

 

 

Capital leases
 
37

 
37

 

 

 

Employment agreements
 
2,381

 
1,881

 
500

 

 

Purchase order obligations
 
83,861

 
83,861

 

 

 

Total
 
$
329,744

 
$
167,720

 
$
95,441

 
$
66,583

 
$


_______________________________________
(a)
Future cable and satellite payment commitments are based on subscriber levels as of January 30, 2016 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 30, 2016. 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. The guidance, also includes additional disclosure requirements regarding revenue, cash flows and obligations related to contracts with customers. In July 2015, the Financial Accounting Standards Board approved a one year deferral of the effective date of ASU 2014-09. The standard will now become effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted 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.
In April 2015, the Financial Accounting Standards Board issued Simplifying the Presentation of Debt Issuance Costs, Subtopic 835-30 (ASU No 2015-03). ASU 2015-03 requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying value of that debt liability, consistent with debt discounts. The recognition

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and measurement guidance for debt issuance costs are not affected by ASU 2015-03. In August 2015, the FASB issued Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, Subtopic 835-30 (ASU No. 2015-15), which clarifies that absent authoritative guidance in ASU 2015-03 for debt issuance costs related to line-of-credit arrangements, the staff of the Securities and Exchange Commission would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The amendments in ASU No. 2015-03 are effective retrospectively for fiscal years, and interim periods within those years, beginning after December 15, 2015. Early adoption is permitted. We are currently evaluating the impact of adopting ASU 2015-03 and ASU 2015-15 on our consolidated financial statements.
In July 2015, the Financial Accounting Standards Board issued Simplifying the Measurement of Inventory, Topic 330 (ASU No 2015-11). ASU 2015-11 changes the measurement principle for inventory from the lower of cost or market to lower of cost or net realizable value. The new standard is effective for the Company for fiscal years and interim periods beginning after December 15, 2016. We are currently evaluating the impact of adopting ASU 2015-11 on our consolidated financial statements.
In November 2015, the Financial Accounting Standards Board issued Balance Sheet Classification of Deferred Taxes, Topic 740 (ASU No 2015-17). ASU 2015-17 requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as non-current on the balance sheet. The new standard is effective for the Company for fiscal years and interim periods beginning after December 15, 2016, with early adoption permitted and applied either prospectively or retrospectively. We are currently evaluating the impact of adopting ASU 2015-17 on our consolidated financial statements.
In February 2016, the Financial Accounting Standards Board issued Leases, Topic 842 (ASU No 2016-02). ASU 2016-02 establishes a right-of-use model that requires a lessee to record a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for the Company for fiscal years and interim periods beginning after December 15, 2018, with early adoption permitted. We are currently evaluating the impact of adopting ASU 2016-02 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 71% to 77%. As of January 30, 2016 and January 31, 2015, we had approximately $108.9 million and $106.7 million, respectively, 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. 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 2015, fiscal 2014 and fiscal 2013 was $11.8 million, $13.0 million and $12.8 million, respectively. Based on our fiscal 2015 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 $3.5 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 30, 2016 and January 31, 2015, we had inventory balances of $65.8 million and $61.5 million, respectively. We regularly review inventory quantities on hand and record a provision

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for excess and obsolete inventory based primarily on the following factors: age of the inventory, estimated required sell-through time, stage of product life cycle and whether items are selling below cost. In determining appropriate reserve percentages, we look at our historical write off experience, the specific merchandise categories affected, our historic recovery percentages on various methods of liquidations, forecasts of future product airings and current markdown processes. Provision for excess and obsolete inventory for fiscal 2015, fiscal 2014 and fiscal 2013 was $7.2 million in fiscal 2015 and $3.8 million for both fiscal 2014 and fiscal 2013. Based on our fiscal 2015 inventory write down experience, a 10% increase or decrease in inventory write downs would have had an impact of approximately $717,200 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 19.8% in fiscal 2015, 21.5% in fiscal 2014, and 22.3% in fiscal 2013. 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 2015 and fiscal 2014 were $4.7 million and $5.6 million, respectively. Based on our fiscal 2015 sales returns, a one-point increase or decrease in our television and online sales returns rate would have had an impact of approximately $3.4 million on gross profit.
FCC broadcasting license.  As of January 30, 2016 and January 31, 2015, 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. 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 30, 2016 and January 31, 2015, we recorded a valuation allowance of approximately $130.1 million and $124.3 million, respectively, for our net deferred tax assets, including net operating loss carryforwards. Based on our recent history of losses, a full valuation allowance was recorded in fiscal 2015, fiscal 2014 and fiscal 2013. 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 exposure to interest rate risk under the PNC Credit Facility. Please refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Financial Condition, Liquidity and Capital Resources-Sources of Liquidity” above for a discussion of the PNC Credit Facility. Changes in market interest rates could impact the level of interest expense and income earned on our cash portfolio. Based on our indebtedness in fiscal year 2015, and assuming no changes to the our consolidated balance sheet at January 30, 2016, a hypothetical increase in LIBOR by 100 basis points would increase our interest expense by $727,000, or 26%, compared to fiscal year 2015.  A hypothetical 43 basis point (as of January 30, 2016, the 30 day LIBOR rate was 0.43%) decrease in LIBOR would decrease our interest expense by $313,000, or 11%, compared to fiscal year 2015.

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Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
OF EVINE Live Inc.
AND SUBSIDIARIES
 
 
 
Page
 
 
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of January 30, 2016 and January 31, 2015
Consolidated Statements of Operations for the Years Ended January 30, 2016, January 31, 2015 and February 1, 2014
Consolidated Statements of Shareholders’ Equity for the Years Ended January 30, 2016, January 31, 2015 and February 1, 2014
Consolidated Statements of Cash Flows for the Years Ended January 30, 2016, January 31, 2015 and February 1, 2014
Notes to Consolidated Financial Statements
Financial Statement Schedule — Schedule II — Valuation and Qualifying Accounts



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
EVINE Live Inc. and Subsidiaries
Eden Prairie, Minnesota

We have audited the accompanying consolidated balance sheets of EVINE Live Inc. and subsidiaries (the "Company") as of January 30, 2016 and January 31, 2015, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended January 30, 2016. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the 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 30, 2016 and January 31, 2015, and the results of their operations and their cash flows for each of the three years in the period ended January 30, 2016, 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 30, 2016, 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 31, 2016 expressed an unqualified opinion on the Company's internal control over financial reporting.


/s/  DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
March 31, 2016


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EVINE Live Inc. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

 
 
 
 
 
 
 
 
January 30,
2016
 
January 31,
2015
 
 
(In thousands, except share and per share data)
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash
 
$
11,897

 
$
19,828

Restricted cash and investments
 
450

 
2,100

Accounts receivable, net
 
114,949

 
112,275

Inventories
 
65,840

 
61,456

Prepaid expenses and other
 
5,913

 
5,284

Total current assets
 
199,049

 
200,943

Property & equipment, net
 
52,629

 
42,759

FCC broadcasting license
 
12,000

 
12,000

Other assets
 
2,085

 
1,989

 
 
$
265,763

 
$
257,691

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
77,779

 
$
81,457

Accrued liabilities
 
35,342

 
36,683

Current portion of long term credit facility
 
2,143

 
1,736

Deferred revenue
 
85

 
85

Total current liabilities
 
115,349

 
119,961

Capital lease liability
 

 
36

Deferred revenue
 
164

 
249

Deferred tax liability
 
2,734

 
1,946

Long term credit facility
 
70,537

 
50,971

Total liabilities
 
188,784

 
173,163

Commitments and contingencies
 

 

Shareholders' equity:
 

 
 
Preferred stock, $.01 per share par value, 400,000 shares authorized; zero shares issued and outstanding
 

 

Common stock, $.01 per share par value, 100,000,000 shares authorized; 57,170,245 and 56,448,663 shares issued and outstanding
 
571

 
564

Additional paid-in capital
 
423,574

 
418,846

Accumulated deficit
 
(347,166
)
 
(334,882
)
Total shareholders’ equity
 
76,979

 
84,528

 
 
$
265,763

 
$
257,691

The accompanying notes are an integral part of these consolidated financial statements.

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EVINE Live Inc. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

 
 
 
For the Years Ended
 
 
 
January 30,
2016
 
January 31,
2015
 
February 1,
2014
 
 
 
(In thousands, except share and per share data)
Net sales
 
 
$
693,312

 
$
674,618

 
$
640,489

Cost of sales
 
 
454,832

 
429,570

 
410,465

Gross profit
 
 
238,480

 
245,048

 
230,024

Operating expense:
 
 
 
 
 
 
 
Distribution and selling
 
 
209,328

 
202,579

 
191,695

General and administrative
 
 
24,520

 
23,983

 
23,799

Depreciation and amortization
 
 
8,474

 
8,445

 
12,320

Executive and management transition costs
 
 
3,549

 
5,520

 

Distribution facility consolidation and technology upgrade costs
 
 
1,347