UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

952-943-6000

(Registrant’s Telephone Number, Including Area Code)

 

This annual report on Form 10-K and other materials we file with the Securities and Exchange Commission (the "SEC"“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"“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, 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): variability in consumer preferences, shopping behaviors, 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;sales and sales promotions; 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 and shipping relationships and develop key partnerships and proprietary and exclusive brands; our ability to manage our operating expenses successfully and our working capital levels; our ability to remain compliant with our credit facilities covenants; customer acceptance of our branding strategy and our repositioning as a video commerce company; the market demand for television station sales;our ability to respond to changes in consumer shopping patterns and preferences, and changes in technology and consumer viewing patterns; 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 Federal Trade Commission, and adverse outcomes from regulatory proceedings; litigation or governmental proceedings affecting our operations; significant public events (including disasters, weather events or events attracting significant television-coverage) that are difficult to predict, or other significant television-covering events causingeither cause an interruption of television coverage or that directly compete with thedivert viewership from our programming; disruptions in our distribution of our programming;network broadcast to our customers; our ability to protect our intellectual property rights; our ability to obtain and retain key executives and employees; our ability to attract new customers and retain existing customers; changes in shipping costs; expenses relating to the actions of activist or hostile shareholders; our ability to offer new or innovative products and customer acceptance of the same; changes in customer viewing habits of 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.

When we refer to "we," "our," "us", "Evine" or the "Company," we mean EvineEVINE 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. EvineEVINE Live Inc. (formerly ValueVision Media, Inc.) was incorporated on June 25, 1990.

The primary form of our multiplatform videointeractive digital commerce retail business is our live 24-hour television shopping network, Evine, which is the third largest television shopping network in the United States. Our comprehensive online website, evine.com, complements our network with a combination of products featured on TV as well as a strong collection of online-only products. Consolidated net sales, including shipping and handling revenues, totaled $648.2 million, $666.2 million $693.3 million and $674.6$693.3 million for fiscal 2016,2017, fiscal 20152016 and fiscal 2014, respectively.2015. We have several convenient methods for a customer to purchase items they want, including our toll-free telephone number, directly online, or using mobile devices. Our television programming is primarily produced at our Eden Prairie, Minnesota headquarters facility and we also produce programming remotely on location during special events. The programming is transmitted nationally via satellite to cable system operators, direct-to-home satellite providers, broadcast television station operators, our owneda full-power broadcast television station WWDP TV in Boston, Massachusetts and through a leased full-power broadcast television station in Seattle, Washington.Boston and over-the-top platforms.

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 online 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. NetConsolidated net sales, from our television shopping business, inclusive ofincluding shipping and handling revenues, totaled $336$648.2 million, $368$666.2 million and $374$693.3 million representing 50%, 53%for fiscal 2017, fiscal 2016 and 55%fiscal 2015. Our digital sales penetration, or, the percentage of consolidated net sales for fiscal 2016, fiscal 2015 and fiscal 2014, respectively. Net sales from our online and mobile business, inclusive of shipping and handling revenues, totaled $330 million, $325 million, and $301 million, representing 50%, 47% and 45% of consolidated net sales for fiscal 2016, fiscal 2015 and fiscal 2014, respectively. Our online sales percentage is calculated based on sales orders that are generated primarily from our evine.com website includingand mobile devices andplatforms, which are primarily ordered directly online.online, was 51.9%, 49.5% and 46.9% in fiscal 2017, fiscal 2016 and fiscal 2015. Our mobile penetration increased to 49.9%, 45.4% and 42.3% of total online sales during fiscal 2017, fiscal 2016 and fiscal 2015.

During fiscal 2016,2017, there were approximately 121122 million homes in the United States with at least one television set. Of those homes, there were approximately 5658 million cable television subscribers, approximately 3432 million direct-to-home satellite subscribers and approximately 1210 million homes which receive programming through telephone service providers,telecommunications companies, such as AT&T and Verizon.

Our 24-hour television shopping networks, Evine and Evine Too, which are distributed primarily on cable and satellite systems, reached more than 87 million homes, or full time equivalent subscribers ("FTEs"(“FTEs”), during fiscal 2016,2017, fiscal 20152016 and fiscal 2014.2015.

Our website, evine.com, as well as our mobile platform, provide customers with a 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 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.merchants (“Remote Sellers”). 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 enhanced tax collection obligations for Remote Sellers. In January 2018, the Supreme Court of the United States agreed to hear a case (South Dakota v. Wayfair, Inc.) which could dramatically increase the ability of states to impose sales tax collection responsibilities on electronic commerce.Remote Sellers including the Company. We cannot predict as tothe outcome of this case or 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.transactions in additional jurisdictions. We already collect and remit sales tax in the several states where we have determined that we are required to do so under current law, and continue to monitor state requirements.

There are a number of federal laws that limit our ability to pursue certain direct marketing activities, including the Telephone Consumer Protection Act, or TCPA, which allows a recipient to affirmatively opt out of e-mail and text solicitations and the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, or the CAN-SPAM Act. The statutes govern when and how we may contact consumers through various communication methods, including email, phone calls, faxes and texts, in some cases requiring consent and in others allowing a consumer to opt out of certain communications. These types of regulation may limit our ability to pursue certain direct marketing activities, thus potentially limiting our sales and number of 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.

In an SEC filing made on August 18, 2015 (SEC File No. 005-41757), GE Equity disclosed that on August 14, 2015, itGE Equity and ASF Radio, who was an independent third party to us as of that time, entered into a Stock Purchase Agreement pursuant to which GE Equity agreed to sell 3,545,049 shares of our common stock, which was all of the shares GE Equity had then owned,

On February 25, 2009, we entered into an amended and restated registration rights agreement that, as further amended, provided GE Equity, NBCU and their affiliates and any transferees and assigns, an aggregate of five demand registrations and unlimited piggy-back registration rights. In connection with the GE/ASF Radio Sale, an amendment to the Amended and Restated Registration Rights Agreement was entered into removing GE Equity as a party and adding ASF Radio L.P. as a party.

On July 9, 2015, we entered into a letter agreement with GE Equity (the “GE Letter Agreement”) 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 Equity’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. In the letter agreement,GE 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, an “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 (as defined in the Shareholder Rights Plan) or the Final Expiration Date (as defined in the Shareholder Rights Plan), (ii) adopt another shareholders' rights plan or (iii) amend the letter agreement.

Our television and online revenues are generated from sales of merchandise offered through our "Be Good to Yourself" initiative,interactive digital platforms, 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 experience 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 core video commerce customers - those who interact with our network and transact through television, online and mobile devices - are primarily women between the ages of 45 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 brands and exclusive brands,products, which generally have higher margins than brandedwidely sold merchandise, across multiple product categories.

Synchrony was previously indirectly majority-owned by the General Electric Company ("GE"), which is also the parent company of GE Equity. Prior to GE Equity's sale of our common stock to ASF Radio on April 29, 2016, GE Equity had a beneficial ownership in us and had certain rights as further described under "Relationship with GE Equity, Comcast and NBCU".

Our products are available for purchase via toll-free telephone numbers, on our website orand through mobile platforms. We maintain agreements with third party call surgeservice providers to support us with volume peaks in demand for telephone order-entry operators and automated order-processing services to take customer orders. We also takereceive orders with our own home-based phone agents, and with agents at our Bowling Green, Kentucky distribution center, and at our Eden Prairie, Minnesota corporate headquarters.

We own an approximately 600,000 square foot distribution facility in Bowling Green, Kentucky, which we useused primarily for the fulfillment of primarily allcustomer orders for 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 fiscal 2015, we expanded our 262,000 square foot facility to our current approximately 600,000 square foot facility and moved out of our leased satellite warehouse space. The updated facilities and technology upgrade includesincluded 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 were phased into production through fiscal 2016.

The majority of customer purchases are paid for by credit or debit cards, including our private label credit card discussed above. Purchases and installment charges made with the Evine 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. Our ValuePay program is an interest-free installment payment program which allows customers to pay by credit card for certain merchandise in two or more equal monthly installments. The percentage of our net sales generated utilizingin which our customer utilized our ValuePay payment program over the past three fiscal years ranged from 70%68% to 75%72%. 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 February 3, 2018 and January 28, 2017, and January 30, 2016, we had inventory balances of $70.2$68.8 million and $65.8 million, respectively.$70.2 million. 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 drop-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.

The cable television industry and the broadcasting industry in general areis 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.

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. The FCC regulates the terms of cable programming networks that are distributed by satellite, as ours is. Those regulations require, among other things, that programming channels be provided to all competing multichannel video programming distributors (“MVPDs”). FCC rules also require that all video programming distributed over MVPDs include captioning for the foregoing mattershearing-impaired, and that all programs that were originally produced to be viewed over MVPD facilities include captions if they are now, or may become,subsequently distributed over the subject of litigation, and we cannot predict the outcome of any such litigation or the effect on our business.internet.

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:

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.

We regard our intellectual property, including trademarks, service marks, copyrights,copyright patents, domain names, trade dress, trade secrets and proprietary technologies, and similar intellectual property as critical to our success, and wesuccess.  We rely on trademark, copyrightintellectual property protections and patent law, trade-secret protection, andon 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.  Our registered trademarks and service marks are presumed valid in the United States, as long as they are in use, their registrations are properly maintained, and they have not been found to have become generic.  Registrations of trademarks and service marks can also generally be renewed indefinitely as long as the trademarks and service marks are in use.

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

Set forth below are the names, ages and titles of the persons serving as our executive officers.

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 investors.evine.com. 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

We experienced operating income (losses) of approximately $3.2 million, $(2.0) million and $(8.7) million in fiscal 2017, fiscal 2016 and fiscal 2015. We reported net income (losses) of $0.1 million, $(8.7) million and $1.0$(12.3) million in fiscal 2016,2017, fiscal 20152016 and fiscal 2014, respectively. We reported net losses of $(8.7) million, $(12.3) million and $(1.4) million in fiscal 2016, fiscal 2015 and fiscal 2014, respectively.2015. 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.

As of January 28, 2017,February 3, 2018, we had approximately $32.6$23.9 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 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.

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 and the GACP Credit Agreement.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 and the GACP Credit Agreement.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 2016,2017, and assuming no changes to our consolidated balance sheet at January 28, 2017,February 3, 2018, a hypothetical increase in LIBOR by 100 basis points would increase our interest expense by $832,000,$740,000, or 15%17%, compared to fiscal 2016.2017.  A hypothetical 78100 basis point (as of January 28, 2017, the 30 day LIBOR rate was 0.78%) decrease in LIBOR would decrease our interest expense by $550,000,$740,000, or 10%17%, compared to fiscal 2016.2017.

Item 8. Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors and Shareholders of

EVINE Live Inc. and Subsidiaries

Eden Prairie, Minnesota