EVINE LIVE INC., 10-K filed on 3/29/2019
Annual Report
v3.19.1
Document and Entity Information - USD ($)
12 Months Ended
Feb. 02, 2019
Mar. 28, 2019
Aug. 03, 2018
Document and Entity Information [Abstract]      
Entity Registrant Name EVINE Live Inc.    
Entity Central Index Key 0000870826    
Document Type 10-K    
Document Period End Date Feb. 02, 2019    
Document Fiscal Year Focus 2018    
Amendment Flag false    
Document Fiscal Period Focus FY    
Current Fiscal Year End Date --02-02    
Entity Well-known Seasoned Issuer No    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Filer Category Accelerated Filer    
Entity Small Business true    
Entity Emerging Growth Company false    
Entity Shell Company false    
Entity Common Stock, Shares Outstanding   67,948,665  
Entity Public Float     $ 85,549,962
v3.19.1
Consolidated Balance Sheets - USD ($)
$ in Thousands
Feb. 02, 2019
Feb. 03, 2018
Current assets:    
Cash $ 20,485 $ 23,940
Restricted cash equivalents 450 450
Accounts receivable, net 81,763 96,559
Inventories 65,272 68,811
Prepaid expenses and other 9,053 5,344
Total current assets 177,023 195,104
Property and equipment, net 51,118 52,048
Other assets 1,846 2,106
TOTAL ASSETS 229,987 249,258
Current liabilities:    
Accounts payable 56,157 55,614
Accrued liabilities 37,374 35,646
Current portion of long term credit facility 2,488 2,326
Deferred revenue 35 35
Total current liabilities 96,054 93,621
Other long term liabilities 50 68
Long term credit facility 68,932 71,573
Total liabilities 165,036 165,262
Commitments and contingencies
Shareholders' equity:    
Preferred stock, $.01 per share par value, 400,000 shares authorized, zero shares issued and outstanding 0 0
Common stock, $.01 per share par value, 99,600,000 shares authorized; 67,919,349 and 65,290,458 shares issued and outstanding 679 653
Additional paid-in capital 442,197 439,111
Accumulated deficit (377,925) (355,768)
Total shareholders’ equity 64,951 83,996
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 229,987 $ 249,258
v3.19.1
Consolidated Balance Sheets (Parentheticals) - $ / shares
Feb. 02, 2019
Feb. 03, 2018
Statement of Financial Position [Abstract]    
Preferred stock, par value $ 0.01 $ 0.01
Preferred stock, shares authorized 400,000 400,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common stock, par value $ 0.01 $ 0.01
Common stock, shares authorized 99,600,000 99,600,000
Common stock, shares issued 67,919,349 65,290,458
Common stock, shares outstanding 67,919,349 65,290,458
v3.19.1
Consolidated Statements of Operations - USD ($)
$ in Thousands
12 Months Ended
Feb. 02, 2019
Feb. 03, 2018
Jan. 28, 2017
Income Statement [Abstract]      
Net sales $ 596,637 $ 648,220 $ 666,213
Cost of sales 389,790 413,108 424,686
Gross profit 206,847 235,112 241,527
Operating expense:      
Distribution and selling 191,917 199,484 207,030
General and administrative 25,883 24,442 23,386
Depreciation and amortization 6,243 6,370 8,041
Executive and management transition costs 2,093 2,145 4,411
Gain on sale of television station (665) (551) 0
Distribution facility consolidation and technology upgrade costs 0 0 677
Total operating expense 225,471 231,890 243,545
Operating income (loss) (18,624) 3,222 (2,018)
Other income (expense):      
Interest income 34 17 11
Interest expense (3,502) (5,084) (5,937)
Loss on debt extinguishment 0 (1,457) 0
Total other expense, net (3,468) (6,524) (5,926)
Loss before income taxes (22,092) (3,302) (7,944)
Income tax benefit (provision) (65) 3,445 (801)
Net income (loss) $ (22,157) $ 143 $ (8,745)
Net income (loss) per common share $ (0.34) $ 0.00 $ (0.15)
Net income (loss) per common share — assuming dilution $ (0.34) $ 0.00 $ (0.15)
Weighted average number of common shares outstanding:      
Basic 66,073,206 63,870,046 59,784,594
Diluted 66,073,206 63,968,299 59,784,594
v3.19.1
Consolidated Statement of Shareholders' Equity - USD ($)
$ in Thousands
Total
Common Stock [Member]
Additional Paid-in Capital [Member]
Accumulated Deficit
Common Stock, Shares, Outstanding period beginning at Jan. 30, 2016   57,170,245    
Total Shareholders' Equity period beginning at Jan. 30, 2016 $ 76,979 $ 571 $ 423,574 $ (347,166)
Net income (loss) (8,745) $ 0 0 (8,745)
Common stock issuances pursuant to equity compensation plans, Shares   423,338    
Common stock issuances pursuant to equity compensation plans, Value (46) $ 5 (51) 0
Share-based payment compensation 1,946 $ 0 1,946 0
Common stock and warrant issuance, Shares   7,598,731    
Common stock and warrant issuance, Value 11,569 $ 76 11,493 0
Common Stock, Shares, Outstanding period end at Jan. 28, 2017   65,192,314    
Total Shareholders' Equity period end at Jan. 28, 2017 81,703 $ 652 436,962 (355,911)
Net income (loss) 143 $ 0 0 143
Repurchases of common stock, Shares   (4,400,000)    
Repurchases of common stock, Value (5,055) $ (44) (5,011) 0
Common stock issuances pursuant to equity compensation plans, Shares   389,871    
Common stock issuances pursuant to equity compensation plans, Value 34 $ 4 30 0
Share-based payment compensation 2,888 $ 0 2,888 0
Common stock and warrant issuance, Shares   4,108,273    
Common stock and warrant issuance, Value $ 4,283 $ 41 4,242 0
Common Stock, Shares, Outstanding period end at Feb. 03, 2018 65,290,458 65,290,458.000    
Total Shareholders' Equity period end at Feb. 03, 2018 $ 83,996 $ 653 439,111 (355,768)
Net income (loss) (22,157) $ 0 0 (22,157)
Common stock issuances pursuant to equity compensation awards, Shares   2,628,891    
Common stock issuances pursuant to equity compensation awards, Value 48 $ 26 22 0
Share-based payment compensation $ 3,064 $ 0 3,064 0
Common Stock, Shares, Outstanding period end at Feb. 02, 2019 67,919,349 67,919,349.000    
Total Shareholders' Equity period end at Feb. 02, 2019 $ 64,951 $ 679 $ 442,197 $ (377,925)
v3.19.1
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
12 Months Ended
Feb. 02, 2019
Feb. 03, 2018
Jan. 28, 2017
OPERATING ACTIVITIES:      
Net income (loss) $ (22,157) $ 143 $ (8,745)
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:      
Depreciation and amortization 10,164 10,307 11,209
Share-based payment compensation 3,064 2,888 1,946
Gain on sale of television station (665) (551) 0
Amortization of deferred revenue (35) (60) (86)
Amortization of deferred finance costs 215 366 558
Loss on debt extinguishment 0 1,457 0
Deferred income taxes 0 (3,522) 788
Changes in operating assets and liabilities:      
Accounts receivable, net 14,796 2,503 15,978
Inventories 3,539 1,381 (3,181)
Prepaid expenses and other 905 166 423
Accounts payable and accrued liabilities (2,614) (11,800) (11,606)
Net cash provided by operating activities 7,212 3,278 7,284
INVESTING ACTIVITIES:      
Property and equipment additions (8,768) (10,499) (10,261)
Proceeds from the sale of assets 665 12,738 0
Cash paid for acquisition 0 0 (508)
Net cash provided by (used for) investing activities (8,103) 2,239 (10,769)
FINANCING ACTIVITIES:      
Proceeds from issuance of revolving loan 239,300 96,800 0
Proceeds of term loans 5,821 6,000 17,000
Proceeds from exercise of stock options 181 79 0
Proceeds from issuance of common stock and warrants 0 4,628 12,470
Payments on revolving loan (245,300) (96,800) 0
Payments on term loans (2,325) (18,780) (2,852)
Payments for restricted stock issuance (133) (45) (46)
Payments for deferred financing costs (96) (265) (1,512)
Payments on capital leases (12) 0 (39)
Payments for repurchases of common stock 0 (5,055) 0
Payments for common stock issuance costs 0 (452) (786)
Payment for debt extinguishment costs 0 (334) 0
Net cash provided by (used for) financing activities (2,564) (14,224) 24,235
Net increase (decrease) in cash and restricted cash equivalents (3,455) (8,707) 20,750
BEGINNING CASH AND RESTRICTED CASH EQUIVALENTS 24,390 33,097 12,347
ENDING CASH AND RESTRICTED CASH EQUIVALENTS $ 20,935 $ 24,390 $ 33,097
v3.19.1
The Company
12 Months Ended
Feb. 02, 2019
General [Abstract]  
The Company
The Company
EVINE Live Inc. and its subsidiaries ("we," "our," "us," or the "Company") are collectively a multiplatform interactive video and digital commerce company that offers a mix of proprietary, exclusive and name-brand merchandise in the categories of jewelry & watches, home & consumer electronics, beauty & wellness, and fashion & accessories directly to consumers 24 hours a day in an engaging and informative shopping experience via television, online and mobile devices. Evine programming is distributed in more than 87 million homes through cable and satellite distribution agreements, agreements with telecommunications companies and arrangements with over-the-air broadcast television stations. Evine programming is also streamed live online at evine.com, a comprehensive digital commerce platform that sells products which appear on its television shopping network as well as an extended assortment of online-only merchandise, and is available on mobile channels and over-the-top platforms. Our programming and products are also marketed via mobile devices, including smartphones and tablets, and through the leading social media channels.
v3.19.1
Summary of Significant Accounting Policies
12 Months Ended
Feb. 02, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Fiscal Year
The Company's fiscal year ends on the Saturday nearest to January 31 and results in either a 52-week or 53-week fiscal year. References to years in this report relate to fiscal years, rather than to calendar years. The Company’s most recently completed fiscal year, fiscal 2018, ended on February 2, 2019, and consisted of 52 weeks. Fiscal 2017 ended on February 3, 2018 and consisted of 53 weeks. Fiscal 2016 ended on January 28, 2017 and consisted of 52 weeks.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.
Revenue Recognition
Revenue is recognized when control of the promised merchandise is transferred to customers in an amount that reflects the consideration the Company expects to receive in exchange for the merchandise, which is upon shipment. Revenue is reported net of estimated sales returns, credits and incentives, and excludes sales taxes. Sales returns are estimated and provided for at the time of sale based on historical experience.
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in Accounting Standards Codification ("ASC") 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Substantially all of the Company's sales are single performance obligation arrangements for transferring control of merchandise to customers.
In accordance with ASC 606-10-50, the Company disaggregates revenue from contracts with customers by significant product groups and timing of when the performance obligations are satisfied. A reconciliation of disaggregated revenue by significant product group is provided in Note 10 - "Business Segments and Sales by Product Group".
As of February 2, 2019, approximately $68,000 is expected to be recognized from remaining performance obligations within the next two years. The Company has applied the practical expedient to exclude the value of remaining performance obligations for contracts with an original expected term of one year or less. Revenue recognized over time was $35,000, $60,000 and $86,000 for fiscal 2018, fiscal 2017 and fiscal 2016.
Merchandise Returns
The Company records a merchandise return liability as a reduction of gross sales for anticipated merchandise returns at each reporting period and must make estimates of potential future merchandise returns related to current period product revenue. The Company estimates and evaluates the adequacy of its merchandise return liability 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 merchandise return liability in any accounting period.
Shipping and Handling
The Company has elected to account for shipping and handling as activities to fulfill the promise to transfer the merchandise. Shipping and handling fees charged to customers are recognized when the customer obtains control of the merchandise, which is upon shipment. The Company accrues costs for shipping and handling activities, which occur subsequent to transfer of control to the customer and are recorded as cost of sales in the accompanying statements of operations.
Sales Taxes
The Company has elected to exclude from revenue the sales taxes imposed on its sales and collected from customers.
Accounts Receivable
The Company utilizes an installment payment program called ValuePay that entitles customers to purchase merchandise and generally pay for the merchandise in two or more equal monthly credit card installments. The Company has elected the practical expedient to not adjust the promised amount of consideration for the effects of a significant financing component when the payment terms are less than one year. Accounts receivable consist primarily of amounts due from customers for merchandise sales and from credit card companies and are reflected net of reserves for estimated uncollectible amounts. As of February 2, 2019 and February 3, 2018, the Company had approximately $74,787,000 and $88,452,000 of net receivables due from customers under the ValuePay installment program and total reserves for estimated uncollectible amounts of $8,533,000 and $6,008,000. The increase in the total reserve as a percentage of receivables is primarily due to the Company's recently extended active collections cycle, whereby the Company is pursuing collection for a longer period prior to selling its receivables. This change in the Company's collection cycle has been yielding a higher total recovery rate.
Revenue Recognition Judgments
The Company's merchandise is generally sold with a right of return for up to a certain number of days after the merchandise is shipped and the Company may provide other credits or incentives, which are accounted for as variable consideration when estimating the amount of revenue to recognize. Merchandise returns and other credits are estimated at contract inception and updated at the end of each reporting period as additional information becomes available.
The Company evaluated whether it is the principal (i.e., report revenues on a gross basis) or agent (i.e., report revenues on a net basis) in certain vendor arrangements where the merchandise is shipped directly from the vendor to the Company's customer and the purchase and sale of inventory is virtually simultaneous. Generally, the Company is the principal and reports revenues from such vendor arrangements on a gross basis, as it controls the merchandise before it is transferred to the customer. The Company's control is evidenced by it being primarily responsible to the customers, establishing price and its inventory risk upon customer returns.
Cost of Sales and Other Operating Expenses
Cost of sales includes primarily the cost of merchandise sold, shipping and handling costs, inbound freight costs, excess and obsolete inventory charges, distribution facility depreciation and vendor share based payment compensation. Purchasing and receiving costs, including costs of inspection, are included as a component of distribution and selling expense and were approximately $10,299,000, $10,660,000 and $9,557,000 for fiscal 2018, fiscal 2017 and fiscal 2016. Distribution and selling expense consists primarily of cable and satellite access fees, credit card fees, bad debt expense and costs associated with purchasing and receiving, inspection, marketing and advertising, show production, website marketing and merchandising, telemarketing, customer service, warehousing, fulfillment and share based compensation. General and administrative expense consists primarily of costs associated with executive, legal, accounting and finance, information systems and human resources departments, software and system maintenance contracts, insurance, investor and public relations, share based compensation and director fees.
Cash
Cash consists of cash on deposit. The Company maintains its cash balances at financial institutions in demand deposit accounts that are federally insured. The Company has not experienced losses in such accounts and believes it is not exposed to any significant credit risk on its cash.
Restricted Cash Equivalents
The Company's restricted cash equivalents consist of certificates of deposit with original maturities of three months or less and are generally restricted for a period ranging from 30 to 60 days. The Company had restricted cash equivalents of $450,000 for both fiscal 2018 and fiscal 2017. Interest income is recognized when earned.
Inventories
Inventories, which consists of consumer merchandise held for resale, are stated at the lower of average cost or net realizable value, giving consideration to obsolescence provision write downs of $5,149,000, $3,757,000 and $5,589,000 for fiscal 2018, fiscal 2017 and fiscal 2016. During fiscal 2018, 2017 and 2016, products purchased from one vendor accounted for approximately 14%, 15% and 16% of our consolidated net sales.
Marketing and Advertising Costs
Marketing and advertising costs are expensed as incurred and consist primarily of contractual marketing fees paid to certain cable operators for cross channel promotions and online advertising, including amounts paid to online search engine operators and customer mailings. Total marketing and advertising costs and online search marketing fees totaled $4,561,000, $4,530,000 and $3,723,000 for fiscal 2018, fiscal 2017 and fiscal 2016. The Company includes advertising costs as a component of distribution and selling expense in the Company’s consolidated statement of operations.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation. Improvements and renewals that extend the life of an asset are capitalized and depreciated. Repairs and maintenance are charged to expense as incurred. The cost and accumulated depreciation of property and equipment retired or otherwise disposed of are removed from the related accounts, and any residual values are charged or credited to operations. Depreciation and amortization for financial reporting purposes are provided on a straight-line method based upon estimated useful lives. Costs incurred to develop software for internal use and for the Company’s websites are capitalized and amortized over the estimated useful life of the software. Costs related to maintenance of internal-use software and for the Company’s website are expensed as incurred. Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment would be recognized when the carrying amount of an asset or asset group exceeds the future estimated undiscounted cash flows expected to be generated by the asset or asset group. If the carrying amount of the asset or asset group exceeds its estimated future cash flows, an impairment charge is recognized in the amount that the carrying amount of the asset exceeds the fair value of the asset.
Intangible Assets
The Company’s primary identifiable intangible assets include the Evine trademark and brand name; and an acquired online watch retailer customer list and trade name. Identifiable intangibles with finite lives are amortized and those identifiable intangibles with indefinite lives are not amortized. Identifiable intangible assets that are subject to amortization are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Identifiable intangible assets not subject to amortization are tested for impairment annually or more frequently if events warrant. The impairment test consists of a comparison of the fair value of the intangible asset with its carrying amount.
Stock-Based Compensation
Compensation is recognized for all stock-based compensation arrangements by the Company, including employee and non-employee stock option and restricted stock unit grants. The estimated grant date fair value of each stock-based award is recognized as compensation over the requisite service period, which is generally the vesting period. Stock-based compensation expense is recognized net of forfeitures, which the Company estimates based on historical data. The estimated fair value of each option is calculated using the Black-Scholes option-pricing model for time-based vesting awards and a Monte Carlo valuation model for market-based vesting awards. The estimated fair value of restricted stock grants is based on the grant date closing price of the Company's stock for time-based vesting awards and a Monte Carlo valuation model for market-based vesting awards.
Income Taxes
The Company accounts for income taxes under the liability method of accounting whereby deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between financial statement and tax basis of assets and liabilities. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of the enactment of such laws. The Company assesses the recoverability of its deferred tax assets and records a valuation allowance when it is more likely than not some portion of the deferred tax asset will not be realized.
The Company recognizes interest and penalties related to uncertain tax positions within income tax expense.
Net Income (Loss) Per Common Share
During fiscal 2018, the Company issued a restricted stock award that meets the criteria of a participating security. Accordingly, basic income (loss) per share is computed using the two-class method under which earnings are allocated to both common shares and participating securities. Undistributed net losses are allocated entirely to common shareholders since the participating security has no contractual obligation to share in the losses. All shares of restricted stock are deducted from weighted-average number of common shares outstanding – basic. Diluted net income (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock of the Company during reported periods and is calculated using the treasury method.
A reconciliation of net income (loss) per share calculations and the number of shares used in the calculation of basic net income (loss) per share and diluted net income (loss) per share is as follows:
 
 
For the Years Ended
 
 
February 2,
2019
 
February 3,
2018
 
January 28,
2017
Numerator:
 
 
 
 
 
 
Net income (loss) (a)
 
$
(22,157,000
)
 
$
143,000

 
$
(8,745,000
)
Earnings allocated to participating share awards (b)
 

 

 

Net income (loss) attributable to common shares — Basic and diluted
 
$
(22,157,000
)
 
$
143,000

 
$
(8,745,000
)
Denominator:
 
 
 
 
 
 
Weighted average number of common shares outstanding — Basic
 
66,073,206

 
63,870,046

 
59,784,594

Dilutive effect of stock options, non-vested shares and warrants (c)
 

 
98,253

 

Weighted average number of common shares outstanding — Diluted
 
66,073,206

 
63,968,299

 
59,784,594

Net income (loss) per common share
 
$
(0.34
)
 
$
0.00

 
$
(0.15
)
Net income (loss) per common share — assuming dilution
 
$
(0.34
)
 
$
0.00

 
$
(0.15
)

(a) The net income (loss) for fiscal 2018, fiscal 2017 and fiscal 2016 includes executive and management transition costs of $2,093,000, $2,145,000 and $4,411,000. The net loss for fiscal 2018 includes a gain on the sale of television station of $665,000. The net income for fiscal 2017 includes a gain on the sale of television station of $551,000 and a loss on debt extinguishment of $1,457,000. The fiscal 2016 net loss includes distribution facility consolidation and technology upgrade costs of $677,000.
(b) During fiscal 2018, the Company issued a restricted stock award that is a participating security. For fiscal 2018, the entire undistributed loss is allocated to common shareholders.
(c) For fiscal 2018 and fiscal 2016, there were 340,000 and 119,000 incremental in-the-money potentially dilutive common shares outstanding. The incremental in-the-money potentially dilutive common stock shares are excluded from the computation of diluted earnings per share, as the effect of their inclusion would be anti-dilutive.
Fair Value of Financial Instruments
GAAP requires disclosures of fair value information about financial instruments for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. GAAP excludes certain financial instruments and all non-financial instruments from its disclosure requirements.
The Company used the following methods and assumptions in estimating its fair values for financial instruments. The carrying amounts reported in the accompanying consolidated balance sheets approximate the fair value for cash, short-term investments, accounts receivable, trade payables and accrued liabilities, due to the short maturities of those instruments. The fair value of the Company’s $71 million variable rate PNC Credit Facility is estimated based on its carrying value due to the variable rate nature of the financial instrument. As of February 2, 2019 and February 3, 2018, the PNC Credit Facility had a carrying amount and an estimated fair value of $71 million and $74 million.
Fair Value Measurements on a Nonrecurring Basis
Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to the Company's tangible fixed assets, finite-lived intangible assets and intangible FCC broadcasting license asset, which was sold during the fourth quarter of fiscal 2017 as discussed further in Note 4 - "Intangible Assets". These assets and liabilities are recorded at fair value only if an impairment is recognized in the current period. If the Company determines that impairment has occurred, the carrying value of the asset is reduced to fair value and the difference is recorded as a loss within operating income in the consolidated statement of operations. The Company had no remeasurements of such assets or liabilities to fair value during fiscal 2018, fiscal 2017 or fiscal 2016.
Use of Estimates
The preparation of financial statements in conformity with GAAP in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during reporting periods. These estimates relate primarily to the carrying amounts of accounts receivable and inventories, the realizability of certain long-term assets and the recorded balances of certain accrued liabilities and reserves. Ultimate results could differ from these estimates.
Recently Adopted Accounting Standards
In May 2014, the Financial Accounting Standards Board ("FASB") issued Revenue from Contracts with Customers, Topic 606 (ASU 2014-09), which provides a framework for the recognition of revenue, with the objective that recognized revenues reflect amounts an entity expects to receive in exchange for goods and services. The guidance also includes additional disclosure requirements regarding revenue, timing of cash flows and obligations related to contracts with customers. On February 4, 2018, the Company adopted ASU 2014-09, "Revenue from Contracts with Customers", and all related amendments using the modified retrospective method applied to contracts that were not completed as of February 4, 2018. The comparative prior period information has not been restated and continues to be reported under the accounting standards in effect during those periods. The adoption did not have a material impact on the Company's revenue recognition and there was no adjustment to its retained earnings opening balance. The Company does not expect the adoption of the new standard to have a material impact on the Company's operating results on an ongoing basis.
The impact of the new revenue standard adoption on our consolidated statements of operations was as follows (in thousands):
 
 
For the Year Ended
February 2, 2019
 
 
As Reported
 
Balance without adoption of ASC 606
 
Effect of Change
Net sales
 
$
596,637

 
$
595,830

 
$
807

Cost of sales
 
389,790

 
389,010

 
780

Operating expense:
 
 
 
 
 
 
Distribution and selling
 
191,917

 
191,694

 
223

Net loss
 
(22,157
)
 
(21,961
)
 
(196
)

As of February 2, 2019, the Company recorded a merchandise return liability of $8,097,000, included in accrued liabilities, and a right of return asset of $4,410,000, included in other current assets. As of February 3, 2018, the Company had approximately $3,544,000 reserved for future merchandise returns included in accrued liabilities, which represents the net margin obligation recorded under the previous revenue guidance.
In November 2016, the FASB issued Statement of Cash Flows, Topic 230: Restricted Cash (ASU 2016-18), which requires amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning and ending amounts shown on the statement of cash flows. The Company adopted this standard in the first quarter of fiscal 2018 and has revised the consolidated statements of cash flows for the twelve-month periods ended February 3, 2018 and January 28, 2017 to reflect total cash and restricted cash equivalents for each period presented. The following table provides a reconciliation of cash and restricted cash equivalents reported with the consolidated balance sheets to the total of the same amounts shown in the consolidated statements of cash flows:
 
February 2, 2019
 
February 3, 2018
 
January 28, 2017
 
January 30, 2016
Cash
$
20,485,000

 
$
23,940,000

 
$
32,647,000

 
$
11,897,000

Restricted cash equivalents
450,000

 
450,000

 
450,000

 
450,000

Total cash and restricted cash equivalents
$
20,935,000

 
$
24,390,000

 
$
33,097,000

 
$
12,347,000


In May 2017, the FASB issued Compensation—Stock Compensation, Topic 718 (ASU 2017-09), which provides clarity on which changes to the terms or conditions of share-based payment awards require an entity to apply modification accounting in Topic 718. The Company adopted this standard in the first quarter of fiscal 2018 and there was no impact on the Company's consolidated financial statements.
In June 2018, the FASB issued Compensation—Stock Compensation, Topic 718 (ASU 2018-07), which simplifies the accounting for share-based payments to nonemployees for goods and services. Under the new standard, most of the guidance on payments to nonemployees is now aligned with the requirements for share-based payments granted to employees. Under the new guidance, (i) equity-classified share-based payment awards issued to nonemployees will be measured at the grant date, instead of the previous requirement to remeasure the awards through the performance completion date, (ii) for performance conditions, compensation cost associated with the award will be recognized when the achievement of the performance condition is probable, rather than upon achievement of the performance condition, and (iii) the current requirement to reassess the classification (equity or liability) for nonemployee awards upon vesting will be eliminated, except for awards in the form of convertible instruments. The new standard is effective for the Company for fiscal years and interim periods beginning after December 15, 2018, with early adoption permitted. The Company elected to early adopt this standard in the second quarter of fiscal 2018 and there was no impact on the Company's consolidated financial statements since there was no outstanding nonemployee share-based payment awards for which there was unrecognized compensation expense.
Recently Issued Accounting Pronouncements
In February 2016, the FASB issued Leases, Topic 842 (ASU 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. The Company plans to adopt this standard in the first quarter of fiscal 2019 using a modified retrospective transition approach to leases existing at, or entered into after, February 3, 2019. Under this transition method, comparative prior periods, including disclosures, will not be restated and a cumulative adjustment will be recognized to the opening balance of retained earnings. Additionally, the Company intends to elect the transition package of practical expedients which, among other things, allows the Company to not reassess historical lease classification. The Company expects to not elect the hindsight practical expedient. The Company expects that the discounted amount of operating leases listed in Note 13 - "Commitments and Contingencies" will be recognized as right-of-use assets and operating lease liabilities on the consolidated balance sheet upon adoption of the new standard. The Company does not expect the adoption of ASU 2016-02 to have a material impact on the Company's consolidated financial statements.
In August 2018, the FASB issued Intangibles—Goodwill and Other—Internal-Use Software, Subtopic 350-40 (ASU 2018-15), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The new standard is effective for the Company for fiscal years and interim periods beginning after December 15, 2019, with early adoption permitted. The new standard can be applied retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is currently assessing the impact that adopting the new accounting standard will have on its consolidated financial statements.
v3.19.1
Property and Equipment
12 Months Ended
Feb. 02, 2019
Property, Plant and Equipment [Abstract]  
Property, Plant and Equipment Disclosure [Text Block]
Property and Equipment
Property and equipment in the accompanying consolidated balance sheets consisted of the following:
 
 
Estimated Useful Life (In Years)
 
February 2, 2019
 
February 3, 2018
Land and improvements
 
 
$
3,236,000

 
$
3,236,000

Buildings and improvements
 
5-40
 
39,397,000

 
39,087,000

Transmission and production equipment
 
5-10
 
7,312,000

 
6,918,000

Office and warehouse equipment
 
3-15
 
19,227,000

 
18,827,000

Computer hardware, software and telephone equipment
 
3-10
 
89,421,000

 
86,421,000

Leasehold improvements
 
3-5
 
2,682,000

 
2,637,000

 
 
 
 
161,275,000

 
157,126,000

Less — Accumulated depreciation
 
 
 
(110,157,000
)
 
(105,078,000
)
 
 
 
 
$
51,118,000

 
$
52,048,000

Depreciation expense in fiscal 2018, fiscal 2017 and fiscal 2016 was $9,999,000, $10,141,000 and $11,118,000.
v3.19.1
Intangible Assets
12 Months Ended
Feb. 02, 2019
Intangible Assets [Abstract]  
Intangible Assets
Intangible Assets
Intangible assets in the accompanying consolidated balance sheets consisted of the following:
 
 
Estimated Useful Life
(In Years)
 
February 2, 2019
 
February 3, 2018
 
 
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Gross
Carrying
Amount
 
Accumulated
Amortization
Finite-lived intangible assets
 
5-15
 
$
1,786,000

 
$
(502,000
)
 
$
1,786,000

 
$
(336,000
)

Finite-lived Intangible Assets
The finite-lived intangible assets are included in Other Assets in the accompanying balance sheets and consist of the Evine trademark and the Princeton Watches trade name and customer list. Amortization expense related to the finite-lived intangible assets was $165,000, $165,000 and $91,000 for fiscal 2018, fiscal 2017 and fiscal 2016. Estimated amortization expense is $165,000 for fiscal 2019 and fiscal 2020, $157,000 for fiscal 2021, and $96,000 for fiscal 2022 and fiscal 2023.
Sale of Boston Television Station, WWDP and FCC Broadcast License
On August 28, 2017, the Company entered into two agreements with unrelated parties to sell its Boston television station, WWDP, including the Company's FCC broadcast license, for an aggregate of $13,500,000. During the fiscal 2017 fourth quarter, the Company closed on the asset purchase agreement to sell substantially all the assets primarily related to its television broadcast station, WWDP(TV), Norwell, Massachusetts (the “Station”), which included an intangible FCC broadcasting license asset. The Company recorded a pre-tax operating gain on the television station sale of $551,000 during the fourth quarter of fiscal 2017 upon the closing of the transaction. During the fiscal 2018 fourth quarter, the Company received the remainder of the sales price, which resulted from the satisfaction of the Station being carried by certain designated carriers, and recorded a pre-tax operating gain of $665,000 upon the resolution of this gain contingency.
v3.19.1
Accrued Liabilities
12 Months Ended
Feb. 02, 2019
Accrued Liabilities, Current [Abstract]  
Accrued Liabilities, Current [Abstract]
Accrued Liabilities
Accrued liabilities in the accompanying consolidated balance sheets consisted of the following:
 
 
February 2, 2019
 
February 3, 2018
Accrued cable access fees
 
$
18,241,000

 
$
22,120,000

Accrued salaries and related
 
2,493,000

 
2,105,000

Allowance for sales returns
 
8,097,000

 
3,544,000

Other
 
8,543,000

 
7,877,000

 
 
$
37,374,000

 
$
35,646,000

v3.19.1
Evine Private Label Consumer Credit Card Program
12 Months Ended
Feb. 02, 2019
Private Label Consumer Credit Card Program [Abstract]  
Evine Private Label Consumer Credit Card Program
Evine Private Label Consumer Credit Card Program
The Company has a private label consumer credit card program (the "Program"). The Program is made available to all qualified consumers to finance Evine purchases and provides benefits including instant purchase credits, free or reduced shipping promotions throughout the year and promotional low-interest financing on qualifying purchases. Use of the Evine credit card enhances customer loyalty, reduces total credit card expense and reduces the Company’s overall bad debt exposure since the credit card issuing bank bears the risk of loss on Evine credit card transactions except those in the Company's ValuePay installment payment program. In July 2017, the Company extended the Program through 2020 by entering into a Private Label Consumer Credit Card Program Agreement Amendment with Synchrony Financial, the issuing bank for the Program.
v3.19.1
Fair Value Measurements
12 Months Ended
Feb. 02, 2019
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Fair Value Measurements
GAAP utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to observable quoted prices (unadjusted) in active markets for identical assets and liabilities (Level 1 measurement), then priority to quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market (Level 2 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).
As of February 2, 2019 and February 3, 2018 the Company had $450,000 in Level 2 investments in the form of bank certificates of deposit, which are included in restricted cash equivalents in the consolidated balance sheets. The Company's investments in certificates of deposits were measured using inputs based upon quoted prices for similar instruments in active markets and, therefore, were classified as Level 2 investments. As of February 2, 2019 and February 3, 2018 the Company also had a long-term variable rate PNC Credit Facility, classified as Level 2, with carrying values of $71,420,000 and $73,899,000. As of February 2, 2019 and February 3, 2018, $2,488,000 and $2,326,000 of the long-term variable rate PNC Credit Facility was classified as current. The fair value of the PNC Credit Facility approximates, and is based on its carrying value, due to the variable rate nature of the financial instrument. The Company has no Level 3 investments that use significant unobservable inputs.
Non-Financial Assets Measured at Fair Value - Nonrecurring Basis
As of January 28, 2017 the Company had an intangible FCC broadcasting license asset with a carrying value of $12,000,000. The intangible FCC broadcasting license, which was included in the Boston television station sale, WWDP, was sold during the fourth quarter of fiscal 2017. See Note 4 - "Intangible Assets" for additional information. Prior to such sale, the Company estimated the fair value of its FCC television broadcast license asset primarily by using income-based discounted cash flow models. In determining fair value, the Company considered, among other factors, the advice of an independent outside fair value consultant. The discounted cash flow models utilized a range of assumptions including revenues, operating profit margin, projected capital expenditures and an unobservable input discount rate of 10.0%. The Company concluded that the inputs used in its intangible FCC broadcasting license asset valuation were Level 3 inputs.
The following table provides a reconciliation of the beginning and ending balances of non-financial assets measured at fair value on a nonrecurring basis that use significant unobservable inputs (Level 3):
 
 
February 3,
2018
Intangible FCC Broadcasting License Asset:
 
 
Beginning balance
 
$
12,000,000

Losses included in earnings (asset impairment)
 

Net gain recognized in earnings upon sale (a)
 
551,000

Sale (a)
 
(12,551,000
)
Ending balance
 
$

(a) During fiscal 2018, the Company received the remainder of the sales price and recorded an additional gain of $665,000 upon the resolution of a gain contingency, which resulted from the satisfaction of the Station being carried by certain designated carriers.
v3.19.1
Credit Agreements
12 Months Ended
Feb. 02, 2019
Debt Disclosure [Abstract]  
Credit Agreements [Text Block]
Credit Agreements
The Company's long-term credit facility consists of:
 
 
February 2, 2019
 
February 3, 2018
PNC revolving loan due July 27, 2023, principal amount
 
$
53,900,000

 
$
59,900,000

PNC term loan due July 27, 2023, principal amount
 
17,643,000

 
14,148,000

Less unamortized debt issuance costs
 
(123,000
)
 
(149,000
)
PNC term loan due July 27, 2023, carrying amount
 
17,520,000

 
13,999,000

Total long-term credit facility
 
71,420,000

 
73,899,000

Less current portion of long-term credit facility
 
(2,488,000
)
 
(2,326,000
)
Long-term credit facility, excluding current portion
 
$
68,932,000

 
$
71,573,000


PNC Credit Facility
On February 9, 2012, the Company entered into a credit and security agreement (as amended through July 27, 2018, the "PNC Credit Facility") with PNC Bank, N.A. ("PNC"), a member of The PNC Financial Services Group, Inc., as lender and agent. The PNC Credit Facility, which includes CIBC Bank USA (formerly known as The Private Bank) as part of the facility, provides a revolving line of credit of $90.0 million and provides for a term loan on which the Company had originally drawn to fund improvements at the Company's distribution facility in Bowling Green, Kentucky and subsequently to pay down the Company's GACP Term Loan (as defined below). The PNC Credit Facility also provides an accordion feature that would allow the Company to expand the size of the revolving line of credit by another $25.0 million at the discretion of the lenders and upon certain conditions being met. On July 27, 2018, the Company entered into the Tenth Amendment to the PNC Credit Facility, which among other things, increased the term loan by $5,821,000, extended the term of the PNC Credit Facility from March 21, 2022 to July 27, 2023, and decreased the interest rate margins on both the revolving line of credit and term loan. The term loan increase was used to reduce borrowings under the revolving line of credit.
All borrowings under the PNC Credit Facility mature and are payable on July 27, 2023. 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 PNC Credit Facility is secured by a first security interest in substantially all of the Company’s personal property, as well as the Company’s real properties located in Eden Prairie, Minnesota and Bowling Green, Kentucky. Under certain circumstances, the borrowing base may be adjusted if there were to be a significant deterioration in value of the Company’s accounts receivable and inventory.
The revolving line of credit under the PNC Credit Facility bears interest at either a Base Rate or LIBOR plus a margin consisting of between 1% and 2% on Base Rate advances and 2% and 3% on LIBOR advances based on the Company's trailing twelve-month reported leverage ratio (as defined in the PNC Credit Facility) measured semi-annually as demonstrated in its financial statements. The term loan bears interest at either a Base Rate or LIBOR plus a margin consisting of between 2% and 3% on Base Rate term loans and 3% to 4% on LIBOR Rate term loans based on the Company’s leverage ratio measured annually as demonstrated in its audited financial statements.
As of February 2, 2019, the Company had borrowings of $53.9 million under its revolving credit facility. Remaining available capacity under the revolving credit facility as of February 2, 2019 was approximately $15.7 million, which provided liquidity for working capital and general corporate purposes. The PNC Credit Facility also provides for a term loan on which the Company had originally drawn to fund an expansion and improvements at the Company's distribution facility in Bowling Green, Kentucky and subsequently to partially pay down the Company's GACP Term Loan and reduce its revolving credit facility borrowings. As of February 2, 2019, there was approximately $17.6 million outstanding under the PNC Credit Facility term loan of which $2.5 million was classified as current in the accompanying balance sheet.
Principal borrowings under the term loan are to be payable in monthly installments over an 84-month amortization period commencing on September 1, 2018 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 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 is also subject to other mandatory prepayment in certain circumstances. In addition, if the total PNC Credit Facility is terminated prior to maturity, the Company would be required to pay an early termination fee of 3.0% if terminated on or before July 27, 2019, 1.0% if terminated on or before July 27, 2020, 0.5% if terminated on or before July 27, 2021; and no fee if terminated after July 27, 2021. As of February 2, 2019, the imputed effective interest rate on the PNC term loan was 6.4%.
Interest expense recorded under the PNC Credit Facility was $3,499,000, $4,128,000 and $3,819,000 for fiscal 2018, fiscal 2017 and fiscal 2016.
The PNC Credit Facility contains customary covenants and conditions, including, among other things, maintaining a minimum of unrestricted cash plus unused line availability of $10.0 million at all times and limiting annual capital expenditures. As the Company's unused line availability was greater than $10.0 million at February 2, 2019, no additional cash was required to be restricted. 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 unused line availability falls below $10.8 million. As of February 2, 2019, the Company's unrestricted cash plus unused line availability was $36.2 million and the Company was in compliance with applicable financial covenants of the PNC Credit Facility and expects to be in compliance with applicable financial covenants over the next twelve months. In addition, the PNC Credit Facility places restrictions on the Company’s ability to incur additional indebtedness or prepay existing indebtedness, to create liens or other encumbrances, to sell or otherwise dispose of assets, to merge or consolidate with other entities, and to make certain restricted payments, including payments of dividends to common shareholders.
Deferred financing costs, net of amortization, relating to the revolving line of credit was $561,000 and $656,000 as of February 2, 2019 and February 3, 2018 and are included within other assets within the accompanying balance sheet. These costs are being expensed as additional interest over the five-year term of the PNC Credit Facility.
Prepayment on Great American Capital Partners Term Loan
During fiscal 2017, the Company retired its term loan (the "GACP Term Loan") under a credit and security agreement with GACP Finance Co., LLC ("GACP"), with voluntary principal prepayments of $9.5 million, $2.5 million and $3.5 million on March 21, 2017, October 18, 2017 and December 6, 2017. The Company recorded a loss on debt extinguishment of $1.5 million during fiscal 2017. The fiscal 2017 loss on debt extinguishment includes early termination and lender fees of $334,000 and a write-off of unamortized debt issuance costs of $1.1 million, which represents the proportionate amount of unamortized debt issuance costs attributable to the settled debt. Interest expense recorded under the GACP Credit Agreement was $940,000 and $2,099,000 for fiscal 2017 and fiscal 2016.
The aggregate maturities of the Company's long-term credit facility as of February 2, 2019 are as follows:
 
 
PNC Credit Facility
 
 
Fiscal year
 
Term loan
 
Revolving loan
 
Total
2019
 
$
2,488,000

 
$

 
$
2,488,000

2020
 
2,714,000

 

 
2,714,000

2021
 
2,714,000

 

 
2,714,000

2022
 
2,714,000

 

 
2,714,000

2023
 
7,013,000

 
53,900,000

 
60,913,000

 
 
$
17,643,000

 
$
53,900,000

 
$
71,543,000

v3.19.1
Shareholders' Equity
12 Months Ended
Feb. 02, 2019
Equity [Abstract]  
Shareholders' Equity
Shareholders' Equity
Common Stock
The Company currently has authorized 99,600,000 shares of undesignated capital stock, of which 67,919,349 shares were issued and outstanding as common stock as of February 2, 2019. The board of directors may establish new classes and series of capital stock by resolution without shareholder approval; however, in certain circumstances the Company is required to obtain approval under our PNC Credit Facility.
Preferred Stock
The Company authorized 400,000 Series A Junior Participating Cumulative Preferred Stock, $0.01 par value, during fiscal 2015 as part of the Shareholder Rights Plan. As of February 2, 2019, there were zero shares issued and outstanding. See Note 12 - "Income Taxes" for additional information.
Dividends
The Company has never declared or paid any dividends with respect to its capital stock. The Company is restricted from paying dividends on its stock by its PNC Credit Facility.
Registered Direct Offering
On May 23, 2017, the Company entered into Common Stock Purchase Agreements with certain accredited investors to which the Company sold, in the aggregate, 4,008,273 shares of common stock in a registered direct offering pursuant to a shelf registration statement on Form S-3 (File No. 333-203209), filed with the SEC on May 13, 2015. The shares were sold at a price of $1.12 per share, except for shares purchased by investors who are directors or executive officers of the Company, which were sold at a price of $1.15 per share. The closing of this sale occurred on May 30, 2017 and the Company received gross proceeds of approximately $4.5 million and incurred approximately $323,000 of issuance costs. The Company has used the proceeds for general working capital purposes.
Warrants
As of February 2, 2019, the Company had outstanding warrants to purchase 5,349,365 shares of the Company’s common stock ("Warrants"), of which 3,974,365 are fully exercisable. The Warrants expire five to seven years from the date of grant. The Warrants issued during fiscal 2016 and fiscal 2017 were in connection with the Purchase Agreements (as described and defined below), including the related option exercises, which the Company entered into with certain accredited investors on September 14, 2016. The Warrants issued on November 27, 2018 were in connection with and as consideration for entering into a services and trademark licensing agreement between the Company and Fonda, Inc. (as described below). The following table summarizes information regarding Warrants outstanding at February 2, 2019:
Grant Date
 
Warrants Outstanding
 
Warrants Exercisable
 
Exercise Price
(Per Share)
 
Expiration Date
September 19, 2016
 
2,976,190

 
2,976,190

 
$2.90
 
September 19, 2021
November 10, 2016
 
333,873

 
333,873

 
$3.00
 
November 10, 2021
January 23, 2017
 
489,302

 
489,302

 
$1.76
 
January 23, 2022
March 16, 2017
 
50,000

 
50,000

 
$1.92
 
March 16, 2022
November 27, 2018
 
500,000

 
125,000

 
$1.05
 
November 27, 2025
November 27, 2018
 
1,000,000

 

 
$3.00
 
November 27, 2025

On November 27, 2018, the Company issued warrants to Fonda, Inc. for 1,500,000 shares of our common stock in connection with and as consideration for entering into a services and trademark licensing agreement between the companies. Under the agreement, the parties plan to develop and market one or more lines of products, including a fitness and wellness lifestyle brand.  Additionally, the agreement identifies Jane Fonda as the primary spokesperson for the brand on our television network. The parties also plan to partner with key retailers to offer a brick & mortar version of the brand.  Of the warrant shares issued, 500,000 have an exercise price of $1.05 per share representing the closing price of the Company's stock on the date the agreement was signed. The warrants vested as to 125,000 warrant shares on the date of grant and 125,000 of the warrant shares will vest on each of the first, second and third anniversaries of the date of grant. Of the warrant shares issued, 1,000,000 have an exercise price of $3.00 per share. These will vest in full on the date when the dollar volume-weighted average price of our common stock equals or exceeds $3.00 for 30 trading days. The aggregate market value on the date of the award was $441,000 and is being amortized as cost of sales over the three year services and trademark licensing agreement term. Compensation expense relating to the warrant issuance was $26,000 for fiscal 2018. As of February 2, 2019, there was $415,000 of total unrecognized compensation cost related to warrant issuances which is expected to be recognized over a weighted average period of 2.8 years.
Private Placement Securities Purchase Agreements
On September 14, 2016, the Company entered into private placement securities purchase agreements ("Purchase Agreements") with certain accredited investors to which the Company: (a) sold, in the aggregate, 5,952,381 shares of the Company's common stock at a price of $1.68 per share; (b) issued five-year warrants ("Warrants") to purchase 2,976,190 shares of the Company's common stock at an exercise price of $2.90 per share, and (c) issued an option by which certain investors may purchase additional shares of Company's common stock and additional warrants to purchase shares of common stock ("Options").
The Company received gross proceeds of $10.0 million and incurred approximately $852,000 of issuance costs. The Warrants will expire on September 19, 2021 and were not exercisable until March 19, 2017. Except as noted below, the term of each option was six months and expired on March 19, 2017. The option exercise price was equal to the five-day volume weighted average price per share of the Company's common stock as of the day immediately prior to exercise. Upon exercise of the Options, two-thirds of the option securities would be issued in the form of common stock, and one-third would be issued in the form of warrants ("Option Warrants"). These Option Warrants have an exercise price at a 50% premium to the Company's closing stock price one-day prior to the option exercise and will expire five years after issuance. If all of the Warrants, Options and Option Warrants issued by the Company are all exercised, the total shares of common stock issued in connection with this offering cannot be more than approximately 19.99% of the Company's total issued and outstanding shares following such exercises.
The Company allocated the $10 million proceeds of the stock offering to each of the issued freestanding financial instruments based on their fair value at the time of issuance. The Warrants are indexed to the Company's publicly traded stock and were classified as equity. As a result, the portion of the proceeds allocated to the fair value of the Warrants was recorded as an increase to additional paid-in capital. The fair value of the Options was determined to be nominal. The par value of the shares issued was recorded within common stock, with the remainder of the proceeds, less offering costs, recorded as additional paid in capital in the Company's balance sheet. The Company has used the proceeds for general working capital purposes.
As part of the Purchase Agreements, the Company agreed to register the shares of common stock sold in the private placement and the shares of common stock issuable upon exercise of the Warrants, Options and certain of the Option Warrants. The Company has filed registration statements on Form S-3 to register the common stock sold in the private placement and issuable upon exercise of the Warrants, Options and the outstanding Option Warrants. The Company agreed to keep the shelf registration statement effective until the earlier of the second anniversary of the closing or such time as all registrable securities may be sold pursuant to Rule 144 under the Securities Act of 1933, without the need for current public information or other restriction.
During the fourth quarter of fiscal 2016, three investors exercised their Options. These exercises resulted in the Company's issuance, in the aggregate, of (a) 1,646,350 shares of the Company's common stock at a price ranging from $1.20 - $1.94 per share, resulting in aggregate proceeds of $2.5 million; and (b) five-year Option Warrants to purchase an additional 823,175 shares of the Company's common stock at an exercise price ranging from $1.76 - $3.00 per share and expire between November 10, 2021 and January 23, 2022. The Company incurred, in the aggregate, approximately $49,000 of issuance costs related to the Options exercised during the fourth quarter of fiscal 2016.
On March 16, 2017, the Company entered into the First Amendment and Restated Option (the "Amended Option") with TH Media Partners, LLC, one of the September 14, 2016 Securities Purchase Agreement investors. Under the terms of the Amended Option, the investor has the right to exercise its Option in two tranches. The first tranche reflects rights to purchase 150,000 shares of the Company’s common stock, which were issuable in the form of 100,000 common shares and a warrant to purchase an additional 50,000 common shares and was exercised on March 16, 2017. The exercise resulted in the issuance of (a) 100,000 shares of the Company's common stock at a price of $1.33 per share, resulting in aggregate proceeds of $133,000; and (b) a five-year Option Warrant to purchase an additional 50,000 shares of the Company's common stock at an exercise price of $1.92 per share and expiring on March 16, 2022. The second tranche reflected the right to purchase up to 1,073,945 shares of the Company’s common stock issuable in the form of 715,963 common shares and an Option Warrant to purchase an additional 357,982 common shares. The second tranche expired unexercised on September 19, 2017. The exercise price of the Option and Option Warrants for the first and second tranches were not modified by the Amended Option. The Company incurred, in the aggregate, approximately $23,000 of issuance costs related to the Options exercised during the first quarter of fiscal 2017.
Restricted Stock Award
On November 23, 2018, the Company entered into a restricted stock award agreement with Flageoli Classic Limited, LLC (“FCL”) granting FCL 1,500,000 restricted shares of the Company's common stock in connection with and as consideration for entering into a vendor exclusivity agreement with the Company. The vendor exclusivity agreement grants us the exclusive right in television shopping to market, promote and sell products under the trademark of Serious Skincare, a successful skin-care brand with a loyal customer base, that launched on the Company's television network on January 3, 2019. Additionally, the agreement identifies Jennifer Flavin-Stallone as the primary spokesperson for the brand on the Company's television network. The restricted shares will vest in three tranches. Of the restricted shares granted, 500,000 vested on January 4, 2019, which was the first business day following the initial appearance of the Serious Skincare brand on the Company's television network. The remaining restricted shares will vest in equal amounts on January 4, 2020 and January 4, 2021. The aggregate market value on the date of the award was $1,408,000 and is being amortized as cost of sales over the three year vendor exclusivity agreement term. The estimated fair value of the restricted stock is based on the grant date closing price of the Company's stock for time-based vesting awards.
Compensation expense relating to the restricted stock award grant was $89,000 for fiscal 2018. As of February 2, 2019, there was $1,319,000 of total unrecognized compensation cost related to non-vested restricted stock unit grants. That cost is expected to be recognized over a weighted average period of 2.8 years. The total fair value of restricted stock vested during fiscal 2018 was $225,000.
A summary of the status of the Company’s non-vested restricted stock award activity as of February 2, 2019 and changes during the twelve-month period then ended is as follows:
 
 
Restricted Stock
 
 
Shares
 
Weighted
Average
Grant Date
Fair Value
Non-vested outstanding, February 3, 2018
 

 
$

Granted
 
1,500,000

 
$
0.94

Vested
 
(500,000
)
 
$
0.94

Non-vested outstanding, February 2, 2019
 
1,000,000

 
$
0.94


Stock Purchase from NBCU
On January 31, 2017, the Company purchased from NBCUniversal Media, LLC (“NBCU”) 4,400,000 shares of the Company's common stock for approximately $5 million or $1.12 per share pursuant to the Repurchase Letter Agreement. Immediately following the Company's share purchase, the direct equity ownership of NBCU in the Company consisted of 2,741,849 shares of common stock, or 4.5% of the Company's outstanding common stock. Upon the settlement, the NBCU Shareholder Agreement was terminated pursuant to the Repurchase Letter Agreement. As of February 3, 2018, the Company believes that NBCU sold its remaining shares of the Company's common stock. See Note 17 - "Related Party Transactions" for additional information.
Stock-Based Compensation - Stock Options
Compensation is recognized for all stock-based compensation arrangements by the Company. Stock-based compensation expense for fiscal 2018, fiscal 2017 and fiscal 2016 related to stock option awards was $1,157,000, $915,000 and $522,000. The Company has not recorded any income tax benefit from the exercise of stock options due to the uncertainty of realizing income tax benefits in the future.
As of February 2, 2019, the Company had one omnibus stock plan for which stock awards can be currently granted: the 2011 Omnibus Incentive Plan that provides for the issuance of up to 13,000,000 shares of the Company's stock. The 2004 Omnibus Stock Plan expired on June 22, 2014. No further awards may be made under the 2004 Omnibus Plan, but any award granted under the 2004 Omnibus Plan and outstanding on June 22, 2014 will remain outstanding in accordance with its terms. The 2011 plan is administered by the human resources and compensation committee of the board of directors and provides for awards for employees, directors and consultants. All employees and directors of the Company and its affiliates are eligible to receive awards under the plan. The types of awards that may be granted under this plan include restricted and unrestricted stock, restricted stock units, incentive and nonstatutory stock options, stock appreciation rights, performance units, and other stock-based awards. Incentive stock options may be granted to employees at such exercise prices as the human resources and compensation committee may determine but not less than 100% of the fair market value of the underlying stock as of the date of grant. No incentive stock option may be granted more than 10 years after the effective date of the respective plan's inception or be exercisable more than 10 years after the date of grant. Options granted to outside directors are nonstatutory stock options with an exercise price equal to 100% of the fair market value of the underlying stock as of the date of grant. With the exception of market-based options, options granted generally vest over three years in the case of employee stock options and vest immediately on the date of grant in the case of director options, and have contractual terms of 10 years from the date of grant.
The fair value of each time-based vesting option award is estimated on the date of grant using the Black-Scholes option pricing model that uses assumptions noted in the following table. Expected volatilities are based on the historical volatility of the Company's stock. Expected term is calculated using the simplified method taking into consideration the option's contractual life and vesting terms. The Company uses the simplified method in estimating its expected option term because it believes that historical exercise data cannot be accurately relied upon at this time to provide a reasonable basis for estimating an expected term due to the extreme volatility of its stock price and the resulting unpredictability of its stock option exercises. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Expected dividend yields were not used in the fair value computations as the Company has never declared or paid dividends on its common stock and currently intends to retain earnings for use in operations.
 
Fiscal 2018
 
Fiscal 2017
 
Fiscal 2016
Expected volatility
72%
-
78%
 
81%
 
81
%
-
84%
Expected term (in years)
6 years
 
6 years
 
6 years
Risk-free interest rate
2.8%
-
3.0%
 
2.0%
-
2.2%
 
1.4%
-
2.2%

A summary of the status of the Company’s stock option activity as of February 2, 2019 and changes during the year then ended is as follows:
 
 
2011
Incentive
Stock
Option
Plan
 
Weighted
Average
Exercise
Price
 
2004
Incentive
Stock
Option
Plan
 
Weighted
Average
Exercise
Price
Balance outstanding, February 3, 2018
 
3,384,000

 
$
1.64

 
112,000

 
$
4.86

Granted
 
2,264,000

 
$
1.02

 

 
$

Exercised
 
(165,000
)
 
$
1.10

 

 
$

Forfeited or canceled
 
(724,000
)
 
$
1.67

 
(5,000
)
 
$
4.62

Balance outstanding, February 2, 2019
 
4,759,000

 
$
1.36

 
107,000

 
$
4.87

Options exercisable at February 2, 2019
 
1,554,000

 
$
1.84

 
107,000

 
$
4.87


The following table summarizes information regarding stock options outstanding at February 2, 2019:
 
 
Options Outstanding
 
Options Vested or Expected to Vest
Option Type
 
Number of
Shares
 
Weighted
Average
Exercise
Price
 
Weighted
Average
Remaining
Contractual
Life
(Years)
 
Aggregate
Intrinsic
Value
 
Number of
Shares
 
Weighted
Average
Exercise
Price
 
Weighted
Average
Remaining
Contractual
Life
(Years)
 
Aggregate
Intrinsic
Value
2011 Incentive:
 
4,759,000

 
$
1.36

 
8.2
 
$

 
4,396,000

 
$
1.38

 
8.2
 
$

2004 Incentive:
 
107,000

 
$
4.87

 
4.7
 
$

 
107,000

 
$
4.87

 
4.7
 
$


The weighted average grant-date fair value of options granted in fiscal 2018, fiscal 2017 and fiscal 2016 was $0.74, $0.91 and $0.96. The total intrinsic value of options exercised during fiscal 2018, fiscal 2017 and fiscal 2016 was $26,000, $15,000 and $0. As of February 2, 2019, total unrecognized compensation cost related to stock options was $1,506,000 and is expected to be recognized over a weighted average period of approximately 1.8 years.
Stock Option Tax Benefit
The exercise of certain stock options granted under the Company’s stock option plans give rise to compensation, which is included in the taxable income of the applicable employees and deductible by the Company for federal and state income tax purposes. Such compensation results from increases in the fair market value of the Company’s common stock subsequent to the date of grant of the applicable exercised stock options and these increases are not recognized as an expense for financial accounting purposes, as the options were originally granted at the fair market value of the Company’s common stock on the date of grant. The related tax benefits will be recorded if and when realized, and totaled $7,000, $6,000 and $0 in fiscal 2018, fiscal 2017 and fiscal 2016. The Company has not recorded any income tax benefit from the exercise of stock options in these fiscal years, due to the uncertainty of realizing income tax benefits in the future.
Stock-Based Compensation - Restricted Stock Units
Compensation expense relating to restricted stock unit grants was $1,792,000, $1,973,000 and $1,424,000 for fiscal 2018, fiscal 2017 and fiscal 2016. As of February 2, 2019, there was $1,848,000 of total unrecognized compensation cost related to non-vested restricted stock unit grants. That cost is expected to be recognized over a weighted average period of 1.7 years. The total fair value of restricted stock units vested during fiscal 2018, fiscal 2017 and fiscal 2016 was $1,216,000, $409,000 and $761,000. The estimated fair value of restricted stock units is based on the grant date closing price of the Company's stock for time-based vesting awards and a Monte Carlo valuation model for market-based vesting awards.
The Company has granted time-based restricted stock units to certain key employees as part of the Company's long-term incentive program. The restricted stock generally vests in three equal annual installments beginning one year from the grant date and is being amortized as compensation expense over the three-year vesting period. The Company has also granted restricted stock units to non-employee directors as part of the Company's annual director compensation program. Each restricted stock grant vests or vested on the day immediately preceding the next annual meeting of shareholders following the date of grant. The grants are amortized as director compensation expense over the twelve-month vesting period.
The Company granted 747,000, 562,000 and 411,000 market-based restricted stock performance units to executives as part of the Company's long-term incentive program during fiscal 2018, fiscal 2017 and fiscal 2016. The number of restricted stock units earned is based on the Company's total shareholder return ("TSR") relative to a group of industry peers over a three-year performance measurement period. Grant date fair values were determined using a Monte Carlo valuation model based on assumptions as follows:
 
Fiscal 2018
 
Fiscal 2017
 
Fiscal 2016
Total grant date fair value
$859,000
 
$860,000
 
$645,000
Total grant date fair value per share
$1.07
-
$1.30
 
$1.53
 
$0.98
-
$1.82
Expected volatility
73%
-
76%
 
75%
 
71%
-
77%
Weighted average expected life (in years)
3 years
 
3 years
 
3 years
Risk-free interest rate
2.4%
-
2.7%
 
1.5%
 
0.7%
-
1.0%

The percent of the target market-based performance vested restricted stock unit award that will be earned based on the Company's TSR relative to the peer group is as follows:
Percentile Rank
 
Percentage of
Units Vested
< 33%
 
0%
33%
 
50%
50%
 
100%
100%
 
150%

During Fiscal 2016, the Company also granted 625,000 shares of restricted stock units in conjunction with an employment agreement upon the appointment of Robert Rosenblatt as permanent Chief Executive Officer. The restricted stock units vest in three tranches. Tranche 1 (one-third of the shares subject to the award) vested on the date of grant. Tranche 2 (one-third) will vest on the date the Company's average closing stock price for 20 consecutive trading days equals or exceeds $4.00 per share and the executive has been continuously employed at least one year. Tranche 3 (one-third) will vest on the date the Company's average closing stock price for 20 consecutive trading days equals or exceeds $6.00 per share and the executive has been continuously employed at least two years. The vesting of the second and third tranches can occur any time on or before the tenth anniversary of the grant date. The total grant date fair value was estimated to be $958,000 and is being amortized over the derived service periods for each tranche.
Grant date fair values and derived service periods for each tranche were determined using a Monte Carlo valuation model based on assumptions, which included a weighted average risk-free interest rate of 1.5%, a weighted average expected life of 1.2 years and an implied volatility of 86% and were as follows for each tranche:
 
 
Fair Value (Per Share)
 
Derived Service Period
Tranche 1 (immediate)
 
$1.60
 
0 Years
Tranche 2 ($4.00/share)
 
$1.52
 
1.46 Years
Tranche 3 ($6.00/share)
 
$1.48
 
2.22 Years

A summary of the status of the Company’s non-vested restricted stock unit activity as of February 2, 2019 and changes during the twelve-month period then ended is as follows:
 
Restricted Stock Units
 
Market-Based Units
 
Time-Based Units
 
Total
 
Shares
 
Weighted
Average
Grant Date
Fair Value
 
Shares
 
Weighted
Average
Grant Date
Fair Value
 
Shares
 
Weighted
Average
Grant Date
Fair Value
Non-vested outstanding, February 3, 2018
1,389,000

 
$
1.53

 
1,440,000

 
$
1.27

 
2,829,000

 
$
1.40

Granted
747,000

 
$
1.15

 
1,710,000

 
$
1.01

 
2,457,000

 
$
1.05

Vested

 
$

 
(1,088,000
)
 
$
1.23

 
(1,088,000
)
 
$
1.23

Forfeited
(507,000
)
 
$
1.56

 
(255,000
)
 
$
1.38

 
(762,000
)
 
$
1.50

Non-vested outstanding, February 2, 2019
1,629,000

 
$
1.35

 
1,807,000

 
$
1.04

 
3,436,000

 
$
1.18

v3.19.1
Business Segments and Sales by Product Group
12 Months Ended
Feb. 02, 2019
Sales by Product Group [Abstract]  
Business Segments and Sales by Product Group
Business Segments and Sales by Product Group
The Company has one reporting segment, which encompasses its interactive video and digital commerce retailing. The Company markets, sells and distributes its products to consumers primarily through its video commerce television, online website, evine.com and mobile platforms. The Company's television shopping, online and mobile platforms have similar economic characteristics with respect to products, product sourcing, vendors, marketing and promotions, gross margins, customers, and methods of distribution. In addition, the Company believes that its television shopping program is a key driver of traffic to both the evine.com website and mobile applications whereby many of the online sales originate from customers viewing the Company's television program and then placing their orders online or through mobile devices. All of the Company's sales are made to customers residing in the United States. The chief operating decision maker is the Chief Executive Officer of the Company. Certain fiscal 2017 and fiscal 2016 product category amounts in the accompanying table have been reclassified to conform to our fiscal 2018 product category groupings.
Information on net sales by significant product groups are as follows (in thousands):
 
 
For the Years Ended
 
 
February 2,
2019
 
February 3,
2018
 
January 28,
2017
Jewelry & Watches
 
$
212,383

 
$
230,376

 
$
245,202

Home & Consumer Electronics
 
135,184

 
147,769

 
144,651

Beauty & Wellness
 
102,099

 
100,829

 
101,113

Fashion & Accessories
 
94,295

 
108,409

 
109,615

All other (primarily shipping & handling revenue)
 
52,676

 
60,837

 
65,632

Total
 
$
596,637

 
$
648,220

 
$
666,213

v3.19.1
Business Acquisition
12 Months Ended
Feb. 02, 2019
Business Combinations [Abstract]  
Business Acquisition [Text Block]
Business Acquisition
On December 16, 2016, Evine entered into an asset purchase agreement and acquired substantially all the assets and select liabilities of Princeton Enterprises, LTD (dba Princeton Watches, "Princeton"), an online retail enterprise engaged in the sale of watches, clocks and related accessories. The acquisition of Princeton will help expand on the Company's strong watch and clock offerings as well as broaden the Company's online distribution channels.
The acquisition has been accounted for under the purchase method of accounting, and accordingly, the purchase price has been allocated to the identifiable assets and liabilities assumed pursuant to the asset purchase agreement based on fair values at the acquisition date. The operating results of Princeton have been included in the consolidated financial statements of the Company since December 16, 2016, the date of acquisition. The supplementary proforma information, assuming this acquisition occurred as of the beginning of the prior period, and the operations of Princeton for the period from the December 16, 2016 acquisition date through the end of fiscal 2016 were immaterial.
The terms of the asset purchase agreement included an upfront cash payment of $508,000, a working capital holdback of $67,000 together with earn-out payments. The earn-out payments were calculated based on Princeton's EBITDA for each of two years after the closing date.
The following table summarizes the fair value of consideration transferred as of the acquisition date:
Cash consideration
 
$
575,000

Fair value of contingent consideration
 
600,000

 
 
$
1,175,000


The following table summarizes our allocation of the Princeton purchase consideration:
Inventories
 
$
1,171,000

Identifiable intangible assets acquired:
 


Existing customer list
 
347,000

Trade Names
 
336,000

Accounts payable
 
(796,000
)
All other net tangible assets and liabilities
 
117,000

 
 
$
1,175,000


The fair value of identifiable intangible assets were determined using an income-based approach, which includes market participant expectations of cash flows that an asset will generate over the remaining useful life discounted to present value using an appropriate rate of return.
The Company incurred $22,000 of acquisition-related costs and are included in general and administrative expense in the accompanying fiscal 2016 consolidated statement of operations.
v3.19.1
Income Taxes
12 Months Ended
Feb. 02, 2019
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
The Company records deferred taxes for differences between the financial reporting and income tax bases of assets and liabilities, computed in accordance with tax laws in effect at that time. The deferred taxes related to such differences as of February 2, 2019 and February 3, 2018 were as follows (in thousands):
 
 
February 2, 2019
 
February 3, 2018
Accruals and reserves not currently deductible for tax purposes
 
$
5,281

 
$
4,220

Inventory capitalization
 
1,339

 
1,354

Differences in depreciation lives and methods
 
(1,382
)
 
(475
)
Differences in basis of intangible assets
 
43

 
23

Differences in investments and other items
 
1,432

 
629

Net operating loss carryforwards
 
85,138

 
80,880

Valuation allowance
 
(91,851
)
 
(86,631
)
Net deferred tax liability
 
$

 
$


The income tax benefit (provision) consisted of the following (in thousands):
 
 
For the Years Ended
 
 
February 2, 2019
 
February 3, 2018
 
January 28, 2017
Current
 
$
(65
)
 
$
(60
)
 
$
(13
)
Deferred
 

 
3,505

 
(788
)
 
 
$
(65
)
 
$
3,445

 
$
(801
)

A reconciliation of the statutory tax rates to the Company’s effective tax rate is as follows:
 
 
For the Years Ended
 
 
February 2, 2019
 
February 3, 2018
 
January 28, 2017
Taxes at federal statutory rates
 
21.0
 %
 
33.8
 %
 
35.0
 %
State income taxes, net of federal tax benefit
 
5.9

 
40.4

 
11.9

Provision to return true-up
 
(2.5
)
 
(41.6
)
 
18.1

Non-cash stock option vesting expense
 
(1.2
)
 
(12.2
)
 
(2.3
)
FCC license deferred tax liability impact on valuation allowance
 

 
100.4

 
(9.4
)
Impact of Tax Act on deferred tax valuation
 

 
(1,382.3
)
 

Valuation allowance and NOL carryforward benefits
 
(23.6
)
 
1,365.3

 
(60.9
)
Other
 
0.1

 
0.5

 
(2.5
)
Effective tax rate
 
(0.3
)%
 
104.3
 %
 
(10.1
)%

Based on the Company’s recent history of losses, the Company has recorded a full valuation allowance for its net deferred tax assets as of February 2, 2019 and February 3, 2018 in accordance with GAAP, which places primary importance on the Company’s most recent operating results when assessing the need for a valuation allowance. The ultimate realization of these deferred tax assets depends on the ability of the Company to generate sufficient taxable income in the future, as well as the timing of such income. The Company intends to maintain a full valuation allowance for its net deferred tax assets until sufficient positive evidence exists to support reversal of the allowance. As of February 2, 2019, the Company has federal net operating loss carryforwards ("NOLs") of approximately $338 million which are available to offset future taxable income. The Company's federal NOLs generated prior to 2018 expire in varying amounts each year from 2023 through 2037 in accordance with applicable federal tax regulations and the timing of when the NOLs were incurred. The Company's federal NOLs generated in 2018 and after can be carried forward indefinitely.
In the first quarter of fiscal 2011, the Company had a change in ownership (as defined in Section 382 of the Internal Revenue Code) as a result of the issuance of common stock coupled with the redemption of all the Series B preferred stock held by GE Equity. Sections 382 and 383 limit the annual utilization of certain tax attributes, including NOL carryforwards, incurred prior to a change in ownership. Currently, the limitations imposed by Sections 382 and 383 are not expected to impair the Company's ability to fully realize its NOLs; however, the annual usage of NOLs incurred prior to the change in ownership is limited. In addition, if the Company were to experience another ownership change, as defined by Sections 382 and 383, its ability to utilize its NOLs could be further substantially limited and depending on the severity of the annual NOL limitation, the Company could permanently lose its ability to use a significant amount of its accumulated NOLs.
For the year ended February 3, 2018 the income tax benefit included a non-cash tax charge of approximately $643,000 relating to changes in the Company's long-term deferred tax liability related to the tax amortization of the Company's indefinite-lived intangible FCC license asset that is not available to offset existing deferred tax assets in determining changes to the Company's income tax valuation allowance. The income tax benefit also included a net, non-cash benefit of approximately $4,147,000 generated by the reversal of the Company’s long-term deferred tax liability relating to the Company's FCC license asset. This deferred tax reversal was the result of the payments received during fiscal 2017 in connection with the sale of the Company's television broadcast station, WWDP(TV), discussed further in Note 4 - "Intangible Assets". The Company recognized a tax gain in conjunction with this transaction which was largely offset with the Company’s available NOLs.
For the year ended January 28, 2017, the income tax provision included a non-cash tax charge of approximately $788,000 relating to changes in the Company's long-term deferred tax liability related to the tax amortization of the Company's indefinite-lived intangible FCC license asset that is not available to offset existing deferred tax assets in determining changes to the Company's income tax valuation allowance.
As of February 2, 2019 and February 3, 2018, there were no unrecognized tax benefits for uncertain tax positions. Accordingly, a tabular reconciliation from beginning to ending periods is not provided. Further, to date, there have been no interest or penalties charged or accrued in relation to unrecognized tax benefits. The Company will classify any future interest and penalties as a component of income tax expense if incurred. The Company does not anticipate that the amount of unrecognized tax benefits will change significantly in the next twelve months.
The Company is subject to U.S. federal income taxation and the taxing authorities of various states. The Company’s tax years for 2017, 2016, 2015 are currently subject to examination by taxing authorities. With limited exceptions, the Company is no longer subject to U.S. federal, state, or local examinations by tax authorities for years before 2015.
On December 22, 2017, the Tax Cuts and Jobs Act (the "Tax Act") was enacted. The Tax Act significantly revised U.S. corporate tax law by, among other things, (i) reducing the corporate tax rate to 21% from 35%, (ii) a repeal of the corporate alternative minimum tax (AMT), (iii) changes to tax depreciation for first-year property, (iv) a partial limitation on the deductibility of business interest expense and (v) for losses incurred in tax years beginning after December 31, 2017 the NOL deduction is limited to 80% of taxable income with an indefinite carry forward.
The phase-in of the lower corporate tax rate has resulted in a blended rate of 33.8% for fiscal 2017, as compared to the previous 35%. The income tax effects of the Tax Act required the remeasurement of our deferred tax assets and liabilities in accordance with ASC Topic 740.  The Securities and Exchange Commission ("SEC") staff issued Staff Accounting Bulletin No. 118 ("SAB 118") that allows companies to record provisional estimates of the impacts of the Tax Act during a measurement period of up to one year from the enactment which is similar to the measurement period used when accounting for business combinations.  The Company has estimated the effects of the Tax Act, which have been reflected in our fiscal 2017 financial statements. The Tax Act did not have an impact on the Company's tax benefit for fiscal 2017 due to the full valuation allowance against the Company's deferred tax assets.
Shareholder Rights Plan
During the second quarter of fiscal 2015, the Company 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, the Company declared a dividend distribution of one purchase right (a “Right”) for each outstanding share of the Company’s common stock to shareholders of record as of the close of business on July 23, 2015 and issuable as of that date. On July 13, 2015, the Company 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 the Company 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. The Company 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 date of the third annual meeting of shareholders following the last annual meeting of shareholders of the Company 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. The Rights Plan was approved by the Company’s shareholders at the 2016 annual meeting of shareholders.
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, the Company may in its 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. The Company 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.
v3.19.1
Commitments and Contingencies
12 Months Ended
Feb. 02, 2019
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies [Text Block]
Commitments and Contingencies
Cable and Satellite Distribution Agreements
As of February 2, 2019, the Company has entered into distribution agreements with cable operators, direct-to-home satellite providers, telecommunications companies and broadcast television stations to distribute our television network over their systems. The terms of the distribution agreements typically range from one to five years. During the fiscal year, certain agreements with cable, satellite or other distributors may expire. Under certain circumstances, the television operators or the Company may cancel the agreements prior to their expiration. Additionally, the Company may elect not to renew distribution agreements whose terms result in sub-standard or negative contribution margins. The distribution agreements generally provide that the Company will pay each operator a monthly access fee and in some cases a marketing support payment based on the number of homes receiving the Company's programming. For fiscal 2018, fiscal 2017 and fiscal 2016 the Company expensed approximately $89,066,000, $91,270,000 and $98,317,000 under these distribution agreements.
Over the past years, each of the material cable and satellite distribution agreements up for renewal have been renegotiated and renewed. Failure to maintain the cable agreements covering a material portion of the Company’s existing cable households on acceptable financial and other terms could adversely affect future growth, revenues and earnings unless the Company is able to arrange for alternative means of broadly distributing its television programming. Cable operators serving a large majority of cable households offer cable programming on a digital basis. The use of digital compression technology provides cable companies with greater channel capacity. While greater channel capacity increases the opportunity for distribution and, in some cases, reduces access fees paid by us, it also may adversely impact the Company's ability to compete for television viewers to the extent it results in less desirable channel positioning for us, placement of the Company's programming in separate programming tiers, the broadcast of additional competitive channels or viewer fragmentation due to a greater number of programming alternatives.
The Company has entered into, and will continue to enter into, distribution agreements with other television operators providing for full- or part-time carriage of the Company’s television shopping programming.
Future cable and satellite distribution cash commitments at February 2, 2019 are as follows:
 
 

Fiscal Year
Amount
 
 
2019
$
56,362,000

2020
39,352,000

2021
1,897,000

2022

2023 and thereafter


Employment Agreements
The Company has entered into employment agreements with some of its on-air hosts with original terms of 12 months with automatic annual one-year renewals and with the chief executive officer of the Company with an original term of 24 months followed by automatic one-year renewals. These agreements specify, among other things, the term and duties of employment, compensation and benefits, termination of employment (including for cause, which would reduce the Company’s total obligation under these agreements), severance payments and non-disclosure and non-compete restrictions. The aggregate commitment for future base compensation related to these agreements at February 2, 2019 was approximately $1,968,000.
On August 18, 2016, the Company entered into an executive employment agreement with Mr. Rosenblatt, the Company's Chief Executive Officer. Among other things, the employment agreement provides for a two-year initial term, followed by automatic one-year renewals, an initial base salary of $750,000, annual bonus stipulations, a temporary living expense allowance and participation in the Company's executive relocation program. In conjunction with the employment agreement, the Company granted Mr. Rosenblatt an award of restricted stock units, performance restricted stock units and incentive stock options under the Company's 2011 Omnibus Incentive Plan with an aggregate fair value of $1.8 million. The chief executive officer’s employment agreement also provides for severance in the event of employment termination of (i) 1.5 times the amount of his base salary, plus (ii) one times his target bonus. In the event of a change of control, as defined in the agreement, the severance shall be two times his base salary and two times his target bonus.
The Company has established guidelines regarding severance for its senior executive officers, whereby if a senior executive officer's employment terminates for reasons other than change of control, up to 15 months of the executive's highest annual rate of base salary for those serving as Executive Vice President and up to 12 months of the executive's highest annual rate of base salary for those serving as Senior Vice President may become payable. If an Executive Vice President's employment terminates within a one-year period commencing on the date of a change in control or within six months preceding the date of a change in control, up to 18 months of the executive's highest annual rate of base salary, plus 1.5 times the target annual incentive bonus determined from such base salary, may become payable. If a Senior Vice President's employment terminates within a one-year period commencing on the date of a change in control or within six months preceding the date of a change in control, up to 15 months of the executive's highest annual rate of base salary, plus 1.25 times the target annual incentive bonus determined from such base salary, may become payable.
Operating Lease Commitments
The Company leases certain property and equipment under non-cancelable operating lease agreements. Property and equipment covered by such operating lease agreements include offices at subsidiary locations, satellite transponder, television transmission equipment and office equipment.
Future minimum lease payments for operating leases at February 2, 2019 are as follows:
Future Minimum Lease Payments:
Amount
 
 
2019
$
1,005,000

2020
604,000

2021

2022

2023 and thereafter


Total rent expense under such agreements was approximately $1,407,000 in fiscal 2018, $1,408,000 in fiscal 2017 and $1,898,000 in fiscal 2016.
Capital Lease Commitments
The Company leases certain office equipment under non-cancelable capital leases and includes these assets in property and equipment in the accompanying consolidated balance sheets. The capitalized cost of leased assets was approximately $41,000 at February 2, 2019.
Future minimum lease payments for assets under capital leases at February 2, 2019 are as follows:
Future Minimum Lease Payments:
Amount
 
 
2019
$
13,000

2020
8,000

2021
8,000

2022
2,000

2023 and thereafter

Total minimum lease payments
31,000

Less: Amounts representing interest
(2,000
)
 
29,000

Less: Current portion
(12,000
)
Long-term capital lease obligation
$
17,000


Retirement Savings Plan
The Company maintains a qualified 401(k) retirement savings plan covering substantially all employees. The plan allows the Company’s employees to make voluntary contributions to the plan. Matching contributions are contributed to the plan on a per pay period basis. The Company currently provides a contribution match of $0.50 for every $1.00 contributed by eligible participants up to a maximum of 6% of eligible compensation. Company plan contributions expense totaled $1,476,000, $1,268,000 and $1,321,000 for fiscal 2018, fiscal 2017 and fiscal 2016, of which $0 was accrued and outstanding at February 2, 2019, February 3, 2018 and January 28, 2017.
v3.19.1
Litigation
12 Months Ended
Feb. 02, 2019
Litigation [Abstract]  
Litigation
Litigation
The Company is involved from time to time in various claims and lawsuits in the ordinary course of business, including claims related to products, product warranties, contracts, employment, intellectual property, consumer protection and regulatory matters. In the opinion of management, none of the claims and suits, either individually or in the aggregate, will have a material adverse effect on the Company's operations or consolidated financial statements.
v3.19.1
Supplemental Cash Flow Information
12 Months Ended
Feb. 02, 2019
Supplemental Cash Flow Elements [Abstract]  
Supplemental Cash Flow Information [Text Block]
Supplemental Cash Flow Information
Supplemental cash flow information and noncash investing and financing activities were as follows:
 
 
For the Years Ended
 
 
February 2, 2019
 
February 3, 2018
 
January 28, 2017
Supplemental Cash Flow Information:
 
 

 
 

 
 

Interest paid
 
$
3,098,000

 
$
4,818,000

 
$
5,061,000

Income taxes paid
 
$
16,000

 
$
36,000

 
$
51,000

Supplemental non-cash investing and financing activities:
 
 
 
 

 
 

Property and equipment purchases included in accounts payable
 
$
473,000

 
$
213,000

 
$
1,060,000

Equipment acquired through capital lease obligations
 
$
41,000

 
$

 
$

Common stock issuance costs included in accrued liabilities
 
$

 
$

 
$
115,000

Deferred financing costs included in accrued liabilities
 
$

 
$

 
$
14,000

v3.19.1
Executive and Management Transition Costs
12 Months Ended
Feb. 02, 2019
Executive Transition Costs [Abstract]  
Executive Transition Costs [Text Block]
Executive and Management Transition Costs
On January 1, 2019, the Company entered into a separation and release agreement with its President in connection with her resignation, effective January 1, 2019. On April 11, 2018, the Company entered into a transition and separation agreement with its Executive Vice President, Chief Operating Officer/Chief Financial Officer, under which his position terminated on April 16, 2018 and he served as a non-officer employee until June 1, 2018. On April 11, 2018, the Company announced the appointment of a new Chief Financial Officer, effective as of April 16, 2018. In conjunction with these executive changes as well as other executive and management terminations made during fiscal 2018, the Company recorded charges to income totaling $2,093,000, which relate primarily to severance payments to be made as a result of the executive officer and other management terminations and other direct costs associated with the Company's 2018 executive and management transitions.
On March 23, 2017, the Company announced the elimination of the position of Senior Vice President of Sales & Product Planning. In conjunction with this executive change as well as other executive and management terminations made during fiscal 2017, the Company recorded charges to income totaling $2,145,000, which relate primarily to severance payments made as a result of the executive officer and other management terminations and other direct costs associated with the Company's 2017 executive and management transitions.
On February 8, 2016, the Company announced the resignation and departure of Mark Bozek, its Chief Executive Officer, and of its Executive Vice President - Chief Strategy Officer & Interim General Counsel. On August 18, 2016, the Company announced that Robert Rosenblatt was appointed permanent Chief Executive Officer, effective immediately, and entered into an executive employment agreement with Mr. Rosenblatt. In conjunction with these executive changes as well as other executive and management terminations made during fiscal 2016, the Company recorded charges to income totaling $4,411,000, which relate primarily to severance payments to be made as a result of the executive officer terminations and other direct costs associated with the Company's 2016 executive and management transitions.
v3.19.1
Related Party Transactions
12 Months Ended
Feb. 02, 2019
Related Party Transactions [Abstract]  
Related Party Transactions
Related Party Transactions
Relationship with GE Equity, Comcast and NBCU
Until April 29, 2016, the Company was a party to an amended and restated shareholder agreement, dated February 25, 2009 (the “GE/NBCU Shareholder Agreement”), with GE Equity and NBCU, which provided for certain corporate governance and standstill matters. The Company has a significant cable distribution agreement with Comcast, of which NBCU is an indirect subsidiary, and believes that the terms of the distribution agreement are comparable to those with other cable system operators. On April 29, 2016, the GE/NBCU Shareholder Agreement was terminated and the Company entered into a new Shareholder Agreement (the “NBCU Shareholder Agreement”) with NBCU.
On January 31, 2017, the Company purchased from NBCU 4,400,000 shares of the Company's common stock, representing approximately 6.7% of shares then outstanding, for approximately $5 million or $1.12 per share, pursuant to a Repurchase Letter Agreement between the Company and NBCU. Following the Company's share purchase, NBCU's direct equity ownership of the Company consisted of 2,741,849 shares of common stock, or 4.5% of the Company's outstanding common stock. The NBCU Shareholder Agreement was terminated pursuant to the Repurchase Letter Agreement. As of February 3, 2018, the Company believes that NBCU sold its remaining shares of the Company's common stock.
Director Relationships
The Company entered into a service agreement with Newgistics, Inc. ("Newgistics") in fiscal 2004. Newgistics provides offsite customer returns consolidation and delivery services to the Company. The Company's Chief Executive Officer, Robert Rosenblatt, was a member of Newgistics Board of Directors until October 2017, when Newgistics was acquired by a third party. The Company made payments to Newgistics totaling approximately $4,474,000 and $4,910,000 during fiscal 2017 and fiscal 2016.
One of the Company's directors, Thomas Beers, has a minority interest in one of the Company's on-air food suppliers. The Company made inventory payments to this supplier totaling approximately $0, $1,156,000 and $1,866,000 during fiscal 2018, fiscal 2017 and fiscal 2016.
v3.19.1
Quarterly Results (Unaudited)
12 Months Ended
Feb. 02, 2019
Quarterly Financial Information Disclosure [Abstract]  
Quarterly Results (Unaudited) [Text Block]
Quarterly Results (Unaudited)
The following summarized unaudited results of operations for the quarters in fiscal 2018 and fiscal 2017 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.
 
 
First
Quarter
 
Second
Quarter
 
Third
Quarter
 
Fourth
Quarter (a)
 
Total
 
 
(In thousands, except percentages and per share amounts)
Fiscal 2018
 
 
 
 
 
 
 
 
 
 
Net sales
 
$
156,505

 
$
150,799

 
$
131,714

 
$
157,619

 
$
596,637

Gross profit
 
56,255

 
56,870

 
47,155

 
46,567

 
206,847

Gross profit margin
 
35.9
%
 
37.7
%
 
35.8
%
 
29.5
%
 
34.7
%
Operating expenses
 
58,202

 
56,001

 
55,537

 
55,731

 
225,471

Operating income (loss) (b)
 
(1,947
)
 
869

 
(8,382
)
 
(9,164
)