Overview
Company Description
We are a multichannel electronic retailer that markets, sells and distributes products to consumers through TV, telephone, online, mobile and social media. Our principal form of product exposure is our 24-hour television shopping network, ShopNBC, which is distributed primarily through cable and satellite affiliation agreements, and markets brand name and private label products in the categories of jewelry & watches; home & electronics; beauty, health & fitness; and fashion & accessories. We also operate ShopNBC.com, a comprehensive e-commerce platform that sells products appearing on our television shopping channel as well as an extended assortment of online-only merchandise. Our programming and products are also marketed via mobile devices - including smartphones and tablets such as the iPad, and through the leading social media channels. We have an exclusive trademark license from NBCUniversal Media, LLC, formerly known as NBC Universal, Inc. ("NBCU"), for the worldwide use of an NBC-branded name for a period ending in January 2014. Pursuant to the license, we operate our television home shopping network and our Internet websites, ShopNBC.com and ShopNBC.tv.
Our investor relations website address is www.valuevisionmedia.com. Our goal is to maintain the investor relations web site as a way for investors to easily find information about us, including press releases, announcements of investor conferences and corporate governance. We also make available free of charge our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to these reports as soon as practicable after that material is electronically filed with or furnished to the SEC. The information found on our website is not part of this or any other report we file with, or furnish to, the SEC.
Products and Customers
Products sold on our multi-media platforms include primarily jewelry & watches, home & electronics, beauty, health & fitness, and fashion & accessories. Historically jewelry and watches have been our largest merchandise categories. We are currently working to shift our product mix to include a more diversified product assortment in order to grow our new and active customer base. The following table shows our merchandise mix as a percentage of television home shopping and internet net merchandise sales for the years indicated by product category group:

                            For the Three-Month
                               Periods Ended
                           April 28,   April 30,
                             2012        2011
Merchandise Mix
Jewelry & Watches             56%         51%
Home & Electronics            22%         33%
Beauty, Health & Fitness      14%         11%
Fashion & Accessories         8%          5%

Our product strategy is to continue to develop new product offerings across multiple merchandise categories as needed in response to both customer demand and in order to maximize margin dollars per minute in our television and internet shopping operations. Our multichannel customers are primarily women between the ages of 35 and 65, married, with average annual household incomes of $70,000 or more. We also have a strong presence of male customers of similar age and income range. We believe our customers make purchases based on our unique products, quality merchandise and value.

Company Strategy
As a premium multichannel electronic retailer, our strategy is to offer our customers differentiated quality brands and products at a compelling value proposition. We also seek to provide today's consumers with flexible programming formats and access that allow them to view and interact with our content and products at their convenience - whenever and wherever they are able. Our merchandise positioning aims to make us a trusted destination for quality and an authority in a broad category of merchandise. We focus on creating a customer experience that builds strong loyalty and a growing customer base.

In support of this strategy, we are pursuing the following actions to improve the operational and financial performance of our Company: (i) broaden and optimize our product mix to appeal to more customers and to encourage additional purchases per customer, (ii) increase new and active customers and improve household penetration, (iii) increase our gross margin dollars by improving merchandise margins in key product categories while prudently managing inventory levels, (iv) reduce our transactional per-unit operating expenses while managing our fixed operating expenses, (v) grow our Internet business with expanded product

assortments and Internet-only merchandise offerings, (vi) expand our Internet, mobile and social media channels to attract and retain more customers, and
(vii) maintain cable and satellite carriage contracts at appropriate durations while seeking cost savings opportunities and improved channel positions.

Our Competition
The direct marketing and retail businesses are highly competitive. In our television home shopping and e-commerce operations, we compete for customers with other television home shopping and e-commerce retailers; infomercial companies; other types of consumer retail businesses, including traditional "brick and mortar" department stores, discount stores, warehouse stores and specialty stores; catalog and mail order retailers and other direct sellers.

In the competitive television home shopping sector, we compete with QVC Network, Inc. and HSN, Inc., both of whom are substantially larger than we are in terms of annual revenues and customers, and whose programming is carried more broadly to U.S. households than our programming. The American Collectibles Network, which operates Jewelry Television, also competes with us for television home shopping customers in the jewelry category. In addition, there are a number of smaller niche players and startups in the television home shopping arena who compete with us. We believe that our major competitors incur cable and satellite distribution fees representing a significantly lower percentage of their sales attributable to their television programming than do we; and that their fee arrangements are substantially on a commission basis (in some cases with minimum guarantees) rather than on the predominantly fixed-cost basis that we currently have. At our current sales level, our distribution costs as a percentage of total consolidated net sales are higher than our competition. However, one of our key strategies is to maintain our distribution fixed cost structure in order to leverage our profitability as we grow our business.

The e-commerce sector also is highly competitive, and we are in direct competition with numerous other internet retailers, many of whom are larger, better financed and have a broader customer base than we do.

We anticipate continuing competition for viewers and customers, for experienced home shopping personnel, for distribution agreements with cable and satellite systems and for vendors and suppliers - not only from television home shopping companies, but also from other companies that seek to enter the home shopping and internet retail industries, including telecommunications and cable companies, television networks, and other established retailers. We believe that our ability to be successful in the television home shopping and e-commerce sectors will be dependent on a number of key factors, including increasing the number of customers who purchase products from us and increasing the dollar value of sales per customer from our existing customer base. Results for the First Quarter of Fiscal 2012 Consolidated net sales for our fiscal 2012 first quarter were $136,549,000 compared to $143,533,000 for our fiscal 2011 first quarter, which represents a 5% decrease. We reported an operating loss of $5,428,000 and a net loss of $8,739,000 for our fiscal 2012 first quarter. We had an operating loss of $630,000 and a net loss of $28,930,000 for our fiscal 2011 first quarter. The net loss for our first quarter of fiscal 2011 was primarily attributable to a one-time $25,679,000 loss on debt extinguishment resulting from the full redemption of our Series B preferred stock.

Results of Operations

                 Selected Condensed Consolidated Financial Data
                                   Operations
                                  (Unaudited)
                                         Dollar Amount as a
                                  Percentage of Net Sales for the
                                     Three-Month Periods Ended
                                    April 28,           April 30,
                                      2012                 2011
Net sales                             100.0  %              100.0  %
Gross margin                           37.4  %               37.2  %
Operating expenses:
Distribution and selling               35.4  %               32.3  %
General and administrative              3.4  %                3.2  %
Depreciation and amortization           2.5  %                2.1  %
                                       41.3  %               37.6  %
Operating loss                         (3.9 )%               (0.4 )%



                            Key Performance Metrics
                                  (Unaudited)
                                 For the Three-Month
                                    Periods Ended
                               April 28,      April 30,
                                 2012           2011         Change
Program Distribution
Total Homes (Average 000's)     81,386          78,291          4.0  %
Merchandise Metrics
Gross Margin %                    37.4 %          37.2 %    +20 bps
Net Shipped Units (000's)        1,336           1,134         17.8  %
Average Selling Price         $     95       $     117        (18.8 )%
Return Rate                       21.2 %          21.2 %      0 bps
Internet Net Sales % (a)          45.9 %          44.9 %   +100 bps

(a) Internet sales percentage is calculated based on sales orders that are generated from our shopnbc.com website and primarily ordered directly online. Program Distribution
Average homes reached, or full time equivalent ("FTE") subscribers, grew 4% in the first quarter of fiscal 2012, resulting in a 3.1 million increase in average homes reached versus the prior year comparable quarter. The increases were driven primarily by increases in our footprint as we expand into lower digital tiers of service as well as by continued growth in satellite and internet protocol television. We anticipate that our cable programming distribution will increasingly shift towards a greater mix of digital with continued improvement in channel positioning and channel adjacencies, which we believe may result in increased subscriber viewership. Nonetheless, because of the broader universe of programming choices available for viewers in digital systems and the higher channel placements commonly associated with digital tiers, the shift towards digital systems may adversely impact our ability to compete for television viewers even if our programming is available in more homes. Our television home shopping programming is also simulcast live 24 hours a day, 7 days a week through our internet websites, www.ShopNBC.com and www.ShopNBC.TV, which is not included in the foregoing data on homes reached.

Cable and Satellite Distribution Agreements We have entered into cable and direct-to-home distribution agreements that require each operator to offer our television home shopping programming substantially on a full-time basis over their systems. The terms of these existing agreements typically range from one to three years. Under certain circumstances, the cable or satellite operators or we may cancel the agreements prior to their expiration. If certain of these agreements are terminated, the termination may materially or adversely affect our business. Failure to maintain our cable agreements covering a material portion of our existing cable households on acceptable financial and other terms could materially and adversely affect our future growth, sales revenues and earnings unless we are able to arrange for alternative means of broadly distributing our television programming.

Net Shipped Units
The number of net shipped units during the fiscal 2012 first quarter increased 18% from the prior year's comparable quarter to 1,336,000 from 1,134,000. We believe the increase in units shipped during the fiscal 2012 first quarter is primarily due to the decrease in our average selling price discussed below and a mix shift during the quarter to higher multi-unit purchase categories such as fashion and beauty.

Average Selling Price
The average selling price, or ASP, per net unit was $95 in the fiscal 2012 first quarter, a 19% decrease from the comparable prior year quarter. The decrease in the ASP was driven primarily by a significant decrease in the sales mix of higher price point consumer electronic items during the quarter combined with a higher concentration of product sales in our beauty, fashion and home product categories.

Return Rates
Our return rate was 21.2% in the fiscal 2012 first quarter as well as for the comparable prior year quarter. The flat 2012 return rate was influenced by a decrease in return rates within our watches and health & beauty product categories, offset by a mix shift away from consumer electronics, which have a historically low return rate. We continue to monitor our return rates in an effort to keep our overall return rates in line and commensurate with our current product sales mix and our average selling price levels.

Net Sales
Consolidated net sales for the fiscal 2012 first quarter were $136,549,000 as compared with consolidated net sales of $143,533,000 for the fiscal 2011 first quarter, a 5% decrease. The decrease in quarterly consolidated net sales from the prior year largely reflects the impact of a 76% sales decrease in our consumer electronics product category. Net sales shortfalls in our consumer electronics category continued to impact our sales results during the first quarter due to continued challenges related to limited product assortment as well as execution and organizational challenges within this product area. While we have taken specific actions to address these challenges, we do not anticipate a significant improvement in consumer electronics performance in the upcoming quarters. Going forward, we expect that this category will remain a small percentage of our overall company sales as we focus on further broadening our other higher margin businesses while investing in new businesses to grow our product mix and customer base. Excluding consumer electronics, aggregate sales in all other product categories increased 12% over prior year's first quarter, reflecting an enhanced product mix and an 8% shift in airtime allocation to these categories. Our e-commerce sales penetration was 45.9% as compared to 44.9% for the first quarter of fiscal 2011 driven primarily by product mix, ongoing strong cross-channel promotions from our core television channel, online marketing efforts, internet only product offerings and mobile and social media platforms.

Gross Profit
Gross profit for the fiscal 2012 first quarter and fiscal 2011 first quarter was $51,032,000 and $53,392,000, respectively, a decrease of $2,360,000, or 4% . The decrease in the gross profits experienced during the quarter was driven primarily by the year-over-year quarter sales decrease discussed above. Gross margin percentages for the first quarters of fiscal 2012 and fiscal 2011 were 37.4% and 37.2%, respectively, a 20 basis point increase. The increase in the gross margin percentage was driven primarily by a lower sales mix of lower margin consumer electronics partially offset by increased shipping and handling promotional initiatives during the quarter.

Operating Expenses
Total operating expenses for the fiscal 2012 first quarter were $56,460,000 compared to $54,022,000 for the comparable prior year period, an increase of 5%. Distribution and selling expense increased $1,889,000, or 4%, to $48,365,000, or 35.4% of net sales during the fiscal 2012 first quarter compared to $46,476,000, or 32.3% of net sales for the comparable prior year fiscal

quarter. Distribution and selling expense increased during the quarter primarily due to increased program distribution expense of $1,054,000 related to a 4% increase in average homes reached during the quarter. The increase over the prior year's quarter was also due to increased customer service and telemarketing expense of $485,000 and increased variable salary and wage costs of $457,000 attributable to an increase in units ordered and shipped during the quarter. These distribution and selling expense increases during the quarter were offset by decreases in advertising and promotion expense of $350,000.

General and administrative expense for the fiscal 2012 first quarter increased $103,000, or 2%, to $4,667,000, or 3.4% of net sales, compared to $4,564,000, or 3.2% of net sales for the comparable prior year fiscal quarter. General and administrative expense increased during the quarter primarily as a result of a $336,000 gain recorded on the disposal of a piece of operational equipment during the prior year first quarter reducing total general and administrative expense in fiscal 2011, partially offset by lower bonus and consulting expenses of $233,000 recorded during the first quarter of fiscal 2012.
Depreciation and amortization expense for the fiscal 2012 first quarter was $3,428,000 compared to $2,982,000 for the comparable prior year fiscal quarter, representing an increase of $446,000, or 15%. The increase in depreciation and amortization expense during the first quarter was primarily due to increased amortization expense of $235,000 attributable to our renewed NBC trademark license and increased depreciation expense of $241,000 attributable to new software upgrades being put into service.

Operating Loss
For the fiscal 2012 first quarter, our operating loss was $5,428,000 compared to an operating loss of $630,000 for the fiscal 2011 first quarter, representing an increase of $4,798,000. Our operating loss increased during the first quarter of fiscal 2012 primarily as a result of decreased gross profit dollars achieved and higher distribution and selling and depreciation expenses as noted above.

Net Loss
For the fiscal 2012 first quarter, we reported a net loss of $8,739,000 or $.18 per common share on 48,638,164 weighted average common shares outstanding compared with a net loss of $28,930,000 or $.71 per share on 40,655,177 weighted average common shares outstanding in fiscal 2011. Net loss for the first quarter of fiscal 2012 includes interest expense of $2.8 million, including a non-cash interest charge of $2.3 million in connection with the write off of previously capitalized debt financing costs and a $500,000 charge relating to a pre-payment penalty paid on the early retirement of our $25 million term loan. Net loss for the first quarter of fiscal 2011 includes a $25.7 million charge related to the early preferred stock debt extinguishment and interest expense of $2,602,000, relating primarily to interest and debt discount amortization on our Series B Preferred Stock, bank term loan interest expense and the amortization of fees paid to obtain our bank term loan.
For the first quarter, net loss reflects an income tax provision of $3,000, relating to state income tax expense on certain income for which there is no loss carryforward benefit available. For the first quarter of fiscal 2011, net loss reflects an income tax provision of $19,000 relating to state income tax expense on certain income for which there is no loss carryforward benefit available.
We have not recorded any income tax benefit on the net loss recorded in the first three months of fiscal 2012 and fiscal 2011 due to the uncertainty of realizing income tax benefits in the future as indicated by our recording of an income tax valuation allowance. Based on our recent history of losses, a full valuation allowance has been recorded and was calculated in accordance with GAAP, which places primary importance on our most recent operating results when assessing the need for a valuation allowance. We will continue to maintain a valuation allowance against our net deferred tax assets, including those related to net operating loss carryforwards, until we believe it is more likely than not that these assets will be realized in the future. Adjusted EBITDA Reconciliation
Adjusted EBITDA loss (as defined below) for the fiscal 2012 first quarter was $(959,000) compared with Adjusted EBITDA of $3,118,000 for the fiscal 2011 first quarter.

A reconciliation of Adjusted EBITDA to its comparable GAAP measurement, net loss, follows, in thousands:

                                                           For the Three-Month
                                                              Periods Ended
                                                         April 28,     April 30,
                                                           2012          2011
Adjusted EBITDA (as defined)                            $    (959 )   $   3,118
Less:
Loss on debt extinguishment                                  (500 )     (25,679 )
Non-cash share-based compensation expense                    (991 )        (697 )
EBITDA (as defined)                                        (2,450 )     (23,258 )
A reconciliation of EBITDA to net loss is as follows:
EBITDA (as defined)                                        (2,450 )     (23,258 )
Adjustments:
Depreciation and amortization                              (3,478 )      (3,051 )
Interest expense                                           (2,808 )      (2,602 )
Income tax provision                                           (3 )         (19 )
Net loss                                                $  (8,739 )   $ (28,930 )

EBITDA represents net income (loss) for the respective periods excluding depreciation and amortization expense, interest income (expense) and income taxes. We define Adjusted EBITDA as EBITDA excluding debt extinguishment, non-operating gains (losses) and non-cash share-based compensation expense. We have included the term "Adjusted EBITDA" in our EBITDA reconciliation in order to adequately assess the operating performance of our "core" television and internet businesses and in order to maintain comparability to our analyst's coverage and financial guidance, when given. Management believes that Adjusted EBITDA allows investors to make a meaningful comparison between our core business operating results over different periods of time with those of other similar companies. In addition, management uses Adjusted EBITDA as a metric measure to evaluate operating performance under its management and executive incentive compensation programs. Adjusted EBITDA should not be construed as an alternative to operating income (loss), net income (loss) or to cash flows from operating activities as determined in accordance with GAAP and should not be construed as a measure of liquidity. Adjusted EBITDA may not be comparable to similarly entitled measures reported by other companies. Critical Accounting Policies and Estimates A discussion of the critical accounting policies related to accounting estimates and assumptions are discussed in detail in our fiscal 2011 annual report on Form 10-K under the caption entitled "Critical Accounting Policies and Estimates." Financial Condition, Liquidity and Capital Resources As of April 28, 2012, we had cash and cash equivalents of $42,531,000 and had restricted cash and investments of $2,100,000 pledged as collateral for our issuances of commercial and standby letters of credit. Our restricted cash and investments are generally restricted for a period ranging from 30-60 days and to the extent that commercial and standby letters of credit remain outstanding. In addition, under our new $40 million credit facility, we are required to maintain a minimum of $6.0 million of unrestricted cash and unused line availability at . . .