consumer preferences, spending and debt levels; the general economic and credit environment; interest rates; seasonal variations in consumer purchasing activities; the ability to achieve the most effective product category mixes to maximize sales and margin objectives; competitive pressures on sales; pricing and gross sales margins; the level of cable and satellite distribution for our programming and the associated fees; our ability to establish and maintain acceptable commercial terms with third-party vendors and other third parties with whom we have contractual relationships, and to successfully manage key vendor relationships; our ability to successfully manage and maintain our brand name and marketing initiatives; our ability to manage our operating expenses successfully and our working capital levels; our ability to remain compliant with our long-term credit facility covenants; the market demand for television station sales; our management and information systems infrastructure; challenges to our data and information security; changes in governmental or regulatory requirements; litigation or governmental proceedings affecting our operations; the risks identified under "Risk Factors" in our Form 10-K for our fiscal year ended January 28, 2012; significant public events that are difficult to predict, such as widespread weather catastrophes or other significant television-covering events causing an interruption of television coverage or that directly compete with the viewership of our programming; and our ability to obtain and retain key executives and employees. Investors are cautioned that all forward-looking statements involve risk and uncertainty. The facts and circumstances that exist when any forward-looking statements are made and on which those forward-looking statements are based may significantly change in the future, thereby rendering the forward-looking statements obsolete. We are under no obligation (and expressly disclaim any obligation) to update or alter our forward-looking statements whether as a result of new information, future events or otherwise. 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 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       For the Six-Month
                               Periods Ended            Periods Ended
                           July 28,     July 30,   July 28,      July 30,
                             2012         2011       2012          2011
Merchandise Mix
Jewelry & Watches             54%         56%         55 %            54 %
Home & Electronics            25%         26%         23 %            29 %
Beauty, Health & Fitness      13%         12%         14 %            12 %
Fashion & Accessories         8%           6%          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) enhance our customer satisfaction through a variety of investments in technology, promotional activity and improved and competitive customer service policies, (v) manage our fixed operating and transaction expenses,
(vi) grow our Internet business with expanded product assortments and Internet-only merchandise offerings, (vii) expand our Internet, mobile and social media channels to attract and retain more customers, and (viii) maintain cable and satellite carriage contracts at appropriate durations while seeking cost savings opportunities and improved footprint productivity through better channel positions and dual illumination or multiple channels.

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 Second Quarter of Fiscal 2012 Consolidated net sales for our fiscal 2012 second quarter were $135,179,000 compared to $132,137,000 for our fiscal 2011 second quarter, which represents a 2% increase. We reported an operating loss of $3,462,000 and a net loss of $3,845,000 for our fiscal 2012 second quarter. We had an operating loss of $3,539,000 and a net loss of $4,456,000 for our fiscal 2011 second quarter. Results of Operations

Selected Condensed Consolidated Financial Data

                                   Operations
                                  (Unaudited)
                                                  Dollar Amount as a                     Dollar Amount as a
                                           Percentage of Net Sales for the        Percentage of Net Sales for the
                                              Three-Month Periods Ended               Six-Month Periods Ended
                                             July 28,             July 30,          July 28,             July 30,
                                               2012                 2011              2012                 2011
Net sales                                      100.0  %              100.0  %         100.0  %              100.0  %
Gross margin                                    38.2  %               38.8  %          37.8  %               38.0  %
Operating expenses:
Distribution and selling                        34.9  %               35.0  %          35.2  %               33.7  %
General and administrative                       3.4  %                4.1  %           3.4  %                3.6  %
Depreciation and amortization                    2.5  %                2.3  %           2.5  %                2.2  %
                                                40.8  %               41.5  %          41.1  %               39.5  %
Operating loss                                  (2.6 )%               (2.7 )%          (3.3 )%               (1.5 )%



                            Key Performance Metrics
                                  (Unaudited)
                                   For the Three-Month                              For the Six-Month
                                      Periods Ended                                   Periods Ended
                                July 28,         July 30,
                                  2012             2011         Change       July 28, 2012      July 30, 2011     Change
Program Distribution
Total Homes (Average 000's)       82,432           78,865          4.5  %         81,932              78,546        4.3  %
Merchandise Metrics
Gross Margin %                      38.2 %           38.8 %    -60 bps              37.8 %              38.0 %   -20 bps
Net Shipped Units (000's)          1,239            1,158          7.0  %          2,584               2,292       12.7  %
Average Selling Price         $      102       $      105         (2.9 )%   $         98       $         111      (11.7 )%
Return Rate                         21.6 %           22.7 %   -110 bps              21.4 %              21.9 %   -50 bps
Internet Net Sales % (a)            45.4 %           46.1 %    -70 bps              45.7 %              45.5 %   +20 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 5% in the second quarter of fiscal 2012, resulting in a 3.6 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 more popular digital tiers of service. In addition, we made low-cost infrastructure investments during the current fiscal year that will enable us to soft launch our signal in high definition (HD) format and improve the appearance of our primary network feed. We are seeking carriage of the HD feed of our service in select markets in 2012 and more widely in 2013. We believe that having an HD feed of our service will allow us to attract new viewers and customers. 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 second quarter increased 7% from the prior year's comparable quarter to 1,239,000 from 1,158,000. For the six months ended July 28, 2012, net shipped units increased 13% from the prior year's comparable period to 2,584,000 from 2,292,000. We believe the increase in units shipped during the fiscal 2012 second quarter and year to date is primarily due to the decrease in our average selling price discussed below and a mix shift during the year to higher multi-unit purchase categories such as fashion and beauty.

Average Selling Price
The average selling price, or ASP, per net unit was $102 in the fiscal 2012 second quarter, a 3% decrease from the comparable prior year quarter. For the six months ended July 28, 2012, the ASP was $98, a 12% decrease from the prior year's comparable period. The decrease in the ASP was driven primarily by a decrease in the sales mix of higher price point consumer electronic items during the quarter and year combined with a higher concentration of product sales in our beauty, fashion and home product categories. We anticipate a continued decrease in ASP as we further broaden and expand our product assortment to reach a broader audience.

Return Rates
Our return rate was 21.6% in the fiscal 2012 second quarter as compared to 22.7% for the comparable prior year quarter, a 110 basis point decrease. For the six months ended July 28, 2012, our return rate was 21.4% as compared to 21.9% for the prior year comparable period, a 50 basis point decrease. The decrease in the fiscal 2012 second quarter and year-to-date return rate was influenced by a decrease in return rates within our jewelry, watches and health & beauty product categories, partially 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 second quarter were $135,179,000 as compared with consolidated net sales of $132,137,000 for the fiscal 2011 second quarter, a 2% increase. The increase in quarterly consolidated net sales was driven by sales increases in the watches, fashion, home and beauty categories, partially offset by decreases in jewelry and consumer electronics product categories. Consolidated net sales for the six months ended July 28, 2012 were $271,728,000 as compared with consolidated net sales of $275,670,000 for the comparable prior period, a 1% decrease. The decrease in our year-to-date consolidated net sales from the prior year largely reflects the impact of a sales decrease in our consumer electronics product category and sales decreases within our jewelry product category. These decreases were offset by sales increases in our watches, fashion, home, and health & beauty product categories. Net sales shortfalls in our consumer electronics category impacted our sales results during the first half of fiscal 2012 due to challenges related to limited product assortment as well as execution within this product area. We have taken specific actions to address these challenges. Going forward, we expect that this category will remain a small percentage of our overall Company sales. We are focused on broadening our higher margin businesses and also investing in new businesses to grow our product mix and customer base. Excluding consumer electronics, aggregate sales in all other product categories increased 9% over the prior year's year-to-date sales results, reflecting an enhanced product mix and a 4% shift in airtime allocation to these categories. Our e-commerce sales penetration was 45.4% and 45.7% as compared to 46.1% and 45.5%, respectively for the second quarter and first six-months of fiscal 2012 compared to fiscal 2011. Our second quarter decrease in internet penetration primarily reflects a higher customer usage of our automated voice response system for order entry stemming from recent improvements made during the fiscal year, which we believe resulted in less internet usage.

Gross Profit
Gross profit for the fiscal 2012 second quarter and fiscal 2011 second quarter was $51,680,000 and $51,268,000, respectively, an increase of $412,000, or 1%. The increase in the gross profits experienced during the quarter was driven primarily by the year-over-year quarter sales increase discussed above, offset by lower quarterly gross margin percentages experienced as discussed below. For the first six-months of fiscal 2012 gross profit was $102,712,000, a decrease of $1,948,000 or 1.9% over $104,660,000 for the comparable prior year period. The decrease in the gross profits experienced during the first half of fiscal 2012 was driven primarily by the year-over-year sales decrease and the lower year-to-date gross margin percentages experienced as discussed below. Gross margin percentages for the second quarters of fiscal 2012 and fiscal 2011 were 38.2% and 38.8%, respectively, a 60 basis point decrease. On a year to date basis, gross profit percentages were 37.8% for fiscal 2012 and 38.0% for fiscal 2011, respectively, a 20 basis point decrease. The decreases in the second quarter and year-to-date gross margin percentage were driven primarily by increased shipping and handling promotions made during the year.

Operating Expenses
Total operating expenses for the fiscal 2012 second quarter were $55,142,000 compared to $54,807,000 for the comparable prior year period, an increase of 1%. Total operating expenses for the six months ended July 28, 2012 were $111,602,000 compared to $108,829,000 for the comparable prior period, an increase of 3%.
Distribution and selling expense increased $868,000, or 2%, to $47,181,000, or 34.9% of net sales during the fiscal 2012 second quarter compared to $46,313,000, or 35.0% 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 $2,298,000 related to a 5% increase in average homes reached during the quarter. The increase in distribution expense was offset by decreases in variable credit card processing fees and bad debt expense of $1,235,000 and decreases in advertising and promotion expense of $333,000.
Distribution and selling expense increased $2,757,000 or 3%, to $95,546,000, or 35.2% of net sales during the six months ended July 28, 2012 compared to $92,789,000 or 33.7% of net sales for the comparable prior year period. Distribution and selling expense increased on a year-to-date basis primarily due to increased program distribution expense of $3,352,000 related to a 4% increase in average homes reached during the year. The increase over the prior year was also due to increased customer service and telemarketing expense of $599,000 and increased salary and wage costs of $582,000 attributable to an increase in units ordered and shipped during the year. These distribution and selling expense increases were offset by decreases in variable credit card processing fees and other credit expense of $1,290,000 and decreases in advertising and promotion expense of $683,000.

General and administrative expense for the fiscal 2012 second quarter decreased $871,000, or 16%, to $4,537,000, or 3.4% of net sales, compared to $5,408,000, or 4.1% of net sales for the comparable prior year fiscal quarter. General and administrative expense decreased during the quarter primarily as a result of a reduction in share-based compensation of $598,000 and decreased salary, bonus and consulting expense of $349,000. The decrease in non-cash, share-based compensation is due to equity grants both made and recognized in the second quarter of fiscal 2011 and the timing of fully vested older equity grants no longer being expensed. For the six months ended July 28, 2012, general and administrative expense decreased $768,000, or 8%, to $9,204,000, or 3.4% of net sales, compared to $9,972,000, or 3.6% of net sales for the comparable prior year period. General and administrative expense decreased on a year-to-date basis primarily as a result of decreased share-based compensation expense of $581,000 as described above, and decreases in salaries, consulting and bonus expense of $609,000, offset by a $405,000 gain recorded in fiscal 2011 on the disposal of a piece of operational equipment.
Depreciation and amortization expense for the fiscal 2012 second quarter was $3,424,000 compared to $3,086,000 for the comparable prior year quarter, representing an increase of $338,000, or 11%. Depreciation and amortization expense as a percentage of net sales for the three-month periods ended July 28, 2012 and July 30, 2011 was 2.5% and 2.3%, respectively. For the six months ended July 28, 2012, depreciation and amortization expense was $6,852,000 compared to $6,068,000 for the comparable prior year period, representing an increase of $784,000, or 13%. Depreciation and amortization expense as a percentage of net sales for the six-month periods ended July 28, 2012 and July 30, 2011 was 2.5% and 2.2%, respectively. The increase in depreciation and amortization expense during the second quarter was primarily due to increased depreciation expense attributable to new software upgrades being put into service. The increase in depreciation and amortization expense on a year-to-date basis was primarily due to increased amortization expense of $253,000 attributable to our renewed NBC trademark license and increased depreciation expense of $490,000 attributable to new software upgrades being put into service.

Operating Loss
For the fiscal 2012 second quarter, our operating loss was $3,462,000 compared to an operating loss of $3,539,000 for the fiscal 2011 second quarter, representing a decrease of $77,000. For the six months ended July 28, 2012, our operating loss was $8,890,000 compared to an operating loss of $4,169,000 for the comparable prior year period representing a year-to-date increase of $4,721,000. For the fiscal second quarter the operating loss slightly decreased due to increased gross profit dollars achieved and lower general administrative expense, offset by higher selling and distribution expense during the quarter. Our year-to-date operating loss increased during fiscal 2012 from the comparable prior year period 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 second quarter, we reported a net loss of $3,845,000 or $.08 per share on 48,853,619 weighted average common shares outstanding compared with a net loss of $4,456,000 or $.09 per share on 48,131,218 weighted average common . . .