VALUEVISION MEDIA INC - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2003

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission File Number 0-20243

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VALUEVISION MEDIA, INC.
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(Exact name of registrant as specified in its charter)

Minnesota 41-1673770
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

6740 Shady Oak Road, Minneapolis, MN 55344
------------------------------------------
(Address of principal executive offices)

952-943-6000
----------------------------------------------------
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

YES [X] NO [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

YES [X] NO [ ]

As of September 12, 2003, there were 35,907,185 shares of the Registrant's
common stock, $.01 par value per share, outstanding.

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VALUEVISION MEDIA, INC. AND SUBSIDIARIES

FORM 10-Q TABLE OF CONTENTS
JULY 31, 2003

2

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VALUEVISION MEDIA, INC.
AND SUBSIDIARIES CONDENSED
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)

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

3

VALUEVISION MEDIA, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except share and per share data)

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

4

VALUEVISION MEDIA, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JULY 31, 2003
(Unaudited)
(In thousands, except share data)

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

5

VALUEVISION MEDIA, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)

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

6

VALUEVISION MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2003
(Unaudited)

(1) GENERAL

ValueVision Media, Inc. and its subsidiaries ("ValueVision" or the
"Company") is an integrated direct marketing company that markets its products
directly to consumers through various forms of electronic media. The Company's
operating strategy incorporates television home shopping, Internet e-commerce,
vendor programming sales, fulfillment services and outsourced e-commerce and
fulfillment solutions. Effective May 16, 2002, the Company changed its name to
ValueVision Media, Inc. from ValueVision International, Inc.

The Company's television home shopping business uses on-air personalities to
market brand name merchandise and proprietary / private label consumer products
at competitive prices. The Company's live 24-hour per day television home
shopping programming is distributed primarily through long-term cable and
satellite affiliation agreements and the purchase of month-to-month full and
part-time block lease agreements of cable and broadcast television time. In
addition, the Company distributes its programming through one Company-owned full
power television station in Boston, Massachusetts and one low power television
station in Atlanta, Georgia. The Company also complements its television home
shopping business by the sale of a broad array of merchandise through its
Internet shopping website (www.shopnbc.com).

On November 16, 2000, the Company entered into an exclusive license
agreement with National Broadcasting Company, Inc. ("NBC") pursuant to which NBC
granted ValueVision worldwide use of an NBC-branded name and the Peacock image
for a ten-year period. The Company rebranded its growing home shopping network
and companion Internet shopping website as "ShopNBC" and "ShopNBC.com",
respectively, in fiscal 2001. This rebranding is intended to position
ValueVision as a multimedia retailer, offering consumers an entertaining,
informative and interactive shopping experience, and position the Company as a
leader in the evolving convergence of television and the Internet.

In 1999, the Company founded ValueVision Interactive, Inc. as a wholly owned
subsidiary of the Company to manage and develop the Company's Internet
e-commerce initiatives. The Company, through its wholly owned subsidiary, VVI
Fulfillment Center, Inc. ("VVIFC"), provides fulfillment, warehousing and
telemarketing services to Ralph Lauren Media, LLC ("RLM"), the NBC Experience
Store in New York City and direct to consumer products sold on NBC's website and
to its FanBuzz, Inc. subsidiary. Through its wholly owned subsidiary, FanBuzz,
Inc. ("FanBuzz"), the Company also provides e-commerce and fulfillment solutions
to some of the most recognized sports, media and other well-known entertainment
and retail companies.

(2) BASIS OF FINANCIAL STATEMENT PRESENTATION

The accompanying unaudited condensed consolidated financial statements have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles in the United States of America have been
condensed or omitted in accordance with such rules and regulations. The
information furnished in the interim condensed consolidated financial statements
includes normal recurring accruals and reflects all adjustments which, in the
opinion of management, are necessary for a fair presentation of such financial
statements. Although management believes the disclosures and information
presented are adequate, it is suggested that these interim condensed
consolidated financial statements be read in conjunction with the Company's most
recent audited financial statements and notes thereto included in its fiscal
2002 Annual Report on Form 10-K. Operating results for the three and six month
periods ended July 31, 2003 are not necessarily indicative of the results that
may be expected for the fiscal year ending January 31, 2004.

The accompanying condensed consolidated financial statements include the
accounts of ValueVision and its wholly owned subsidiaries. Intercompany accounts
and transactions have been eliminated in consolidation. The accompanying
condensed consolidated results of operations for the three and six months ended
July 31, 2003 include the operations of television station WWDP TV-46 as of the
effective date of its acquisition, April 1, 2003. The accompanying condensed
consolidated results of operations for the three and six months ended July 31,
2002 include the operations of FanBuzz, Inc. as of the effective date of its
acquisition, March 8, 2002.

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(3) STOCK-BASED COMPENSATION

At July 31, 2003, the Company had a number of stock-based compensation
plans. The Company accounts for these plans under the recognition and
measurement principles of APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations. No stock-based employee compensation
cost is reflected in net income (loss), as all options granted under those plans
had an exercise price equal to the market value of the underlying common stock
on the date of grant. The following table illustrates the effect on net income
(loss) and net income (loss) per share if the Company had applied the fair value
recognition provisions of Statement of Financial Accounting Standards No. 123,"
Accounting for Stock-Based Compensation" ("SFAS No. 123"), to stock-based
employee compensation:

(4) NET INCOME (LOSS) PER COMMON SHARE

The Company calculates earnings per share ("EPS") in accordance with the
provisions of Statement of Financial Accounting Standards No. 128, "Earnings per
Share" ("SFAS No. 128"). Basic EPS is computed by dividing reported earnings by
the weighted average number of common shares outstanding for the reported
period. Diluted EPS 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.

A reconciliation of EPS calculations under SFAS No. 128 is as follows:

(5) COMPREHENSIVE INCOME

The Company reports comprehensive income in accordance with Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
No. 130"). SFAS No. 130 establishes standards for reporting in the financial
statements all changes in equity during a period, except those resulting from
investments by and distributions to owners. For the Company,

8

comprehensive income includes net income (loss) and other comprehensive income
(loss), which consists of unrealized holding gains and losses from equity
investments classified as "available-for-sale". Total comprehensive income
(loss) was $2,157,000 and $(2,791,000) for the three months ended July 31, 2003
and 2002, respectively. Total comprehensive income (loss) was $2,973,000 and
$(905,000) for the six months ended July 31, 2003 and 2002, respectively.

(6) SEGMENT DISCLOSURES

Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS No. 131"), requires
the disclosure of certain information about operating segments in financial
statements. The Company's reportable segments are based on the Company's method
of internal reporting. The Company's primary business segment is its electronic
media segment, which consists of the Company's television home shopping business
and Internet shopping website business. Management has reviewed the provisions
of SFAS No. 131 and has determined that the Company's television and internet
home shopping businesses meet the aggregation criteria as outlined in the
Statement since these two business units have similar customers, products,
economic characteristics and sales processes. Products sold through the
Company's electronic media segment primarily include jewelry, computers and
other electronics, housewares, apparel, health and beauty aids, seasonal items
and other merchandise. The Company's segments operate exclusively in the United
States and no one customer represents more than 5% of the Company's overall
revenue. There are no intersegment sales. Segment information as of and for the
quarters and six-month periods ended July 31, 2003 and 2002 are as follows:

9

(a) Revenue from segments below quantitative thresholds are attributable
to FanBuzz, which provides e-commerce and fulfillment solutions to
sports, media and entertainment companies and VVIFC, which provides
fulfillment, warehousing and telemarketing services primarily to RLM.

(b) Corporate assets consist of long-term investments not directly
assignable to a business segment.

(7) EQUITY INVESTMENTS

As of July 31, 2003 and 2002, the Company had equity investments totaling
approximately $2,011,000 and $38,558,000, respectively, of which $-0- and
$30,886,000 related to the Company's investment in RLM after adjusting for the
Company's equity share of RLM losses under the equity method of accounting. At
July 31, 2003 and 2002, investments in the accompanying condensed consolidated
balance sheets also included approximately $-0- and $5,661,000, respectively,
related to equity investments made in companies whose shares are traded on a
public exchange. Investments in common stock are classified as
"available-for-sale" investments and are accounted for under the provisions of
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" ("SFAS No. 115"). Investments held in
the form of stock purchase warrants are accounted for under the provisions of
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No.133"). In addition, investments at
July 31, 2003 and 2002 include certain other nonmarketable equity investments in
private and other enterprises totaling approximately $2,011,000 which are
carried at the lower of cost or net realizable value.

In February 2000, the Company entered into a strategic alliance with Polo
Ralph Lauren, NBC, NBCi and CNBC.com and created RLM, a joint venture formed for
the purpose of bringing the Polo Ralph Lauren American lifestyle experience to
consumers via multiple platforms, including the Internet, broadcast, cable and
print. The Company owns a 12.5% interest in RLM. In connection with forming this
strategic alliance, the Company had committed to provide up to $50 million of
cash for purposes of financing RLM's operating activities of which the entire
commitment has been funded. In the fourth quarter of fiscal 2002, the Company
evaluated the carrying value of its RLM investment and concluded that an
impairment had occurred with respect to this investment and the decline in value
was determined to be other than temporary whereby the Company will not be able
to recover the carrying amount of its investment. As a result, the Company wrote
off its investment in RLM in the fourth quarter of fiscal 2002.

The Company evaluates the carrying values of its other investments by using
recent financing and securities transactions, present value and other pricing
models, as well as by evaluating available information on financial condition,
liquidity prospects, cash flow forecasts and comparing operating results to
plan. Impairment losses are recorded if events or circumstances indicate that
such investments may be impaired and the decline in value is other than
temporary. For the three months ended July 31, 2003, the Company recorded a net
pre-tax investment gain of $361,000 relating to the sale of its common stock
investments of Paxson Communications, Inc. and iDine Rewards Network, Inc.
("iDine"; f/k/a Transmedia Network, Inc.). For the three months ended July 31,
2002, the Company, in a cashless transaction, exchanged its warrants to purchase
a total of 438,356 shares of common stock of iDine, accounted for under the
provisions of SFAS No. 133, for 170,532 shares of the common stock of iDine and
recorded a loss of $526,000 on the exchange. In the six months ended July 31,
2002, the Company recorded pre-tax investment losses totaling $1,070,000
relating primarily to an investment made in 1997. The decline in fair value of
such investment was determined by the Company to be other than temporary.

(8) RELATED PARTY TRANSACTION

At July 31, 2003, the Company held a note receivable totaling $4,128,000,
including interest (the "Note"), from an officer of the Company for a loan made
in accordance with provisions set forth in such officer's employment agreement
with the Company. The Note is reflected as a reduction of shareholders' equity
in the accompanying condensed consolidated balance sheet and is collateralized
by a security interest in vested stock options and in shares of the Company's
common stock to be acquired by the officer upon the exercise of such vested
stock options.

(9) RESTRICTED STOCK

On February 1, 2003, the Company awarded 114,170 shares of restricted stock
from the Company's 2001 Omnibus Stock Plan (as amended) to certain executive
officers. The stock vests one third on each of the next three anniversary dates
of the grant provided that the recipient is still employed with the Company. The
aggregate market value of the restricted stock at the date of award was

10

$1,491,000 and has been recorded as deferred compensation, a separate component
of shareholders' equity, and is being amortized as compensation expense over the
three-year vesting period.

(10) COMMON STOCK REPURCHASE PROGRAM

In the second quarter of fiscal 2001, the Company's Board of Directors
authorized a $25 million common stock repurchase program whereby the Company may
repurchase shares of its common stock in the open market and through negotiated
transactions, at prices and times deemed to be beneficial to the long-term
interests of shareholders and the Company. In the second quarter of fiscal 2002,
the Company's Board of Directors authorized the repurchase of an additional $25
million of the Company's common stock. In November 2002, the Company's Board of
Directors authorized an additional $25 million for repurchases of the Company's
common stock pursuant to its common stock repurchase program. The repurchase
program is subject to applicable securities laws and may be discontinued at any
time without any obligation or commitment by the Company to repurchase all or
any portion of the shares covered by the authorization. As of July 31, 2003, the
Company had repurchased a total of 3,820,000 shares of its common stock under
its stock repurchase programs for a total net cost of $54,322,000 at an average
price of $14.22 per share. During the quarter ended July 31, 2003, the Company
had repurchased 19,000 shares of its common stock at an average price of
approximately $12.26 per share. During the six-month period ended July 31, 2003,
the Company had repurchased 586,000 shares of its common stock at an average
price of approximately $10.94 per share.

(11) ACQUISITIONS AND DISPOSITIONS

On January 15, 2003, the Company announced that it entered into an agreement
with Norwell Television LLC to acquire full power television station WWDP TV-46
in Boston, which reaches approximately 1.8 million cable households. The deal
closed in the first quarter of fiscal 2003 on April 1, following FCC approval.
The Company made the investment in television station WWDP TV-46 in order to
build a long-term and cost effective distribution strategy in the Boston,
Massachusetts area. The purchase price of the acquisition was $33,617,000,
including professional fees, and has been accounted for using the purchase
method of accounting as stipulated by Statement of Financial Accounting
Standards No. 141, "Business Combinations" ("SFAS No. 141"). The results of
operations of the acquired television station have been included in the
accompanying condensed consolidated financial statements from April 1, 2003, the
date of acquisition. The allocation of the purchase price has been prepared on a
preliminary basis, however, the Company does not expect any material changes
when finalized. Pro-forma results of the Company, assuming the acquisition had
been made at the beginning of each period presented, would not be materially
different from the results reported.

The following table summarizes the estimated fair values of the assets
acquired and liabilities assumed from television station WWDP TV-46 on the date
of acquisition:

Current assets $ 176,000
Property and equipment 1,598,000
Other assets 5,000
FCC broadcasting license 31,943,000
------------
Total assets acquired 33,722,000
Current liabilities 105,000
------------
Net assets acquired $ 33,617,000
============

The Company assigned $31,943,000 of the total acquisition price to
television station WWDP TV-46's Federal Communication Commission ("FCC")
broadcasting license, which is not subject to amortization as a result of its
indefinite useful life. The Company will test the FCC license asset for
impairment annually, or more frequently if events or changes in circumstances
indicate that the asset might be impaired.

In February 2003, the Company entered into an agreement to purchase property
and two commercial buildings occupying approximately 209,000 square feet in Eden
Prairie, Minnesota for approximately $11,300,000. One building purchased is
where the Company currently maintains its corporate administrative, television
production and jewelry distribution operations. Included, as part of the
acquisition, was a second building of approximately 70,000 square feet of
commercial rental space, which the Company leases out to third parties. As a
result of this acquisition, the Company's long-term property lease has been
terminated.

In February 2003, the Company completed the sale of ten of its eleven LPTV
stations for a total of $5,000,000. The Company recorded a pre-tax operating
gain on the sale of these LPTV stations of $4,417,000 in the first quarter of
fiscal 2003. Management believes that the sale of these stations will not have a
significant impact on the ongoing operations of the Company.

On February 25, 2002, the Company announced it had signed a definitive
agreement to acquire 100% of the outstanding shares of

11

the parent of Minneapolis-based FanBuzz that provides e-commerce and fulfillment
solutions to some of the most recognized sports, media and other well known
entertainment companies in the world and many other professional sports teams,
leagues and colleges. The purchase price of the acquisition, which closed on
March 8, 2002, was $14.1 million and has been accounted for using the purchase
method of accounting as stipulated by SFAS No. 141. Pro-forma results of the
Company, assuming the acquisition had been made at the beginning of each period
presented, would not be materially different from the results reported.

The following table summarizes the estimated fair values of the assets
acquired and liabilities assumed from FanBuzz on the date of acquisition:

Current assets .................. $ 3,965,000
Property and equipment .......... 3,305,000
Other assets .................... 78,000
Intangible assets ............... 2,000,000
Goodwill ........................ 9,442,000
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Total assets acquired ......... 18,790,000
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Current liabilities ............. 3,265,000
Capital lease obligations ....... 1,425,000
------------
Total liabilities assumed ..... 4,690,000
------------
Net assets acquired ........... $ 14,100,000
============

Total amortizable intangible assets acquired were $2,000,000 (4-year
weighted average useful life) and were assigned as follows: registered website
and URL address of $1,000,000 (3-year weighted average useful life), partnership
contracts of $280,000 (2-year weighted average useful life), non-compete
agreements of $230,000 (3-year weighted average useful life), favorable lease
contracts of $200,000 (13-year weighted average useful life) and other assets of
$290,000 (2-year weighted average useful life). Total goodwill recorded as a
result of the acquisition was $9,442,000, none of which is expected to be
deductible for tax purposes. The Company does not expect there to be any
significant residual value with respect to these acquired intangible assets.

(12) GOODWILL AND OTHER INTANGIBLE ASSETS

In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets," which addresses the financial accounting and reporting standards for
the acquisition of intangible assets outside of a business combination and for
goodwill and other intangible assets subsequent to their acquisition. This
accounting standard requires that goodwill be separately disclosed from other
intangible assets in the statement of financial position, and no longer be
amortized but tested for impairment on a periodic basis. These impairment tests
are required to be performed at adoption and at least annually thereafter.

Changes in the carrying amount of goodwill for the six-month period ended
July 31, 2003 are as follows:

Balance as of January 31, 2003 ......... $ 9,442,000
Goodwill acquired during the period .... --
Impairment losses ...................... --
------------
Balance as of July 31, 2003 ............ $ 9,442,000
============

Intangible assets have been recorded by the Company as a result of the
acquisition of FanBuzz in the first quarter of fiscal 2002 and television
station WWDP TV-46 in the first quarter of fiscal 2003. The components of
amortized and unamortized intangible assets in the accompanying condensed
consolidated balance sheets consist of the following:

12

Amortization expense for intangible assets for the six months ended July 31,
2003 and 2002 was $309,000 and $402,000, respectively. Estimated amortization
expense for fiscal 2003 and the succeeding five years is as follows: $581,000 in
fiscal 2003, $436,000 in fiscal 2004, $84,000 in fiscal 2005, $15,000 in fiscal
2006, $15,000 in fiscal 2007 and $15,000 in fiscal 2008.

(13) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity (SFAS No. 150).
SFAS No. 150 establishes standards for issuer classification and measurement of
certain financial instruments with characteristics of both liabilities and
equity. Instruments that fall within the scope of SFAS No. 150 must be
classified as a liability. SFAS No. 150 is effective for financial instruments
entered into or modified after May 31, 2003. For financial instruments issued
prior to June 1, 2003, SFAS No. 150 is effective for the Company in the third
quarter of fiscal year 2003. The adoption of SFAS No. 150 is not expected to
have a material impact on the Company's consolidated balance sheet or results of
operations.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

INTRODUCTION

The following discussion and analysis of financial condition and results of
operations should be read in conjunction with the Company's accompanying
unaudited condensed consolidated financial statements and notes included herein
and the audited consolidated financial statements and notes included in the
Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2003.

SELECTED CONDENSED CONSOLIDATED FINANCIAL DATA
(UNAUDITED)

13

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

ValueVision Media, Inc. and its subsidiaries ("ValueVision" or the
"Company") is an integrated direct marketing company that markets its products
directly to consumers through various forms of electronic media. The Company's
operating strategy incorporates television home shopping, Internet e-commerce,
vendor programming sales, fulfillment services and outsourced e-commerce and
fulfillment solutions. Effective May 16, 2002, the Company changed its name to
ValueVision Media, Inc. from ValueVision International, Inc.

The Company's television home shopping business uses on-air personalities to
market brand name merchandise and proprietary / private label consumer products
at competitive prices. The Company's live 24-hour per day television home
shopping programming is distributed primarily through long-term cable and
satellite affiliation agreements and the purchase of month-to-month full and
part-time block lease agreements of cable and broadcast television time. In
addition, the Company distributes its programming through one Company-owned full
power television station in Boston, Massachusetts and one low power television
station in Atlanta, Georgia. The Company also complements its television home
shopping business by the sale of a broad array of merchandise through its
Internet shopping website (www.shopnbc.com).

On November 16, 2000, the Company entered into an exclusive license
agreement with National Broadcasting Company, Inc. ("NBC") pursuant to which NBC
granted ValueVision worldwide use of an NBC-branded name and the Peacock image
for a ten-year period. The Company rebranded its growing home shopping network
and companion Internet shopping website as "ShopNBC" and "ShopNBC.com",
respectively, in fiscal 2001. This rebranding is intended to position
ValueVision as a multimedia retailer, offering consumers an entertaining,
informative and interactive shopping experience, and position the Company as a
leader in the evolving convergence of television and the Internet.

In 1999, the Company founded ValueVision Interactive, Inc. as a wholly owned
subsidiary of the Company to manage and develop the Company's Internet
e-commerce initiatives. The Company, through its wholly owned subsidiary, VVI
Fulfillment Center, Inc. ("VVIFC"), provides fulfillment, warehousing and
telemarketing services to Ralph Lauren Media, LLC ("RLM"), the NBC Experience
Store in New York City and direct to consumer products sold on NBC's website and
to its FanBuzz, Inc. subsidiary. Through its wholly owned subsidiary, FanBuzz,
Inc. ("FanBuzz"), the Company also provides e-commerce and fulfillment solutions
to some of the most recognized sports, media and other well-known entertainment
and retail companies.

On May 20, 2003, the Company announced that its Chairman and Chief Executive
Officer (CEO), Gene McCaffery, will be part of a transition process to determine
a successor as CEO of the Company. The Company has engaged the search firm
Korn/Ferry International to assist in the transition process. Mr. McCaffery and
the Company's Board of Directors are committed to a process that is orderly and
in the Company's best interests. Mr. McCaffery will remain as Chairman and CEO
during the transition period and will serve on the search committee to assist in
the selection of the successor. The Board of Directors and Mr. McCaffery are in
discussions to finalize terms of the transition as well as address any
relationship that would be deemed beneficial going forward.

ACQUISITIONS AND DISPOSITIONS

On January 15, 2003, the Company announced that it entered into an agreement
with Norwell Television LLC to acquire full power television station WWDP TV-46
in Boston, which reaches approximately 1.8 million cable households. The deal
closed in the first quarter of fiscal 2003 on April 1, following FCC approval.
The Company made the investment in television station WWDP TV-46 in order to
build a long-term and cost effective distribution strategy in the attractive
Boston, Massachusetts area. The purchase price of the acquisition was
$33,617,000, including professional fees, and has been accounted for using the
purchase method of accounting as stipulated by SFAS No. 141. The results of
operations of the acquired television station have been included in the
accompanying condensed consolidated financial statements as of April 1, 2003,
the date of acquisition.

In February 2003, the Company entered into an agreement to purchase property
and two commercial buildings occupying approximately 209,000 square feet in Eden
Prairie, Minnesota for approximately $11,300,000. One building purchased is
where the Company currently maintains its corporate administrative, television
production and jewelry distribution operations. Included, as part of the
acquisition, was a second building of approximately 70,000 square feet of
commercial rental space, which the Company leases out to third parties. As a
result of this acquisition, the Company's long-term property lease has been
terminated.

14

In February 2003, the Company completed the sale of ten of its eleven LPTV
stations for a total of $5,000,000. The Company recorded a pre-tax operating
gain on the sale of these LPTV stations of $4,417,000 in the first quarter of
fiscal 2003. Management believes that the sale of these stations will not have a
significant impact on the ongoing operations of the Company.

On February 25, 2002, the Company announced it had signed a definitive
agreement to acquire Minneapolis-based FanBuzz, Inc., an e-commerce and
fulfillment solutions provider of affinity based merchandise to some of the most
recognized sports, media and other well known entertainment brands in the world,
including ESPN, the National Hockey League, the Weather Channel, numerous
amateur sports organizations affiliated with the Olympics, and many other
professional and college sports teams and leagues. FanBuzz, Inc. has focused its
business model of operating online product stores and providing fulfillment and
customer care solutions for already-established brands and destinations. The
purchase price of the acquisition, which closed on March 8, 2002, was $14.1
million and has been accounted for using the purchase method of accounting as
stipulated by SFAS No. 141.

WRITE-DOWN OF INVESTMENTS AND OTHER GAINS & LOSSES

During the quarter ended July 31, 2003, the Company recorded a net pre-tax
investment gain of $361,000 relating to the sale of its common stock investments
of Paxson Communications, Inc. and iDine Rewards Network, Inc. ("iDine"; f/k/a
Transmedia Network, Inc.). During the quarter ended July 31, 2002, the Company,
in a cashless transaction, exchanged its warrants to purchase a total of 438,356
shares of common stock of iDine, accounted for under the provision of SFAS No.
133, for 170,532 shares of the common stock of iDine and recorded a loss of
$526,000 on the exchange. In the six-month period ended July 31, 2002, the
Company recorded pre-tax investment losses totaling $1,070,000 relating to an
investment made in 1997. The decline in fair value of this investment was
determined by the Company to be other than temporary.

RESULTS OF OPERATIONS

NET SALES

Consolidated net sales, inclusive of shipping and handling revenue for the
three months ended July 31, 2003 were $144,214,000 compared with net sales of
$128,336,000 for the three months ended July 31, 2002, a 12% increase.
Consolidated net sales, inclusive of shipping and handling revenue for the six
months ended July 31, 2003 were $287,689,000 compared with net sales of
$261,185,000 for the six months ended July 31, 2002, a 10% increase. The
increase in consolidated net sales is directly attributable to the continued
improvement in and increased sales from the Company's television home shopping
and Internet operations. Net sales attributed to the Company's television home
shopping and Internet operations increased 11% to $138,876,000 for the three
months ended July 31, 2003 from $124,572,000 for the comparable prior year
period. Net sales attributed to the Company's television home shopping and
Internet operations increased 9% to $275,996,000 for the six months ended July
31, 2003 from $252,459,000 for the comparable prior year period. The still
challenging retail economic environment and slowdown in consumer spending
experienced by the Company and other merchandise retailers along with the
distraction of hostilities in Iraq has continued to have an adverse affect on
total net sales growth for the quarter as compared to the prior year.
Notwithstanding the challenging economic situation, the continued growth in home
shopping net sales is primarily attributable to the growth in full-time
equivalent ("FTE") homes receiving the Company's television programming. During
the 12-month period ended July 31, 2003, the Company added approximately 6.4
million FTE subscriber homes, a 14% increase, however, the complete net sales
impact and productivity from these additional homes is still to be realized as
these additional new homes have yet to completely mature. In addition to new FTE
subscriber homes, television home shopping and Internet sales increased due to
the continued addition of new customers from households already receiving the
Company's television home shopping programming, an increase in the average order
size and a 20% year-to-date increase in Internet sales over the prior year. In
addition, total net sales increased over prior year as a result of the Company
reflecting a full six months of FanBuzz net sales in fiscal 2003 in connection
with its acquisition of FanBuzz, Inc. in March 2002. The Company intends to
continue to develop its merchandising and programming strategies with the goal
of improving its television home shopping and Internet sales results. While the
Company is optimistic that television home shopping and Internet sales results
will continue to improve, there can be no assurance that such changes in
strategy will achieve the intended results.

GROSS PROFITS

Gross profits for the three months ended July 31, 2003 and 2002 were
$54,281,000 and $48,412,000, respectively, an increase of $5,869,000 or 12%.
Gross margins for the three months ended July 31, 2003 and 2002 were 37.6% and
37.7%, respectively. Gross profits for the six months ended July 31, 2003 and
2002 were $107,370,000 and $100,231,000, respectively, an increase of $7,139,000
or 7%. Gross margins for the six months ended July 31, 2003 and 2002 were 37.3%
and 38.4%, respectively. The principal reason for

15

the increase in gross profits was the increased sales volume from the Company's
television home shopping and Internet businesses. In addition, gross profit for
the three and six months ended July 31, 2003 included positive contributions
from VVIFC's fulfillment services provided to RLM and FanBuzz businesses.
Television and Internet gross margins for the three months ended July 31, 2003
remained relatively flat compared to television and Internet gross margins for
the three months ended July 31, 2002. Television and Internet gross margins for
the six months ended July 31, 2003 decreased as compared to the six months ended
July 31, 2002 primarily due to first quarter promotional activity in the form of
discounting and shipping and handling promotions which were implemented by the
Company in an effort to maintain sales levels during the Iraq conflict when
viewership was decreased and general uncertainty had an adverse impact on retail
merchants. The Company expects the retail environment to continue to be
challenging and anticipates continued promotional activity. Also, during the
first quarter of fiscal 2002, gross margins were favorably impacted by the sale
of high margin Winter Olympics merchandise.

OPERATING EXPENSES

Total operating expenses for the three months ended July 31, 2003 were
$55,013,000 versus $49,257,000 for the comparable prior year period. Total
operating expenses for the six months ended July 31, 2003 were $112,341,000
(excluding the gain on sale of television stations) versus $99,092,000 for the
comparable prior year period. Distribution and selling expense increased
$4,558,000 or 11% to $45,773,000 or 32% of net sales during the second quarter
of fiscal 2003 compared to $41,215,000 or 32% of net sales for the comparable
prior-year period. Distribution and selling expense increased $9,882,000 or 12%
to $93,450,000 or 32% of net sales for the six months ended July 31, 2003
compared to $83,568,000 or 32% of net sales for the comparable prior-year
period. Distribution and selling expense increased primarily as a result of
increases in net cable access fees due to a 15% year-to-date increase in the
number of average FTE subscribers over the prior year, increased costs
associated with new merchandising personnel, additional distribution and selling
costs associated with FanBuzz resulting from its partnership with the National
Hockey League and increased customer service costs associated with the Company's
commitment to improve its customer care service, offset by decreased
telemarketing costs from prior year relating to efficiencies realized and
decreased advertising expense. Distribution and selling expense remained flat as
a percentage of net sales over the prior year.

General and administrative expense for the three months ended July 31, 2003
increased $994,000 or 25% to $4,939,000 or 3% of net sales compared to
$3,945,000 or 3% of net sales for the three months ended July 31, 2002. For the
six months ended July 31, 2003, general and administrative expense increased
$2,231,000 or 28% to $10,337,000 or 4% of net sales compared to $8,106,000 or 3%
of net sales for the six months ended July 31, 2002. General and administrative
expense increased over prior year as a result of increased consulting and
maintenance fees totaling $885,000 associated with the Company's systems
conversion effort, the establishment of a $451,000 reserve for a pending
litigation settlement, the write-off of approximately $500,000 of legal fees
incurred in connection with a discontinued business development initiative and
additional expense incurred in connection with the Company's search for a new
chief executive officer. These increases were offset by a decrease in rent
expense, which resulted from the termination of the Company's long-term property
lease following the Company's acquisition of the leased property in the first
quarter of fiscal 2003.

Depreciation and amortization expense for the three months ended July 31,
2003 was $4,301,000 versus $4,097,000, representing an increase of $204,000 or
5% from the comparable prior-year period. Depreciation and amortization expense
for the six months ended July 31, 2003 was $8,554,000 versus $7,418,000,
representing an increase of $1,136,000 or 15% from the comparable prior-year
period. Depreciation and amortization expense as a percentage of net sales for
the three and six months ended July 31, 2003 and 2002 were each 3%,
respectively. The dollar increase is primarily due to increased depreciation and
amortization as a result of assets placed in service in connection with the
Company's ERP systems conversion and implementation and depreciation on the two
commercial buildings purchased by the Company in February 2003, offset by
decreased depreciation associated with VVIFC fixed assets which were written
down in the fourth quarter of fiscal 2002 following the Company's restructuring
of its customer care and fulfillment services agreement with RLM.

OPERATING INCOME (LOSS)

For the three months ended July 31, 2003, the Company reported an operating
loss of $732,000 compared to an operating loss of $845,000 for the three months
ended July 31, 2002, a positive increase of $113,000. For the six months ended
July 31, 2003, the Company reported an operating loss of $554,000 compared to
operating income of $1,139,000 for the six months ended July 31, 2002, a
decrease of $1,693,000. Operating income decreased for the six months ended July
31, 2003 from prior year primarily as a result of the Company's decrease in
gross margins, as described above under "Gross Profits." Also contributing to
the decrease in operating income were increases in distribution and selling
expenses, particularly net cable access fees for which the expense of adding
approximately 6.4 million new FTE homes since July 2002 is being incurred but
the future revenue benefit and productivity of these additional homes is yet to
be fully realized, increased general and administrative expenses recorded in
connection with pending

16

litigation and the write off of capitalized legal fees associated with a
discontinued business development initiative and increases in depreciation and
amortization as a result of assets placed in service in connection with the
Company's ERP systems conversion and implementation. These expense increases
were offset by the increase in net sales and gross profits reported by the
Company's television home shopping and other businesses and the recording of a
$4,417,000 pre-tax gain following the sale of ten low power television stations
in the first quarter of fiscal 2003.

NET INCOME (LOSS)

For the three months ended July 31, 2003, the Company reported a net loss
available to common shareholders of $147,000 or $.00 per share on 35,690,000
weighted average common shares outstanding compared with a net loss available to
common shareholders of $1,662,000 or $.04 per share on 38,007,000 weighted
average common shares outstanding for the quarter ended July 31, 2002. The net
loss available to common shareholders for the quarter ended July 31, 2003
includes a pre-tax gain of $361,000 relating to the sale of its common stock
investments of Paxson Communications, Inc. and iDine Rewards Network, Inc. and
interest income totaling $395,000 earned on the Company's cash and short-term
investments. The net loss available to common shareholders for the quarter ended
July 31, 2002 includes a net pre-tax loss of $526,000, which resulted from the
cashless exchange of iDine warrants for iDine common stock. In addition, the net
loss also included an $86,000 pre-tax loss related to the write-down of an
investment whose decline in fair value was determined to be other than
temporary. For the quarter ended July 31, 2002, the net loss available to common
shareholders also included a pre-tax loss of $2,132,000 related to the Company's
equity interest in RLM and interest income of $1,091,000 earned on the Company's
cash and short-term investments.

For the six months ended July 31, 2003, the Company reported net income
available to common shareholders of $315,000 or $.01 per share on 42,489,000
diluted weighted average common shares outstanding ($.01 per share on 35,835,000
basic shares) compared with a net loss available to common shareholders of
$1,123,000 or $.03 per share on 38,080,000 weighted average common shares
outstanding for the six months ended July 31, 2002. Net income available to
common shareholders for the six months ended July 31, 2003 includes a pre-tax
gain of $361,000 relating to the sale of its common stock investments of Paxson
Communications, Inc. and iDine Rewards Network, Inc. and interest income
totaling $749,000 earned on the Company's cash and short-term investments. The
net loss available to common shareholders for the six months ended July 31, 2002
includes pre-tax losses totaling $1,070,000 related to the write-down of
investments whose decline in fair value was determined to be other than
temporary, a net pre-tax unrealized gain of $1,021,000 resulting from market
price increases on the holdings of the Company's warrant investments and pre-tax
losses totaling $532,000 related to the sale and conversion of investments. For
the six months ended July 31, 2002, the net loss available to common
shareholders also included a pre-tax loss of $4,230,000 related to the Company's
equity interest in RLM and interest income totaling $2,127,000 earned on the
Company's cash and short-term investments.

The Company recorded an income tax provision in the quarter ended July 31,
2003, relating to state income taxes payable on certain income for which there
was no loss carryforward benefit available. The Company has not recorded any
additional tax provision in fiscal 2003 as such provision is offset fully by the
reversal of the income tax valuation allowance recorded against loss
carryforwards in fiscal 2002. The Company's effective tax rate for the quarter
and six months ended July 31, 2002 was 36%.

PROGRAM DISTRIBUTION

The Company's television home-shopping programming was available to
approximately 59.4 million homes as of July 31, 2003, as compared to 55.1
million homes as of January 31, 2003 and to 53.1 million homes as of July 31,
2002. The Company's programming is currently available through affiliation and
time-block purchase agreements with approximately 980 cable or satellite
systems. Beginning in April 2003, the Company's programming was also made
available full-time to homes in the Boston, Massachusetts market via a
full-power television broadcast station that a subsidiary of the Company
acquired and a low power television station in Atlanta, Georgia. As of July 31,
2003 and 2002, the Company's programming was available to approximately 53.1
million and 46.6 million FTE households, respectively. As of January 31, 2003,
the Company's programming was available to 50.5 million FTE households.
Approximately 46.4 million and 39.7 million households at July 31, 2003 and
2002, respectively, received the Company's programming on a full-time basis.
Homes that receive the Company's television home shopping programming 24 hours
per day are counted as one FTE each and homes that receive the Company's
programming for any period less than 24 hours are counted based upon an analysis
of time of day and day of week. The Company's television home shopping
programming is also simulcast live 24 hours a day, 7 days a week through its
Internet shopping website (www.shopnbc.com) which is not included in total FTE
households.

17

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

A discussion of the critical accounting policies related to accounting
estimates and assumptions is contained in the Company's 2002 Annual Report on
Form 10-K.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

As of July 31, 2003, cash and cash equivalents and short-term investments
were $137,735,000, compared to $168,634,000 as of January 31, 2003, a
$30,899,000 decrease primarily related to the Company's acquisition of
television station WWDP TV-46 in Boston, Massachusetts. For the six months ended
July 31, 2003, working capital decreased $37,187,000 to $189,379,000. The
current ratio was 3.2 at July 31, 2003 compared to 3.6 at January 31, 2003. At
July 31, 2003, short-term investments and cash equivalents were invested
primarily in money market funds, high quality commercial paper with original
maturity dates of less than 270 days and investment grade corporate and
municipal bonds and other tax advantaged certificates with tender option terms
ranging from one month to one year. The Company's principal source of liquidity
is its cash, cash equivalents and short-term investments as well as its
operating cash flows. Although management believes the Company's short-term
investment policy is very conservative in nature, certain short-term investments
in commercial paper can be exposed to the credit risk of the underlying
companies to which they relate. The average maturity of the Company's investment
portfolio ranges from 30 to 60 days.

Total assets at July 31, 2003 were $404,503,000, compared to $406,274,000 at
January 31, 2003, a $1,771,000 decrease. Shareholders' equity was $273,059,000
at July 31, 2003, compared to $274,646,000 at January 31, 2003, a $1,587,000
decrease. The decrease in shareholders' equity for the six-month period ended
July 31, 2003 resulted primarily from the repurchase of 586,000 common shares
totaling $6,429,000 under the Company's authorized stock repurchase plan,
$30,000 relating to accrued interest on a note receivable from an officer and
accretion on redeemable preferred stock of $141,000. These decreases were offset
by increases in shareholders' equity of $1,792,000 from proceeds received
related to the exercise of stock options, the recording of net income of
$456,000, unrealized gains on investments classified as "available-for-sale"
totaling $2,517,000 and vesting of deferred compensation of $248,000.

For the six-month period ended July 31, 2003, net cash provided by operating
activities totaled $16,781,000 compared to net cash provided by operating
activities of $5,201,000 for the six-month period ended July 31, 2002, an
$11,580,000 increase. Net cash provided by operating activities for the
six-month periods ended July 31, 2003 and 2002 reflects net income (loss), as
adjusted for depreciation and amortization, common stock issued to employees,
vesting of deferred compensation, gain on sale of television stations,
write-down of investments, unrealized gains on security holdings, equity in
losses of affiliates and (gains) losses on the sale and conversion of
investments. In addition, net cash provided by operating activities for the six
months ended July 31, 2003 reflects a decrease in accounts receivable,
inventories and prepaid expenses, offset by a decrease in income taxes payable.
Accounts receivable decreased primarily due to the first quarter receipt of
$11.0 million from RLM resulting from VVIFC's agreement to amend the RLM
customer care and fulfillment services agreement in fiscal 2002. Receivables
also decreased as a result of the timing of customer collections made pursuant
to the "ValuePay" installment program and an increase in the percentage of sales
made using the ShopNBC credit card. These decreases were offset by an increase
in credit card receivables as a result of increased sales and the recording of a
$5.5 million receivable relating to the timing of the proceeds to be received in
settlement of the Company's second quarter common stock investment sales.
Inventories decreased from year-end as a result of management efforts to reduce
inventory levels and the timing of merchandise receipts. Although the Company
believes it will be able to reduce current inventory quantities to more normal
historic levels, there remains the risk of inventory obsolescence and/or
markdowns should this prove unsuccessful. Prepaid expenses decreased primarily
as a result of the timing of long-term cable access fee payments, offset by an
increase in prepaid insurance following the Company's annual insurance renewal.

Net cash provided by investing activities totaled $7,877,000 for the six
months ended July 31, 2003 compared to net cash used for investing activities of
$26,219,000 for the six months ended July 31, 2002. For the six months ended
July 31, 2003 and 2002, expenditures for property and equipment were $16,186,000
and $5,522,000, respectively. Expenditures for property for the six months ended
July 31, 2003 included the Company's $11,300,000 property and commercial
building purchase in February 2003 where the Company maintains its corporate
administrative, television production and jewelry distribution operations.
Included as part of the acquisition was a second commercial building, which the
Company leases out to third parties. Other expenditures for property and
equipment during the periods ended July 31, 2003 and 2002 primarily include
capital expenditures made for the upgrade, stabilization and replacement of
computer software and front-end ERP, customer care management and merchandising
systems, related computer equipment, digital broadcasting equipment and other
office equipment, warehouse equipment, production equipment and expenditures on
leasehold improvements. Principal future capital expenditures include the
upgrade, stabilization and replacement of computer software and front-end
merchandising systems and business processes, the upgrade and digitalization of
television

18

production and transmission equipment and related computer equipment associated
with the expansion of the Company's home shopping business and e-commerce
initiatives. In the six months ended July 31, 2003, the Company invested
$40,834,000 in various short-term investments, received proceeds of $91,309,000
from the sale of short-term investments and received proceeds of $5,000,000 in
connection with the sale of ten low power television stations. Also during the
first six months of fiscal 2003, the Company invested $33,466,000, net of cash
acquired, in connection with the acquisition of television station WWDP TV-46 in
Boston, Massachusetts and received proceeds of $2,054,000 from the sale of
common stock investments. In the six months ended July 31, 2002, the Company
invested $83,676,000 in various short-term investments, received proceeds of
$77,972,000 from the sale of short-term investments, made disbursements of
$2,688,000 for certain investments and other assets, and received proceeds of
$2,000 from the sale of investments and property. Also during the first six
months of fiscal 2002, the Company invested $12,307,000, net of cash acquired,
in connection with the acquisition of FanBuzz, Inc.

Net cash used for financing activities totaled $5,082,000 for the six months
ended July 31, 2003 and related primarily to payments made of $6,429,000 in
conjunction with the repurchase of 586,000 shares of the Company's common stock
at an average price of approximately $10.94 per share and payments of long-term
capital lease obligations of $438,000, offset by cash proceeds received of
$1,785,000 from the exercise of stock options. Net cash used for financing
activities totaled $17,642,000 for the six months ended July 31, 2002 and
related primarily to payments of $21,135,000 made in conjunction with the
repurchase of 1,295,000 shares of the Company's common stock at an average price
of $15.95 per share and payments of long-term capital lease obligations of
$206,000, offset by cash proceeds received of $3,699,000 from the exercise of
stock options.

Management believes that funds currently held by the Company should be
sufficient to fund the Company's operations, anticipated capital expenditures,
strategic investments and cable launch fees through at least the next twelve
months. A discussion of the nature and amount of future cash commitments is
contained in the Company's 2002 Annual Report on Form 10-K.

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Information contained in this Form 10-Q and in other materials filed by the
Company with the Securities and Exchange Commission (as well as information
included in oral statements or other written statements made or to be made by
the Company) contain certain "forward-looking statements" within the meaning of
federal securities laws which represent management's expectations or beliefs
concerning future events. These statements are based on management's current
expectations and are accordingly subject to uncertainty and changes in
circumstances. Actual results may vary materially from the expectations
contained herein due to various important factors, including (but not limited
to): changes in consumer spending habits and debt levels; changes in interest
rates; seasonal variations in consumer purchasing activities; changes in the mix
of products sold by the Company; competitive pressures on sales; changes in
pricing and gross profit margins; changes in the level of cable, satellite and
other distribution for the Company's programming and fees associated therewith;
the success of the Company's strategic alliances and relationships; the ability
of the Company to manage its operating expenses successfully; risks associated
with acquisitions; changes in governmental or regulatory requirements;
litigation or governmental proceedings involving or otherwise affecting the
Company's operations; and the ability of the Company to obtain and retain key
executives and employees. Investors are cautioned that all forward-looking
statements involve risk and uncertainty and the Company is under no obligation
(and expressly disclaims any such obligation) to update or alter its
forward-looking statements whether as a result of new information, future events
or otherwise.

In addition to any specific risks and uncertainties discussed in this Form
10-Q, the risks and uncertainties discussed in detail in the Company's Form 10-K
for the fiscal year ended January 31, 2003, specifically under the captions
entitled "Risk Factors" and "Critical Accounting Policies and Estimates,"
provide information which should be considered in evaluating any of the
Company's forward-looking statements. In addition, 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 obsolete the forward-looking statements on which such facts
and circumstances were based.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company does not enter into financial instruments for trading or
speculative purposes and does not currently utilize derivative financial
instruments as a hedge to offset market risk. The Company has held certain
equity investments in the form of common stock purchase warrants in public
companies and accounted for these investments in accordance with the provisions
of SFAS No. 133. As of July 31, 2003, the Company no longer has investments in
the form of common stock purchase warrants. The operations of the Company are
conducted primarily in the United States and as such are not subject to foreign
currency exchange rate risk. However,

19

some of the Company's products are sourced internationally and may fluctuate in
cost as a result of foreign currency swings. The Company has no long-term debt
other than fixed capital lease obligations, and accordingly, is not
significantly exposed to interest rate risk, although changes in market interest
rates do impact the level of interest income earned on the Company's substantial
cash and short-term investment portfolio.

ITEM 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, the Company conducted an
evaluation, under the supervision and with the participation of the Company's
Chief Executive Officer, Gene McCaffery and Chief Financial Officer, Richard D.
Barnes, of the Company's disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the
"Exchange Act")). Based on this evaluation, the Chief Executive Officer and
Chief Financial Officer concluded that the Company's disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Company in reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms. There was no change in
the Company's internal control over financial reporting during the Company's
most recently completed fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the Company's internal control over
financial reporting.

20

VALUEVISION MEDIA, INC. AND SUBSIDIARIES

PART II OTHER INFORMATION

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The annual meeting of shareholders of the Company was held on June 26, 2003.
Shareholders holding an aggregate of 38,454,712 shares (common and preferred
shares), or approximately 94% of the outstanding shares, were represented at the
meeting by proxy or in person. Matters submitted at the meeting for vote by the
shareholders were as follows:

(a) Election of Directors

The following nominees were elected with the following votes to serve as members
of the Board of Directors until the next annual meeting of shareholders or until
such time as a successor may be elected:

* Messrs. Burgess and Flannery are the representatives of the holders of the
Company's Series A Redeemable Convertible Preferred stock.

(b) Ratification of Deloitte & Touche LLP as independent auditors for the
current fiscal year.

Shareholders ratified the appointment of Deloitte & Touche LLP as independent
auditors for the fiscal year ending January 31, 2004 by a vote of 37,100,721
shares in favor and 1,339,891 shares against approval. There were 14,100 shares
that were voted to abstain and no broker non-votes.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

10.1 Separation Agreement dated June 30, 2003 between the
Registrant and John Ryan +

10.2 Form of Salary Continuation Agreement dated July 2,
2003 between the Registrant and each of Richard
Barnes, Nathan Fagre and Stann Leff +

31.1 Certification Pursuant to 18 U.S.C. 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 - Chief Executive Officer

31.2 Certification Pursuant to 18 U.S.C. 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 - Chief Financial Officer

32.1 Certification Pursuant to 18 U.S.C. 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 - Chief Executive Officer

32.2 Certification Pursuant to 18 U.S.C. 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 - Chief Financial Officer

21

+ Management compensatory plan/arrangement.

(b) Reports on Form 8-K

(i) The Registrant filed a Current Report on Form 8-K on August 25, 2003
reporting under Item 12 that the Registrant issued a press release
dated August 20, 2003 disclosing its second quarter fiscal 2003
earnings.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

VALUEVISION MEDIA, INC. AND SUBSIDIARIES

/s/ Gene McCaffery
---------------------------------------------------
Gene McCaffery
Chairman of the Board, Chief Executive
Officer and President (Principal Executive Officer)

/s/ Richard D. Barnes
---------------------------------------------------
Richard D. Barnes
Executive Vice President, Chief Financial
Officer and Chief Operating Officer
(Principal Financial and Accounting Officer)

September 12, 2003

22