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UPDATE: Valley Media Stock Price Rises, Keeping Company on Nasdaq Board

20 Jul, 2001 By: Joan Villa

Thanks to several days of trading in the $1.50 to $2 range, distributor Valley Media has pulled itself back from the brink of delisting from the Nasdaq National Market.

“We went back to Nasdaq and said, ‘This is a fine company that's been around a long time. We had a bad year and a half. Don't penalize us forthat,’ explains James P. Miller, Valley's president and c.o.o. “They were convinced we had taken the steps necessary to remainstrong and in compliance.”

As a result of Valley's stock increase, Nasdaq notified the company July 13 that it would halt delisting proceedings initiated last month and also would not act on either a reverse stock split or a move down to the Nasdaq Small Cap exchange — two measures that had been discussed asalternatives to delisting.

Valley's turnaround traces to a spate of trading activity that began June 27, when the share price nearly doubled to $1.99 and more than 135,000 shares changed hands. Valley attributes the sudden volumeprimarily to company executives, who were able to trade their shares for the first time in three months in compliance with insider trading rules.

Since then, Valley has enjoyed nearly three weeks of trading between $1.40 and $2.25 per share, spurred by investor interest, Miller says.

“The investing public has taken a look at our year-end earnings and said it's ugly, but they recognize we've taken hold of it and there'ssome good things ready to happen,” he says.

Valley reported a $29.5 million loss for the fiscal year ended March 31, primarily related to the bankruptcies of a few major customers, uncollectable debt, excess inventory write-offs and severance toemployees “hired for growth that never came around.” Valley's net sales for the year were off 12% to $803.7 million.

“Through these horrible losses we've been cash flow positive,” Miller reports. “The company is ahead of budget for the first few months [of the new fiscal year] and it's a budget that will show a profit for thefull year.”

Last month, the Woodland, Calif.-based wholesaler appealed a Nasdaq staff determination that its stock, under the symbol VMIX, could be delisted after trading under $1 for more than 90 days. The company was also in violation of Nasdaq's requirement that it maintain a minimum $5 million market value.

The climb in Valley's price both addressed compliance issues and produced the best possible outcome for the distributor, Miller adds. “A,the stock is at twice the value of a few weeks ago, and B, we don't have to spend time or money figuring out how to keep company liquidity for our shareholders,” Miller notes. “Now we can get back to focusing on our operating results and stuff that's going to make us money.”

Industry analyst Tom Adams of Adams Media Research agrees that Valley's public listing is critical to financing its operations. “Their functionis carrying the inventory and the risk. You have to have access to capital to do that,” he says.

A delisting would have jeopardized Valley's ability to work with banks and borrow money against equity, he adds. “It's tough to be adistributor if you can't shift money around with ease, because that's what the distribution game is.”

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