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Value America revives on investment, 1Q results

Value America Inc. (Nasdaq: VUSA) was up 11 percent Thursday after it received a new round of funding and said it would be profitable in 2002.

The company announced Wednesday $90 million in additional financing, as well as a loss of 60 cents a share for its first quarter, beating First Call's expected loss by 10 cents a share.

Shares the online retailer, which had the honor of being the third worst performing IPO in 1999, were up 7/32 to 2 3/16. Shares have declined steadily from their 52-week high of 33 3/4.

Value America says the financing commitments "represent a significant vote of confidence" in the company's refocusing. But the $90 million financing, which will come from current investors, may just an attempt to recoup losses.

"I do see it as a vote of confidence," said Neal Johnson, an analyst with The Robinson-Humphrey Company. "Shareholders, and the board of a directors are the ones that know the most about a company." Johnson said that though the financing and refocusing shows the company has cash and business in order to proceed, it will have to prove it through execution in order to attract investors.

The agreements call for the sale of $30 million in stock to existing Value America investors including Vulcan Ventures, Inc., Pacific Capital Group and Frederick W. Smith, Chairman of FDX Corp. and Federal Express. A new preferred stock entitles the purchasers to convert it into shares of the company's common stock on a one-for-one basis, at a premium of 15 percent over Value America's closing stock price of $2.03 on May 9.

Under the deal with Acqua Wellington, Value America will have access to up to $60 million in equity through periodic sales of its common stock over the next 14 months.

The company has also agreed to sell, at a small discount to market prices, up to $60 million in stock to Acqua Wellington North America Equities Fund, Ltd.

Investors under both agreements also will receive warrants to purchase shares of Value America's common stock.

The company said it expects the new round of funding to bring it to profitability at the beginning of 2002.

Meanwhile, the company is still reporting significant, but narrowing losses; a first quarter loss of $27.4 million, or 60 cents a share was an improvement over loss of $2.72 per share for the first quarter last year. The company cited reductions in its general and administrative expenses and a more efficient advertising spending for the decline.

Revenue was $47.2 million, up 68.4 percent over the $28 million during the first quarter of 1999.

Value America stock plunged in December on news that it would cut its workforce and investigate "strategic opportunities."

Instead of coming up against broad-based etailers like Amazon (Nasdaq: AMZN), the company now competes with retailers of computers and electronics such as Buy.com (Nasdaq: BUYX), Egghead (Nasdaq: EGGS) and Cyberian Outpost (Nasdaq: COOL). Value America said its recent changes have improved in key operating indices, including revenue per head, on-time delivery, advertising efficiency, and customer satisfaction.