Here's the way to do funding......... (R/S) Vit

Here's the way to do funding.........

(R/S) VitalStream Completes $14 Million Equity Financing (R/S)
Monday February 6, 6:30 am ET
Announces Plans for Reverse Stock Split and Application for Nasdaq Listing


IRVINE, Calif.--(BUSINESS WIRE)--Feb. 6, 2006--VitalStream Holdings, Inc. (OTCBB:VSTH - News), the world leader in audio and video streaming, today announced that its board of directors has approved several significant initiatives that significantly strengthen the Company financially and strategically, positioning VitalStream for strong growth in 2006 and beyond. Specifically, the Company is announcing the successful completion of a private financing totaling $14 million in cash for VitalStream, its intention to enact a reverse split of VitalStream common stock designed to allow the company to qualify for listing of its common stock on the Nasdaq Capital Market (formerly known as the Nasdaq SmallCap Market) and eventually the Nasdaq National Market, and as announced last week, the addition of Mel Harris, former president of both Paramount Pictures and Sony Pictures Entertainment, to the VitalStream board of directors.
ADVERTISEMENT


"As we formalized our 2006 plan, VitalStream's board recognized that in order to accelerate our ability to capture our share of the significant operating and acquisition opportunities in the streaming media applications market, we needed to strengthen our balance sheet, expose the company to a wider investor base, and deepen our strategic relationships. We have now taken significant steps towards achieving all of these objectives," said Jack Waterman, Chairman and Chief Executive Officer of VitalStream.

"We are particularly pleased by the strong show of support from two new investors, Winslow Management Company of Boston, who was the lead in this financing round, and Crosslink Capital. In addition, demand from several existing investors, including Columbia Acorn Fund, was so strong that we were able to complete the transaction without a placement agent. Simultaneously, we believe that enacting a reverse split as the final step towards our ultimate objective of moving to the Nasdaq National Market will make the company more attractive to a broader financial base over time. Furthermore, the addition of someone of Mel Harris' stature to our board is a very strong signal that VitalStream intends to strengthen its leadership and expand its presence in the streaming media industry. With a business built around one of the fastest growing segments of the Internet sector and a financial model featuring strong recurring revenues, we are reiterating our expectations to report record revenues for the fourth quarter of 2005 and positive EBITDA in 2006, excluding stock-based compensation and absent any potential merger or strategic investment opportunities. We look forward to discussing these positive events and our 2005 financial results on our regularly scheduled fourth quarter and fiscal year conference call on February 13, 2006," concluded Mr. Waterman.

The financing transaction was accomplished through a private placement of 10,769,230 shares of common stock of the Company at a price of $1.30 per share, for aggregate proceeds of $14 million. The parties closed the private placement on February 3, 2006. The total number of the Company's common shares outstanding after the financing is 83,854,939. The Company has agreed to promptly file a registration statement registering the resale of the shares of common stock purchased in the financing transaction.

In order to meet the minimum stock price for listing on the Nasdaq Capital Market and the Nasdaq National Market, VitalStream's board of directors has approved, and recommended for approval by shareholders, a resolution authorizing the Board of Directors to effect, or in its discretion not effect, a reverse stock split of all outstanding shares of common stock within a range of 1:2 to 1:5.5 (one post-consolidation share for every two pre-consolidation shares to one post-consolidation share for every five and one-half pre-consolidation shares) at anytime prior to December 31, 2006. The Company intends to immediately seek consent for the reverse split from a majority of shareholders through distribution of a consent solicitation statement, and, assuming shareholder consent is obtained, to effect the reverse split and file an application with Nasdaq within the next few months. The record date for shareholders entitled to give their consent is February 3, 2006. It is anticipated that if the Company's application is successful, its shares of common stock will begin trading on the Nasdaq Capital Market on a post-split basis in April or May of this year.