<PAGE>

===============================================================================

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

                                    FORM 10-Q
<TABLE>
<S>     <C>                                                <C>         <C>

[x]     Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

        For the quarterly period ended July 1, 2000                    Commission file number 000-25617

                                                            OR

[ ]     Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the
        transition period from ________ to _______
</TABLE>

                               Valley media, INC.
             (Exact name of registrant as specified in its charter)

               Delaware                                  94-2556440
     (State or other jurisdiction           (I.R.S. Employer Identification No.)
  of incorporation or organization)



                            ------------------------

               1280 Santa Anita Court, Woodland, California 95776
               (Address of principal executive offices) (zip code)
       Registrant's telephone number, including area code: (530) 661-6600

                            ------------------------

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      .
                       -----                              -----


The number of shares outstanding of the Registrant's common stock as of July 28,
2000 was 8,453,291 shares.


===============================================================================
<PAGE>

                        PART I - Financial Information

ITEM 1.  Financial Statements

                              Valley Media, Inc.

                          Consolidated Balance Sheets

                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                               July 1,         April 1,
                                                                                                2000            2000
                                                                                              ---------       ---------
        Dollars in thousands, except share data
        Assets
        Current assets
<S>                                                                                              <C>            <C>
           Cash............................................................................      $  286         $   274
           Accounts receivable, less allowance for doubtful accounts of $12,259 at July 1,
              2000 and $12,017 at April 1, 2000............................................     156,212         175,776
           Inventories, net of reserves of $5,327 at July 1, 2000 and $4,145
              at April 1, 2000.............................................................     179,532         190,428
           Investment in marketable equity securities, available for sale (Note 3).........       8,501          17,002
           Deferred income taxes...........................................................       7,291           7,234
           Prepaid expenses and other......................................................       9,388           2,164
                                                                                              ---------       ---------
                    Total current assets...................................................     361,210         392,878

        Property and equipment, net........................................................      25,423          26,132

        Goodwill and other intangibles, net................................................      12,839          13,207

        Deferred income taxes..............................................................         951             951

        Other assets.......................................................................         789             910
                                                                                              ---------       ---------


        Total assets.......................................................................    $401,212        $434,078
                                                                                               ========        ========

        Liabilities and stockholders' equity
        Current liabilities
           Accounts payable................................................................    $152,795        $149,004
           Accrued liabilities.............................................................       7,484           7,903
           Revolving line of credit........................................................     161,496         181,772
           Current portion of long-term debt...............................................       3,810           3,984
           Deferred income taxes (Note 3)..................................................       2,458               2
                                                                                              ---------       ---------
                    Total current liabilities..............................................     328,043         342,665

        Deferred income taxes..............................................................       7,034          12,890

        Long-term debt.....................................................................       6,956           7,861

        Commitments and contingencies
        Stockholders' equity
           Preferred stock, $.001 par value, 2,000,000 shares authorized, none issued.....
           Common stock, $.001 par value, 20,000,000 shares authorized, 8,453,291 shares
              issued and outstanding.......................................................           8               8
           Additional paid-in capital......................................................      52,489          51,951
           Stockholders' notes receivable..................................................        (194)           (194)
           Retained earnings...............................................................       2,570           9,490
           Accumulated other comprehensive income (Note 3).................................       4,306           9,407
                                                                                              ---------       ---------
              Total stockholders' equity...................................................      59,179          70,662
                                                                                              ---------       ---------
        Total liabilities and stockholders' equity.........................................    $401,212        $434,078
                                                                                              =========       =========
</TABLE>

                 See notes to consolidated financial statements.

                                       1
<PAGE>

                               Valley Media, Inc.

                      Consolidated Statements of Operations

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                      ------------------------------------------
                                                                  Thirteen Weeks Ended
                                                      ------------------------------------------
                                                                July 1,           July 3,
                                                                 2000              1999
                                                              ---------          ---------
<S>                                                            <C>                <C>
Dollars in thousands, except share data
Net sales.............................................         $177,020           $185,766
Cost of goods sold....................................          162,809            163,895
                                                              ---------          ---------

Gross profit..........................................           14,211             21,871
Selling, general and administrative expenses..........           21,486             20,073
                                                              ---------          ---------

Operating income (loss)...............................           (7,275)             1,798
Interest expense......................................            4,252              3,164
                                                              ---------          ---------

Loss before income taxes..............................          (11,527)            (1,366)
Income tax benefit....................................           (4,607)              (567)
                                                              ---------          ---------

Net loss..............................................        $  (6,920)         $    (799)
                                                              =========          =========

Net loss per share:
   Basic and diluted net loss per share...............        $   (0.82)         $   (0.09)

Weighted average shares used in the calculation:
   Basic and diluted..................................        8,453,291          8,449,009

</TABLE>


                See notes to consolidated financial statements.

                                       2
<PAGE>

                               Valley Media, Inc.

                      Consolidated Statements of Cash Flows

                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                      -------------------------------
                                                                                            Thirteen Weeks Ended
                                                                                      -------------------------------
                                                                                           July 1,          July 3,
                                                                                            2000             1999
                                                                                          ---------        --------
<S>                                                                                       <C>              <C>
Dollars in thousands
Cash flows from operating activities
   Net loss ........................................................................      $  (6,920)       $   (799)
   Adjustments to reconcile net loss to net cash (provided by) used in operating
    activities:
   Depreciation and amortization....................................................          1,842           1,565
   Bad debt expense.................................................................            374             265
   Noncash compensation expense.....................................................            538
   Amortization of deferred financing fees..........................................            234
   Deferred income taxes............................................................            (57)
   Equity in net income of joint venture............................................             (4)
   Changes in assets and liabilities:
     Accounts receivable............................................................         19,190          42,944
     Inventories....................................................................         10,896          (7,717)
     Prepaid expenses and other.....................................................         (7,308)           (247)
     Accounts payable...............................................................          3,791         (34,637)
     Accrued  liabilities...........................................................            502          (4,466)
                                                                                          ---------        --------
       Net cash provided by (used in) operating activities..........................         23,078          (3,092)
                                                                                          ---------        --------

Cash flows from investing activities
   Purchases of property and equipment..............................................         (1,686)         (6,454)
   Other............................................................................            (25)             40
                                                                                          ---------        --------
       Net cash used in investing activities........................................         (1,711)         (6,414)
                                                                                          ---------        --------

Cash flows from financing activities
   Short-term borrowings under revolving line of credit.............................        172,140         221,964
   Repayment of short-term borrowings...............................................       (192,416)       (216,342)
   Issuance of long-term debt.......................................................                          2,985
   Repayment of long-term debt......................................................         (1,079)           (399)
   Repayment of stockholder note receivable.........................................                            126
                                                                                          ---------        --------
       Net cash provided by (used in) financing activities..........................        (21,355)          8,334
                                                                                          ---------        --------

NET INCREASE (DECREASE) IN CASH.....................................................             12          (1,172)
CASH, BEGINNING OF PERIOD...........................................................            274           1,433
                                                                                          ---------        --------
CASH, END OF PERIOD.................................................................      $     286        $    261
                                                                                          =========        ========
</TABLE>

                See notes to consolidated financial statements.

                                       3
<PAGE>

                               Valley Media, Inc.

             Notes to Consolidated Financial Statements (Unaudited)

1.  Basis of Presentation

         The accompanying consolidated financial statements of Valley Media,
Inc., and its subsidiaries (the "Company"), are unaudited and reflect all
normal, recurring adjustments (except for adjustments relating to obsolete
inventory and severance charges as described in Management's Discussion and
Analysis of Financial Condition and Results of Operations), which, in the
opinion of management, are necessary for a fair presentation of such financial
statements. The Company's interim results are not indicative of results for a
full year.


         These unaudited consolidated financial statements should be read in
conjunction with the audited financial statements included in the Company's
Annual Report on Form 10-K for the fiscal year ended April 1, 2000.


2.  amplified.com


         On April 9, 2000, the Company entered into agreements with
amplified.com, Inc. ("amplified.com") to merge both Companies' Internet
businesses. The Company contributed certain of its Internet-related assets in
exchange for 50% of the outstanding shares of amplified.com. The net book value
of the net assets contributed, which included customer lists, trademarks and
tradenames, databases, design documents, office furniture and equipment, and the
Company's rights and interests under the Agreement with Loudeye was not
material. The Company uses the equity method to account for its investment in
amplified.com.


         amplified.com provides marketing and sales support services to existing
Valley customers for a commission. The Company provides fulfillment services to
amplified.com customers for the cost of the product and a fulfillment fee. The
Company provides certain services (including occupancy, systems connectivity and
support, human resources, accounting and credit department services) to
amplified.com. The Company receives a fee for services provided. In addition,
the Company provides amplified.com with a line of credit under which
amplified.com may borrow up to an aggregate of $2.0 million. As of July 1, 2000,
approximately $1,275,000 was outstanding under the line of credit. As of July 1,
2000 the Company has incurred certain costs totaling approximately $2,007,000 in
connection with these agreements which are recorded as a receivable from
amplified.com.


3.  Investment in Marketable Equity Securities

         The Company's investment in Loudeye common stock is recorded at
$8,501,000 (based upon the closing price of Loudeye common stock at June 30,
2000) and an unrealized gain of $5,101,000 (net of deferred taxes of $3,400,000)
was included in accumulated other comprehensive income.

                                       4
<PAGE>

4.  Segment Information

         Management has determined that there are three reportable segments
based on the customers served by each segment: Full-line Distribution,
e-Fulfillment and Independent Distribution. Such determination was based on the
level at which executive management reviews the results of operations in order
to make decisions regarding performance assessment and resource allocation.


         Full-line Distribution serves music, video and other retailers
worldwide with customers ranging from independent stores to specialty chains to
retailers who sell music and video as an ancillary product line. e-Fulfillment
provides product and data to Internet retailers. Independent Distribution serves
independent labels and studios. Independent Distribution sells products to
Full-line Distribution and e-Fulfillment at market price, and accordingly, the
intersegment revenues are included in "intersegment eliminations" in the
reconciliation of operating income reported below.


         Expenses of the advertising, distribution, information systems, finance
and administrative groups are not allocated to the operating segments and are
included in "other" in the reconciliation of operating income reported below.
The Company does not allocate equity in net loss of joint venture, interest
expense, income taxes or extraordinary items to operating segments. The Company
does not identify and allocate assets or depreciation by operating segment.

         Information on reportable segments is as follows:
<TABLE>
<CAPTION>
                                                                                      -----------------------------
                                                                                         Thirteen Weeks Ended
                                                                                      -----------------------------
                                                                                          July 1,        July 3,
                         Dollars in thousands                                              2000           1999
                                                                                        ----------    ----------
<S>                                                                                      <C>            <C>
                         Full-line Distribution
                         Net sales........................................             $  105,115     $  116,256
                         Operating income.................................             $    6,745     $    8,834

                         e-Fulfillment
                         Net sales........................................             $   57,773     $   59,145
                         Operating income.................................             $    4,810     $    7,281

                         Independent Distribution
                         Net sales.......................................              $   18,118     $   13,991
                         Operating income ................................             $    1,974     $    2,028

                         Other
                         Unallocated expenses.............................             $  (20,804)    $  (16,345)

                         Intersegment Eliminations
                         Net sales........................................             $   (3,986)    $   (3,626)

                         Total
                         Net sales........................................             $  177,020     $  185,766
                         Operating income (loss)..........................             $   (7,275)    $    1,798

</TABLE>

                                       5
<PAGE>

5. Net Loss Per Share

   Basic net loss per shares has been computed by dividing net loss by the
weighted average number of shares outstanding during the period. Diluted net
loss per share is computed by adjusting the weighted average number of shares
outstanding during the period for all potentially dilutive shares outstanding
during the period. Net loss and weighted average shares outstanding used for
computing diluted loss per share were the same as that used for computing basic
loss per share for the thirteen weeks ended July 1, 2000 and July 3, 1999. Stock
options to purchase 1,246,117 and 809,856 shares of common stock outstanding
during the thirteen weeks ended July 1, 2000 and July 3, 1999, respectively,
were not included in the computation of diluted net loss per share since the
inclusion of such shares would be antidilutive.

                                       6
<PAGE>

ITEM 2.  Management's Discussion And Analysis Of Financial Condition And Results
Of Operations

Results of Operations

       Thirteen Weeks Ended July 1, 2000 Compared with Thirteen Weeks Ended
       July 3, 1999

       Net sales decreased $8.8 million, or 5%, to $177.0 million in the
thirteen weeks ended July 1, 2000 from $185.8 million in the thirteen weeks
ended July 3, 1999. The net loss of $6.9 million ($.82 per share) for the first
quarter of fiscal 2001 represents an increase of $6.1 million from the net loss
of $.8 million ($.09 per share) in the first quarter of fiscal 2000.

       Loss for the first quarter of fiscal 2001 includes a one-time adjustment
for obsolete inventory of $1.2 million after tax as well as severance charges
totaling $1.0 million after tax which relate to the resignation of the former
Chief Executive Officer and a reduction in the administrative staff of
approximately 22%. The loss was further affected by lower gross profit caused by
reduced sales levels and pricing adjustments in the e-Fulfillment segment, as
well as increased interest expense levels.

       Full-line Distribution net sales decreased $11.2 million, or 10%, to
$105.1 million in the first quarter of fiscal 2001 from $116.3 million in the
prior year quarter. Net sales in this segment have been adversely affected by
higher than normal product returns along with inventory adjustments by key
customers.

       e-fulfillment sales decreased $1.3 million, or 2%, in the first quarter
to $57.8 million compared to $59.1 million in the prior year quarter. Shipments
to the Company's top two customers in this segment were lower than in the prior
year, reflecting a slowing in the growth of e-commerce sales generally.


       Independent Distribution net sales increased $4.1 million, or 29%, in the
first quarter of fiscal 2001 due to addition of new labels and growth of
existing labels.

       Gross profit decreased $7.7 million, or 35%, to $14.2 million in the
first quarter of the year compared to $21.9 million in the prior year quarter,
with gross margin decreasing from 11.8% to 8.0%. Margins decreased primarily due
to competitive pricing adjustments to key e-Fulfillment customers and reduced
marketing income as compared to the first quarter of fiscal 2000. Gross profit
was also affected by the adjustment for obsolete inventory referred to above.

       Selling, general and administrative expenses increased $1.4 million, or
7%, to $21.5 million in the first quarter of fiscal 2001 from $20.1 million in
the first quarter of 2000, primarily as a result of the severance costs referred
to above. Savings from the staff reductions are expected to reduce future
administrative costs by approximately $1.5 million per quarter.


       Interest expense increased $1.1 million, or 34%, to $4.3 million in the
first quarter of fiscal 2001 compared to $3.2 million in the first quarter of
the prior year, primarily due to an increase of

                                       7
<PAGE>

the average interest rate to 9.6% in the most recent quarter from 7.7% in the
corresponding quarter last year, along with higher debt balances in the first
quarter of fiscal 2001 compared to fiscal 2000.

       The effective tax rate was a benefit of 40.0% in the first quarter of
fiscal 2001, compared to a benefit of 41.5% in the prior year quarter.

Liquidity and Capital Resources

        Net cash provided by operating activities of $23.1 million in the first
quarter of fiscal 2001 consisted primarily of decreases in accounts receivable
and inventories of $19.2 million and $10.9 million, respectively, offset by an
increase in prepaid and other expenses of $7.2 million. Net cash used in
operating activities of $3.1 million in the first quarter of fiscal 2000
consisted primarily of decreases of $34.6 million in accounts payable and $4.5
million in accrued liabilities and an increase of $7.7 million in inventories,
offset by a decrease in accounts receivable of $42.9 million.

        Net cash used in investing activities was $1.7 million and $6.4 million
for the first quarter of fiscal 2001 and 2000, respectively. Cash used in the
first quarter of fiscal 2001 consisted of expenditures for property and
equipment acquisitions. Cash used in the first quarter of fiscal 2000 consisted
of expenditures for property and equipment acquisitions, including $2.2 million
related to the new California distribution facility and investments in
information systems technology.

        Net cash used in financing activities of $21.4 million in the first
quarter of fiscal 2001 consisted primarily of repayments of amounts under our
credit facility in excess of additional borrowings for the period. Financing
activities provided net cash of $8.3 million in the first quarter of fiscal 2000
and consisted primarily of additional borrowings under our credit facility to
fund increased working capital requirements. Cash provided by financing
activities in the first quarter of fiscal 2000 also included $3.0 million
related to the issuance of a note payable for the purchase of certain equipment.

        The Company's total long- and short-term debt to equity ratio was 2.91
to 1.00 and 2.79 to 1.00, respectively, and working capital was $33.2 million
at July 1, 2000. As of July 1, 2000, the Company had a credit facility with a
commercial bank providing for borrowings up to the lesser of $240.0 million or
the amount of collateral availability, of which $161.5 million was used. The
Company believes its available cash and existing credit facilities are
sufficient to meet its short-term requirements.


Seasonality in Operating Results

        The Company's quarterly net sales and operating results have varied
significantly in the past and will likely continue to do so in the future as a
result of seasonal variations in the demand for music and video. Historically,
sales are highest during the third fiscal quarter (the holiday season) and
returns are highest during the fourth fiscal quarter. Due to this seasonality,
the Company typically experiences significant changes in cash flows and capacity
needs during the year, with the heaviest credit needs and highest capacity
requirements typically occurring during the third and fourth fiscal quarters.

                                       8
<PAGE>

Factors Affecting Operating Results

       This report contains forward-looking statements made pursuant to the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. These statements are identified by words such as "will", "expects",
"anticipates", "plans", or "intends" and by other descriptions of future
circumstances or conditions and include statements regarding our expected
savings from staff reductions. Actual results may differ materially from those
projected in these forward-looking statements. Factors that could affect the
Company's actual results include, without limitation, risks and uncertainties
related to the following factors: changing conditions in the online market for
music and video; the success of the Company's affiliate, amplified.com; the
impact of new delivery technologies on demand for the product the Company sells;
competitive conditions in the Company's markets; customer concentration; and
inability to fill certain key management positions and the impact of turnover
among the Company's senior executives. More information about these and other
factors that could negatively affect the Company's financial performance and the
value of its common stock is contained in the Company's filings with the
Securities and Exchange Commission, including its Annual Report on Form 10-K.
Readers of the 10-K should pay particular attention to the sections entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Factors Affecting Operating Results."


ITEM 3.  Quantitative and Qualitative Disclosures About Market Risk

        The Company is exposed to market risks primarily from changes in U.S.
interest rates. The Company does not engage in financial transactions for
trading or speculative purposes.

        The interest payable on the Company's revolving line of credit is based
on variable interest rates and is therefore affected by changes in market
interest rates. If interest rates on variable rate debt rose 0.92 percentage
points (a 10% change from the average interest rate as of July 1, 2000),
assuming no change in the Company's outstanding balance under the line of credit
(approximately $161.5 million as of July 1, 2000), the Company's loss before
taxes and cash flows from operating activities would increase by approximately
$1.5 million.

                           PART II - Other Information

ITEM 1.  Legal Proceedings

        The Company is subject to various legal proceedings that arise in the
ordinary course of business. While the outcome of all of these proceedings
cannot be predicted with certainty, management believes that none of such
proceedings, individually or in the aggregate, will have a material adverse
effect on the Company's business or financial condition.


ITEM 2.  Changes in Securities and Use of Proceeds

        Not applicable.

ITEM 3.  Defaults Upon Senior Securities

        Not applicable.

                                       9
<PAGE>

ITEM 4.  Submission Of Matters To A Vote Of Security Holders

        Not applicable.

ITEM 5.  Other Information

        Not applicable.

ITEM 6.  Exhibits And Reports On Form 8-K
(a)  Exhibits

------------------------------------------------------------------------------
Exhibit Number               Description of Document
----------------  ------------------------------------------------------------
        27.1                 Financial Data Schedule.


      -----------------------
 (b) Reports On Form 8
         The following reports on Form 8-K were filed during the thirteen weeks
ended July 1, 2000.

         (1)     Report on Form 8-K dated May 17, 2000, filed May 25, 2000,
                 announcing the resignation of the Company's President and Chief
                 Executive Officer.

         (2)     Report on Form 8-K dated July 3, 2000, filed July 3, 2000,
                 announcing staffing reductions to target cost savings.

                                       10
<PAGE>

                                   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.


                                   VALLEY MEDIA, INC.


                                   By: /s/  Barnet J. Cohen
                                      ------------------------------------
                                       Barnet J. Cohen
                                       Chairman of the Board and Acting
                                       Chief Executive Officer
                                       Date: August 7, 2000


                                   By:/s/  James P. Miller
                                      ------------------------------------
                                      James P. Miller
                                      Acting Chief Financial Officer
                                      Date: August 7, 2000

                                       11