Digital Lifestyles Group
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Digital Lifestyles Group reports third quarter 2004 financial results and product update.

AUSTIN, TX – November 15, 2004 – Digital Lifestyles Group, Inc, the maker of hip-e and Northgate products, today announced results for the third quarter and nine months ended September 30, 2004.  For the quarter, sales, gross profit and net loss were $10.5 million, $1.1 million and $3.7 million respectively.  For the nine months, sales, gross profit and net loss were $39.0 million, $4.2 million and $4.3 million respectively. This compares to sales, gross profit and net loss of $54.8 million, $2.7 million and $2.9 million for the nine-month period ended September 30, 2003.  Gross margins for the third quarter and nine months ended September 30, 2004 were 10.1% and 10.7% compared with 7.5% and 5.0% for the comparable periods in 2003.

“We made a strategic decision at the beginning of 2004 to refocus the mix of our Northgate customers away from low margin and high credit risk customers, towards more profitable and reliable channels and partners,” commented Kent Savage, CEO of Digital Lifestyles Group.  “While this has meant a decrease in Northgate product sales, we are seeing the benefits of the decision through significant gross margin and gross profit improvement compared with last year. Year to date, our gross profit on Northgate products is over 50% higher compared to where we were at this time last year.”

He went on to further comment: “While we continue to successfully restructure our Northgate operations, we continue to invest capital and resources in the development of hip-e, the world’s first digital lifestyle computer and entertainment system designed exclusively for teens.   The hip-e line of computer and entertainment products and services serve as the strategic growth vehicle for our company.   I am pleased to announce that we are executing according to plan, and are on track to ship product in time for the holidays.  Get your loved ones the perfect holiday gift by purchasing a hip-e today at www.hip-e.com or 1-877-hip-e4me.”

 

About Digital Lifestyles Group, Inc.

Digital Lifestyles Group, Inc. designs, manufactures and markets digital lifestyle products, including software, personal computers, accessories and entertainment and communication solutions. The Company's products include hip-e, the first digital lifestyle platform for teens, and the Northgate line of desktop and notebook computers for consumer, business and education customers. The Company sells its products through its online stores (www.hip-e.com, www.northgate.com), direct sales force, third-party resellers and retail stores. More information about Digital Lifestyles Group is available at www.dig-life.com.

Forward-looking Statements

This announcement contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are subject to significant risks and uncertainties. Although the Company believes that the expectations reflected in its forward-looking statements are reasonable, the Company can give no assurance that such expectations or any of the forward-looking statements will prove to be correct, and future results may differ materially from those discussed in this press release. Important information regarding the factors that may affect the Company's future performance is included in its public reports that it files with the Securities and Exchange Commission. The Company disclaims any intention or obligation to revise any forward-looking statements, whether as a result of new information, future event, change in expectations, conditions or circumstances, or otherwise. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The inclusion of any statement in this release does not constitute an admission by the Company or any other person that the events or circumstances described in such statement are material.