Avalon Digital Announces Acquisition of Mindwire Inc.; Acquisition Brings Additional Revenues and .NET Technical Capabilities.

Business Editors & High-Tech Writers

HUNTINGTON BEACH, Calif.--(BUSINESS WIRE)--Feb. 5, 2003

Avalon Digital Marketing Systems Inc. (Nasdaq:AVLN), a leading provider of digital marketing software and services, today announced it has acquired Mindwire Inc., a Utah-based technology company that services the Internet marketing needs of companies primarily in the Intermountain West, in a stock-for-stock exchange.

"Based on 2002 results and the Mindwire sales pipeline, we believe the acquisition will be accretive to Avalon's top and bottom line for calendar 2003," stated Robert Webber, Avalon's president and CEO.

"The Mindwire team will integrate effectively with our existing operations in Salt Lake City, Utah, and their strong sales personnel and award-winning creative and Microsoft .NET development engineers will enhance our ability to effectively service our growing portfolio of large enterprise clients."

"Joining the Avalon team allows us access to a new and exciting line of digital marketing products and services," stated Jeff Burningham of Mindwire.

"We have seen Avalon prove the effectiveness of these products over time and are excited to join forces. We believe that the robust product suite that Avalon has created combined with our expertise in custom Web and application development will provide additional value to our current and future clients."

In the transaction, Mindwire shareholders will receive shares of Avalon common stock. Additional shares of common stock could be issued if three members of the former Mindwire sales team attain certain net revenue targets for Avalon during the 12 months following the close of the acquisition.

About Avalon Digital Marketing Systems

Avalon is a digital marketing software and services company serving both the Fortune 1000 and the more than 25 million small businesses that comprise the bulk of the U.S. economy through a suite of technology solutions.

The company provides its large enterprise clients with marketing automation and digital communication software complemented by full-service professional consultation and integration support. The company addresses the small business market through e-commerce products, including merchant accounts, payment gateways and Web site design and hosting software.

Avalon's expertise is centered on three key areas of e-business -- providing its clients with compelling content delivery technology, streamlined e-commerce solutions, and enhanced one-to-one communications software.

In addition to a growing base of more than 10,000 small-business customers, Avalon's customer base includes more than 100 leading companies, including Mazda, Cendant, Johnson & Johnson, NEC, Avaya, and the National Basketball Association. The company's headquarters are in Southern California, with offices in New York, Salt Lake City, and Hong Kong.

About Mindwire

Mindwire is a full-scale Internet development and interactive brand management firm that connects creativity with technology to deliver business solutions for the Web and related media. By leveraging a wide array of technologies, Mindwire enables businesses to achieve strategic interactive objectives, increasing revenues, enhancing productivity, and maximizing competitive advantage.

Privately held Mindwire, based in Utah, delivers strategy, systems development, and creative services that provide effective and efficient means for corporations to achieve lasting profitability. Clients include Novell, PowerQuest, Vspring Capital, MEP, SBDC, Utah Department of Probation, Flowserve and Teleperformance USA.

Certain statements contained in this news release are forward-looking statements under the federal securities laws, and Avalon Digital Marketing Systems intends that such statements be subject to the safe-harbor created thereby. These forward-looking statements are not guarantees of future growth and involve risks, uncertainties and assumptions that are difficult to predict. Avalon's performance and actual outcomes and results may differ materially from what is expressed in, or implied by, such forward-looking statements. These forward-looking statements include, but are not limited to, statements concerning (i) the likelihood that the acquisition will be accretive; (ii) the ability to integrate Mindwire technology and personnel; and (iii) the potential market for and adoption of Avalon technology. Among the important factors that could cause actual results to differ from such forward-looking statements include, without limitation, (i) Avalon's limited operating history, (ii) Avalon's possible inability to sustain and manage its growth, and (iii) the risk that Avalon will not be able to obtain additional financing, if needed, to support its operations. Additional factors that could affect Avalon and its financial results are included in the periodic filings of Avalon, MindArrow Systems Inc. and Category 5 Technologies Inc. made with the Securities and Exchange Commission, and the joint proxy statement/prospectus of MindArrow and Category 5 dated Sept. 16, 2002 filed with the SEC. Avalon undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.