D.G. Jewelry Inc. Reports Results for 2001 - Net Income For The Year Up 13.67% to $1.57 Million.

Business Editors

TORONTO--(BUSINESS WIRE)--April 2, 2002

D.G. Jewelry Inc. (Nasdaq:DGJL) today reported its results for the year ended December 31, 2001 and the fourth quarter then ended.

Net Income for the year was $1.57 million as compared to $1.38 million in 2000.

Basic earnings per share for the year was $0.23, as compared to $0.21 in 2000. On a fully diluted basis, earnings per share for the year were $0.22, as compared to $0.21 in 2000.

On a fully diluted basis, shares outstanding as at December 31, 2001 were 8,221,573. Earnings on a fully diluted basis were calculated using a weighted average of 7,241,962 shares outstanding, as compared to 6,777,244 as at December 31, 2001.

This increase in shares outstanding is due to the Company's decision to include as outstanding at December 31, 2001, 316,933 shares issued to Haymarket in February 2002, pursuant to a Court Order, as well as 751,896 shares issued to a select group of vendors in November, 2001. As well, the Company re-priced certain employee stock-options, effectively causing them to be included in the calculation of shares outstanding on a diluted basis.

Revenues for the year were $36.0 million as compared to $39.9 million, a decrease of 9.8 percent. This decrease was attributable in its entirety to results after September 11, 2001. Fourth quarter revenues were $9.9 million, compared to $13.9 million in the year-earlier period. Loss per share for the quarter was $0.03, compared to a loss of $0.04, a year earlier.

Jack Berkovits, CEO of D.G. Jewelry Inc. commented: "I would like to thank our associates for their outstanding effort and results in 2001. We were able to show an improved bottom line for the year and the fourth quarter notwithstanding the effects of September 11, 2001."

"The post-September 11, 2001 environment was not conducive to business as usual. We are pleased that December was back to normal and indications are that consumer confidence is back with a vengeance."

"We are further pleased that we have been able to maintain gross margins at approximately 37% before taking into account our subscription to a gold lease facility. This margin is possible due to our continued emphasis on improved manufacturing processes, which make us, I believe, the world's foremost jewelry technology leader. We will continue to invest in ways to improve our efficiency, quality and low-cost production techniques."

"Our results are even more impressive when it is considered that we have expensed in 2001 approximately $750K in contingent liabilities to several diamond suppliers, where that liability may be extinguished depending on our share price performance. In addition, we continue to show a reserve in the amount of $1.8 million for the Haymarket litigation, even though we expect that obligation to be materially less and against which we will be receiving credit for the value of the shares issued to Haymarket in February 2002. At the same time, we show those shares, 316,933 in all, as outstanding at year-end, for the purpose of calculating earnings per share."

Berkovits added: "We hope to demonstrate in the coming months that this will be a year with clear focus on revenue growth from current and new accounts, while maintaining margins and a tight lid on expenses."

D.G. Jewelry Inc. is primarily engaged in the design, merchandising and distribution of stone-set jewelry for major retailers including department stores, mass merchants, shopping networks, major high-volume retailers and other major discounters in the U.S., Canada and Europe. For more information, please visit us at www.dgjewelry.com.

Except for the historical information contained herein, the matters discussed in this release include forward-looking statements that may involve a number of risks and uncertainties. Actual results may vary significantly based on a number of factors, including, but not limited to, risks in product demand, the impact of competitive products and pricing, changing economic conditions both here and abroad, release and sales of new products, other risk factors detailed in the company's most recent annual report and filings with the Securities and Exchange Commission. There can be no assurances that our reserves for litigation will be adequate or that our share price will increase adequately to void any obligations under our vendor share Purchase Agreement. As well, there can be no assurances that we will be able to maintain and grow our customer base or that we will succeed in our efforts to improve our efficiencies, quality and low-cost production techniques.