DG Systems to Delay Filing of 2004 Annual Report on Form 10-K.

DALLAS -- DG Systems, Inc. (Nasdaq: DGIT) announced today that it would require additional time to file its annual report on Form 10-K. The delay in filing the 10-K is due to the identification of a material weakness in the company's internal control over financial reporting as defined in Auditing Standard No. 2 of the Public Company Accounting Oversight Board. Despite the identification of the material weakness, DG Systems does not expect that a restatement of financial statements for any period is required.

In connection with management's review and assessment of the Company's disclosure controls and procedures and its evaluation of its internal control over financial reporting pursuant to Section 404 of Sarbanes-Oxley Act of 2002 management has identified a material weakness in an error in the identification of certain of the Company's deferred tax assets as of December 31, 2004. The Company had correctly identified all federal deferred tax assets as either acquired or non-acquired based on the Company's federal tax return for fiscal year 2003. However, as a result of the material weakness, the Company did not specifically identify certain other deferred tax assets as acquired or non-acquired, but instead arrived at an estimate based upon the ratio applicable to the federal deferred tax assets. This approach with respect to these deferred tax assets was incorrect as such other deferred tax assets should have been specifically identified as acquired or non-acquired.

Upon identifying the error, the Company recorded two audit adjustments that decreased non-cash tax expense and increased goodwill in the fourth quarter of 2004. The net impact of these adjustments on the Company's consolidated statements of operations was to increase the Company's net earnings by $299,000. The error was corrected prior to the release of the Company's financial results in the Company's earnings release dated February 17, 2005 and no restatement of financial statements for any period is required.

Management is in the process of analyzing the material weakness in order to provide disclosure pursuant to Item 9A of Form 10-K and as necessary to prepare Management's Annual Report on Internal Control Over Financial Reporting under Section 404 of Sarbanes-Oxley Act of 2002. Management is also in the process of determining the steps necessary to remediate the material weakness and making recommendations to the Company's Audit Committee.

Management is working with the Company's Audit Committee in order to complete the work necessary to file the Form 10-K on or before March 31, 2005.

About DG Systems, Inc. (www.dgsystems.com)

DG Systems and its StarGuide and SourceTV divisions provide the standard in Digital Media Exchange services for the advertising and broadcast industries, featuring dependable satellite and Internet transmission technology and a suite of digital media asset management tools. DG's extensive digital network is the largest in the advertising and broadcasting industries, reaching more than 5,000 advertisers and agencies, over 3,200 television, cable, and network broadcast destinations and over 10,000 radio stations with innovative delivery and management solutions for short-and long-form audio and video content. DG Systems is based in Irving, Texas, with offices located in New York City, Detroit, Los Angeles, Chicago, Boca Raton, Wilmington, Ohio and Louisville, Kentucky.

Caution Regarding Forward-Looking Statements 

This news release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties and reflect the judgment of DG Systems as of the date of this release. These statements include those related to management's review and analysis regarding the identified material weakness, its efforts to eliminate the identified material weakness and the time to complete and file the Form 10-K. Actual events or results may differ materially from the these expectations. There can be no assurance that analysis of the material weakness will be timely completed or that remediation efforts will effectively implemented. In addition, DG Systems's stock price may suffer as a result of the identification of the material weakness. Additional information concerning these risks and other risk factors affecting DG Systems can be found in prior press releases as well as in public periodic filings by DG Systems with the Securities and Exchange Commission, available via DG Systems's web site at http://www.dgit.com. DG Systems disclaims any intent or obligation to update these forward-looking statements beyond the date of this release.