DSI Toys Inc. Announces 2001 Financing Transactions.

Business Editors

HOUSTON--(BUSINESS WIRE)--April 2, 2001

DSI Toys Inc. (Nasdaq:DSIT) today announced the closing of two key financing transactions, structured to meet working capital needs for current operations as well as the growth of the Company for 2001.

On March 19, 2001, the Company engaged in a non-brokered, private placement of an Investment Warrant to MVII, LLC ("MVII"), a California limited liability company controlled by E. Thomas Martin, chairman of the DSI board, for total cash consideration of $2.7 million. The Investment Warrant is exercisable for no additional consideration, for up to 1.8 million shares of Company Common Stock for a ten year period beginning on June 3, 2002. The Company and MVII entered into a Registration Rights Agreement in connection with the Investment Warrant, granting MVII certain registration rights concerning Company common stock acquired pursuant to the Investment Warrant.

In addition to the transaction with MVII, on March 30, 2001, the Company entered into an amendment to the Loan and Security Agreement with Sunrock Capital Corporation increasing the Company's credit facility from $10.0 million to $17.5 million.

Michael J. Lyden, president and CEO, said, "DSI remains committed to high quality, proprietary product offerings. With the launching of our 2001 product line, we have several products that require a higher dollar amount for development due to the complexity of the product and the advanced technology, which has been incorporated into the design. The proceeds from the issuance of the Investment Warrant will provide current operating capital, which will serve to facilitate the continued expansion and growth of the product line. Additionally, the larger credit facility from Sunrock will provide the increased working capital needed to allow DSI to assure inventory availability to meet the needs of our customers when the traditional shipping season is at its peak."

The Company designs, develops, markets and distributes high quality, innovative dolls, toys and consumer electronics products. Core products include youth electronics such as Tech-Link(R) brand communications products, e*BRAIN(TM) electronic companions, Kawasaki(R) brand musical instruments, GearHead(R) brand remote control vehicles and a full range of doll brands including Sweet Faith(R), Pride and Joy(TM), Too Cute Twins(TM), Hush Li'l Baby(R), Little Darlings(TM), Elite(R) brand of Lifetime Play Dolls(TM) and Fashion Buzz(TM) Air Nails Salon(TM). The Company's Web site can be reached at http://www.dsitoys.com.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Statements in this press release that are not historical facts, including statements about plans and expectations regarding products and opportunities, demand and acceptance of new and existing products, capital resources, and future financial condition and results are forward-looking. Forward-looking statements involve risks and uncertainties, which may cause DSI's actual results in future periods to differ materially and adversely from those expressed. These uncertainties and risks include changing consumer preferences, lack of success of new products, loss of DSI's customers, competition, and other factors discussed from time to time in DSI's filings with the Securities and Exchange Commission.