Digital Lava States Revenue Target and Strategic Growth Milestones for Fiscal 1999; the Company Sees Current- Year Revenue Growth at Almost Two and a Half Times Fiscal 1998 Levels.

LOS ANGELES--(BUSINESS WIRE)--June 1, 1999--

Digital Lava Inc. (AMEX:DGV) a leader in streaming media applications and video publishing technology, Tuesday announced that management expects to achieve almost two and a half times the level of revenue growth for the fiscal year 1999 vs. the prior year, due to the strong market response for the company's training, communications and distance learning software solutions: vPrism(tm), VideoVisor(tm) and its newest offering VideoVisor(tm) Web.

Digital Lava also stated that -- despite its annual revenue target -- the company expects its actual second quarter 1999 results to be much lower than expectations.

Joshua Sharfman, Digital Lava's president and chief executive officer, said: "Revenue growth in the current quarter has been constrained largely by the ramping-up of our growing sales force which reached planned expansion size in May. Going forward, our increased sales presence should be able to readily capture the strong interest in our products and solutions.

"And, while we expect to report improved results over time, we wish to point out that quarterly comparisons tend not to be the best measure of our true progress given our strategic emphasis on gaining increased market penetration and building a high-quality user base."

Market Acceptance and Penetration

Digital Lava has continued to receive broad, positive reception of its software technology in its target markets. To further support the company's marketing efforts, Digital Lava most recently was selected to publish promotional CD-ROMs for Training '99 and MultiMediaCom, two industry-leading conferences.

Digital Lava's desktop video publishing technology will allow more than 16,000 individuals to easily re-experience and interact with video from these two popular industry events and is an important forum to demonstrate the company's leading-edge technology and generate significant new business prospects.

Digital Lava also plans to participate in several trade shows in the coming months including The American Society for Training and Development, Streaming Media-East, MultiMediaCom - Fall, Online Learning 99 and TechLearn 99.

Sharfman commented on a key element of the company's sales strategy, saying: "We don't intend to pursue incremental business in order to meet near-term expectations for the company's growth. Rather, our management team is focused on optimizing longer return business with substantial, well-known customers to better build and sustain our future prospects."

Expanded Sales Effort

Sharfman briefly reviewed the sales cycle for Digital Lava's products, stating: "Our sales process typically spans between three to six months and begins with the customer's introduction to our business solutions. This occurs through a number of ways, such as visiting our Web site, seeing our products or technical presentations at a trade show, using a demonstration disk or content gallery on the Web, seeing a co-branded promotion, attending a seminar or receiving one of our direct-mail solicitations.

"Building a telephone sales organization, often referred to as `telesales,' within Digital Lava should enable us to more efficiently capitalize upon these initial experiences consumers have with our products and advance the sales prospecting process."

According to Sharfman, for the more likely targets, a direct-sales professional visits the customer and begins the process of mapping out the product solutions that are most appropriate for that particular customer's business.

Sharfman said: "We have built a reputation whereby we are viewed as consultants and industry experts. Often, we also engage the help of our own business partners, such as RealNetworks, to provide a total solution for the client." Such a consultative approach to the selling process also increases the likelihood of repeat business opportunities, noted Sharfman.

Sharfman continued: "Our sales force now consists of seven people and covers seven major regional areas in the U.S. We are quite pleased to have recruited experienced sales people; however, most of them only began working for us towards the end of the second quarter -- later than we initially planned. Hence, we now expect them to start generating sales in the second half of the year rather than, as originally expected, during the current quarter."

According to Sharfman: "This delay is a major contributing factor to the adjustment in the company's revenue expectation. Going forward, we expect that our ability to build our sales force in the first half of 1999 will translate into significant sales for the second half of this year."

Milestones for Future Growth

Digital Lava expects market acceptance to be a true measure of the company's ability to drive revenue growth for fiscal 1999 and beyond. To that end, specific milestones to track Digital Lava's success going forward include the following:

-- Continued, aggressive marketing efforts and programs. -- Establishment of a nationwide telephone sales group, specifically

assigned by geographic region and market segment. -- Achievement of a strong foothold in the East Coast market. -- Launch of new products, feature introductions and business

solutions.

Sharfman added: "At the beginning of 1999 and during the IPO process, we outlined very specific initiatives that we planned to undertake with the funds we raised in the offering. One of those was to invest in building our sales and marketing capabilities, something we have successfully done over the past several months.

"Having fulfilled these objectives, we now enter the second half of this year with a substantial sales and marketing presence that should fuel our revenue growth going forward.

"We encourage our investors to view this next set of milestones mentioned today as giving you more guidance to help you measure our company's progress. Ultimately, our management team remains committed to increasing shareholder value over the longer term by successfully setting and meeting growth goals that promote market acceptance, product user growth and strong revenue ramp-up."

About Digital Lava

Digital Lava is a leader in the convergence of software-related technologies that organize and allow for the rapid manipulation of video with other data in ways that make possible -- at low cost -- previously difficult or expensive video solutions. The company's software products and services are used for corporate training, communications and research, and other applications.

Digital Lava's product line includes vPrism(tm), VideoVisor(tm) and VideoVisor(tm) Web software and allows the user to organize video content, link video to other types of files and publish video on compact disks, or "stream" the video information over the Internet or a company's intranet.

The company's award-winning VideoVisor software allows users to manage, manipulate and integrate video with other information on their computers, much like word processors manipulate textual data. Digital Lava is traded on the American Stock Exchange under the symbol "DGV." The company's award-winning Web site is www.digitallava.com.

Forward-Looking Statements 

This news release contains forward-looking statements concerning the business and products of the company. Actual results may differ from those projected or implied by such forward-looking statements depending on a number of risks and uncertainties, including, but not limited to, the following: development, shipment and market acceptance. Other risks inherent in the business of the company are described in Securities and Exchange Commission filings, including the company prospectus on Form SB-2. The company undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this release.