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<title>Prepared By R.R. Donnelley Financial -- Form 8-K</title>
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<b>UNITED STATES </b></font></div>

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<b>SECURITIES AND EXCHANGE COMMISSION </b></font></div>

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<b>Washington D.C., 20549 </b></font></div>

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<b>Form 8-K </b></font></div> <div><font Size="1">&nbsp;</font></div>

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<b>Current Report </b></font></div>

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<b>Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 </b></font></div>

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<b>Date Of Report (Date Of Earliest Event Reported):&nbsp;&nbsp;11/30/2004 </b></font></div>

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<b>DIGITAL LIFESTYLES GROUP INC </b></font></div>

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<b>(Exact Name of Registrant as Specified in its Charter)</b></font></div>

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<b>Commission File Number:&nbsp;&nbsp;000-27828 </b></font></div>

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<div Align="center"><font Face="times New Roman" Size="3" Color="#000000"><b>13-3779546</b></font>
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<b>(State or Other Jurisdiction Of</b></font>
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<div Align="center"><font Face="times New Roman" Size="2" Color="#000000"><b>(I.R.S. Employer</b></font>
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<b>Incorporation or Organization)</b></font>
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<b>Identification No.)</b></font>
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<b>1001 S. Capital of Texas Hwy. Building I, Suite 200 </b></font></div>

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<b>Austin, TX 78746 </b></font>
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<b>(Address of Principal Executive Offices, Including Zip Code)</b></font>
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<b>512-617-8282 </b></font>
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<b>(Registrant&#146;s Telephone Number, Including Area Code) </b></font>
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<b>Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):<BR><BR>
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<b>[&nbsp;&nbsp;]&nbsp;&nbsp;
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)<BR><BR>

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Soliciting material pursuant to Rule 14a-12 under the Exchange Act(17CFR240.14a-12)<BR><BR>


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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act(17CFR240.14d-2(b))<BR><BR>


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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act(17CFR240.13e-4(c))
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Items to be Included in this Report</b>
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<b>Item 1.01.&nbsp;&nbsp;&nbsp;&nbsp;Entry into a Material Definitive Agreement</b></font>
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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  Digital Lifestyles Group, Inc. (the "Company") announced today that on November 30, 2004, it </div><div style="text-indent:4%">closed a financing transaction with Laurus Master Fund, Ltd, a Cayman Islands corporation ("Laurus"), to </div><div style="text-indent:4%">obtain a $7,500,000 credit facility.  The financing was completed pursuant to a Security Agreement by </div><div style="text-indent:4%">and among the Company, Northgate Operating Company, a California corporation and wholly owned </div><div style="text-indent:4%">subsidiary of the Company ("Northgate"), hip-e Operating Company, a Delaware corporation and wholly </div><div style="text-indent:4%">owned subsidiary of the Company ("hip-e," and together with Northgate, the "Operating Subsidiaries") </div><div style="text-indent:4%">and Laurus (the "Security Agreement"), pursuant to which the Company issued to Laurus a $2,750,000 </div><div style="text-indent:4%">Secured Convertible Minimum Borrowing Note (the "MB Note") and  a $4,750,000 Secured Convertible </div><div style="text-indent:4%">Revolving Note (the "Revolving Note" and, together with the MB Note, the "Notes").</div><div style="text-indent:4%">  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  The amount of funds available for borrowing under the credit facility is based upon eligible </div><div style="text-indent:4%">inventory and accounts receivable of the Company and the Operating Subsidiaries, with an advance rate </div><div style="text-indent:4%">equal to the sum of (i) 50% of eligible inventory of the Company and the Operating Subsidiaries, up to </div><div style="text-indent:4%">$1,500,000, and (ii) 90% of eligible accounts receivable of the Company and the Operating Subsidiaries. </div><div style="text-indent:4%">The Security Agreement contains representations and warranties, covenants and indemnification </div><div style="text-indent:4%">provisions that are typical for similar asset-based credit facilities.  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each of the Notes is dated November 29, 2004, matures on November 29, 2007 and carries an </div><div style="text-indent:4%">interest rate of prime plus two percent, subject to potential downward adjustment based upon the future </div><div style="text-indent:4%">trading price of the Company's common stock, par value $.03 per share ("Common Stock").  Laurus may </div><div style="text-indent:4%">convert all or a portion of the principal amount of the Notes and accrued interest thereon into shares of </div><div style="text-indent:4%">Common Stock at a conversion price of $0.39 per share, subject to anti-dilution adjustments. The </div><div style="text-indent:4%">conversion price of the Notes will be adjusted upon the occurrence of certain events including but not </div><div style="text-indent:4%">limited to:  (i) any recapitalization, reorganization or reclassification involving the Company's Common </div><div style="text-indent:4%">Stock; (ii) any stock split, combination or dividend payable in shares of Common Stock; (iii) any merger, </div><div style="text-indent:4%">consolidation or sale of substantially all of the Company's assets; and (iv) any issuance of shares of </div><div style="text-indent:4%">Common Stock or securities convertible into Common Stock at a consideration per share less than the </div><div style="text-indent:4%">conversion price. <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Laurus' ability to convert either Note into shares of Common Stock is limited so that Laurus on </div><div style="text-indent:4%">any given day may convert a Note into only up to that number of shares equal to 30% of the aggregate </div><div style="text-indent:4%">trading volume of the Common Stock for the twenty-two trading days immediately prior to the </div><div style="text-indent:4%">conversion date minus the number of shares already issued to Laurus, if any, upon conversions of the </div><div style="text-indent:4%">Notes during that twenty-two trading day period. Further, Laurus cannot deliver more than two </div><div style="text-indent:4%">conversion notices during any twenty-two day trading period.  The Notes also contain a restriction that </div><div style="text-indent:4%">prohibits Laurus from converting either Note into any number of shares that would result in Laurus </div><div style="text-indent:4%">becoming the beneficial owner of more than 4.99% of the outstanding shares of Common Stock.<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The MB Note is structured as a term note and the Revolving Note is structured as a revolving </div><div style="text-indent:4%">balance note.  In the event that the aggregate outstanding balance under the MB Note falls below </div><div style="text-indent:4%">$2,750,000 due to conversions, amounts due and payable under the Revolving Note shall be transferred to </div><div style="text-indent:4%">a new MB Note, so that, at any given time, the aggregate outstanding balance under all outstanding MB </div><div style="text-indent:4%">Notes during the term of the credit facility remains equal to $2,750,000. However, transfers of </div><div style="text-indent:4%">outstanding amounts under the Revolving Note are subject to the condition that, after the transfer, the </div><div style="text-indent:4%">outstanding principal amount of the Revolving Note shall not be reduced below $1,500,000, which makes </div><div style="text-indent:4%">it possible that the aggregate outstanding balance under all outstanding MB Notes during the term of the </div><div style="text-indent:4%">credit facility could be less than $2,750,000.<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amounts outstanding under the Revolving Note will also vary as funds are borrowed and repaid </div><div style="text-indent:4%">from time to time during the term.  The Security Agreement requires the Company to maintain a lock box </div><div style="text-indent:4%">account to receive payments of the Company's accounts receivable, and all funds transmitted to the lock </div><div style="text-indent:4%">box account will be applied to amounts outstanding under the Revolving Note. <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because the Revolving Note contemplates multiple repayments and reborrowings during the term </div><div style="text-indent:4%">of the credit facility, there is no minimum amount that is required to be outstanding under the Revolving </div><div style="text-indent:4%">Note and there is no prepayment penalty associated with the Revolving Note.  However, if the Company </div><div style="text-indent:4%">prepays any MB Note prior to November 29, 2007, the Company must also pay a prepayment premium </div><div style="text-indent:4%">equal to 20% of all sums due under the MB Notes.<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the Company desires to terminate the credit facility prior to November 29, 2007, the Company </div><div style="text-indent:4%">must pay Laurus a fee of (i) $300,000, if such termination occurs prior to November 29, 2005, (ii) </div><div style="text-indent:4%">$225,000, if such termination occurs on or after November 29, 2005 and prior to November 29, 2006, and </div><div style="text-indent:4%">(iii) $75,000, if such termination occurs on or after November 29, 2006 and prior to November 29, 2007.<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As part of the financing, the Company paid Laurus a credit facility management fee of $292,500 </div><div style="text-indent:4%">and issued to Laurus a Common Stock Purchase Warrant (the "Laurus Warrant") to purchase 3,846,154 </div><div style="text-indent:4%">shares of Common Stock.  The Laurus Warrant is dated November 29, 2004, has an exercise price of </div><div style="text-indent:4%">$0.44 per share of Common Stock, and expires on November 29, 2009.  The exercise price and the </div><div style="text-indent:4%">number of shares of Common Stock purchasable upon exercise of the Laurus Warrant is subject to </div><div style="text-indent:4%">adjustment (under formulae set forth in the Laurus Warrant) upon the occurrence of certain events, </div><div style="text-indent:4%">including, but not limited to stock dividends or other distributions of Common Stock, stock splits or </div><div style="text-indent:4%">combinations. The Laurus Warrant also contains a restriction identical to the one found in the Notes that </div><div style="text-indent:4%">prohibits Laurus from converting the Laurus Warrant into any number of shares that would result in </div><div style="text-indent:4%">Laurus becoming the beneficial owner of more than 4.99% of the outstanding shares of Common Stock.<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company's obligations to Laurus </div><div style="text-indent:4%">under the credit facility are secured by substantially all the </div><div style="text-indent:4%">assets (other than intellectual property) of the Company and the Operating Subsidiaries, including the </div><div style="text-indent:4%">Company's ownership interests in the Operating Subsidiaries.  The Company entered into a Stock Pledge </div><div style="text-indent:4%">Agreement, dated November 29, 2004, with Laurus, pursuant to which the Company pledged the capital </div><div style="text-indent:4%">stock of the Operating Subsidiaries as security for the Company's obligations to Laurus under the credit </div><div style="text-indent:4%">facility.  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Operating Subsidiaries of the Company have also entered into a Subsidiary Guaranty, dated </div><div style="text-indent:4%">November 29, 2004, with Laurus, pursuant to which the Operating Subsidiaries have guaranteed the </div><div style="text-indent:4%">obligations of the Company under the credit facility.<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the financing, the Company and Laurus entered into a Registration Rights </div><div style="text-indent:4%">Agreement, dated November 29, 2004 (the "Registration Rights Agreement").  Pursuant to the </div><div style="text-indent:4%">Registration Rights Agreement, the Company has agreed to use its commercially reasonable efforts to </div><div style="text-indent:4%">file, from time to time, with the Securities and Exchange Commission (the "SEC") registration statements </div><div style="text-indent:4%">(each, a "Registration Statement") for offerings to be made on a continuous basis pursuant to Rule 415 </div><div style="text-indent:4%">under the Securities Act of 1933, as amended (the "Securities Act"), and have such Registration </div><div style="text-indent:4%">Statements be declared effective by the SEC, with respect to the resale of (i) the shares of Common Stock </div><div style="text-indent:4%">issuable upon the conversion of the MB Notes and (ii) the shares of Common Stock issuable upon </div><div style="text-indent:4%">exercise of the Laurus Warrant.  The Company has no obligation to file a registration statement with </div><div style="text-indent:4%">respect to the resale of the shares of Common Stock issuable upon conversion of the Revolving Note.  </div><div style="text-indent:4%">With respect to the first Registration Statement to be filed by the Company, the Company is obligated to </div><div style="text-indent:4%">file such Registration Statement on or prior to January 13, 2005, and have such Registration Statement </div><div style="text-indent:4%">declared effective on or prior to February 25, 2004.&nbsp;&nbsp;&nbsp;The Company will be obligated to file additional </div><div style="text-indent:4%">Registration Statements each time that the aggregate outstanding balance under any particular series of </div><div style="text-indent:4%">new MB Notes equals $2,750,000. The Company is obligated to file each such additional Registration </div><div style="text-indent:4%">Statement on or prior to thirty days after such outstanding balance is reached and have such Registration </div><div style="text-indent:4%">Statement declared effective on or prior to sixty days after the date such Registration Statement is filed </div><div style="text-indent:4%">with the SEC.  If (i) the Company does not have a Registration Statement on file with the SEC by the </div><div style="text-indent:4%">required date, (ii) the Company does not have a Registration Statement declared effective by the required </div><div style="text-indent:4%">date, (iii) a Registration Statement, after it is declared effective, ceases to be effective for more than </div><div style="text-indent:4%">twenty consecutive calendar days or more than thirty days in the aggregate during a year, or (iv) the </div><div style="text-indent:4%">Common Stock is not listed or quoted or is suspended from trading on any trading market for three </div><div style="text-indent:4%">consecutive trading days, and such suspension shall not have been lifted within thirty days or the </div><div style="text-indent:4%">Common Stock is not listed on another trading market, then the Company will pay to Laurus, as </div><div style="text-indent:4%">liquidated damages,  a cash fee equal to 1.50% of the original principal amount of the MB Note for each </div><div style="text-indent:4%">thirty day period until the event that triggered such payment is cured.&nbsp;&nbsp;&nbsp;<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Registration Rights Agreement contains other covenants and indemnification provisions that </div><div style="text-indent:4%">are typical for registration rights agreements entered into by public companies in connection with similar </div><div style="text-indent:4%">credit facilities.</font>
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<b>Item 2.03.&nbsp;&nbsp;&nbsp;&nbsp;Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant</b></font>
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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Reference is made to the disclosure provided in response to Item 1.01 of this Form 8-K with respect to the incurrence by the Company of a direct financial obligation of up to an aggregate of $7,500,000 in connection with the execution of the Notes, which disclosure is incorporated herein by this reference.</div><div style="text-indent:4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</div><div style="text-indent:4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to certain grace periods, the Notes and related agreements provide for the following events of default (among others):<p>-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Failure to pay interest and principal when due;</div><div style="text-indent:4%">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A material uncured breach or failure to perform by the Company or the Operating Subsidiaries under any of the Notes or related agreements;</div><div style="text-indent:4%">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An attachment or levy in excess of  $50,000 is made upon the Company's assets or a judgment is rendered against the Company involving a liability of more than $50,000, which is not vacated, discharged, stayed or bonded within thirty days from entry; </div><div style="text-indent:4%">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There occurs an event of default under any indebtedness of the Company or any Operating Subsidiary in excess of $50,000, and any applicable grace or cure period has expired;</div><div style="text-indent:4%">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any form of bankruptcy or insolvency proceeding is instituted by or against the Company or the Operating Subsidiaries;</div><div style="text-indent:4%">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any material adverse change in the condition of the Company and the Operating Subsidiaries, taken as a whole; or</div><div style="text-indent:4%">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A change in control of the Company.<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the Company defaults under the agreements with Laurus, Laurus may enforce its rights as a secured party and accelerate payments due under the credit facility and the Company may lose all or a portion of its assets.  In addition to other remedies available, upon such a continuing default, Laurus may elect to require the Company to pay (i) additional interest at the rate of 2% per month and (ii) a penalty fee equal to 120% of the outstanding principal amount of the Notes, which penalty fee shall be applied to the amounts the Company owes Laurus under the credit facility.  The fee for early termination of the credit facility due to a continuing event of default is (i) $300,000, if such termination occurs prior to November 29, 2005, (ii) $225,000, if such termination occurs on or after November 29, 2005 and prior to November 29, 2006, and (iii) $75,000 if such termination occurs on or after November 29, 2006 and prior </div><div style="text-indent:4%">to November 29, 2007.</div><div style="text-indent:4%"></font>
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<b>Item 3.02.&nbsp;&nbsp;&nbsp;&nbsp;Unregistered Sales of Equity Securities</b></font>
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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference is made to the disclosure provided in response to Item 1.01 of this Form 8-K, with </div><div style="text-indent:4%">respect to (i) the issuance by the Company of a $2,750,000 secured convertible MB Note and a </div><div style="text-indent:4%">$4,750,000 secured convertible Revolving Note, and (ii) the issuance by the Company to Laurus of the </div><div style="text-indent:4%">Laurus Warrant to purchase 3,846,154 shares of Common Stock, which disclosure is incorporated herein </div><div style="text-indent:4%">by this reference.<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Notes and the Laurus Warrant were offered and sold without registration under the Securities </div><div style="text-indent:4%">Act or the securities laws of certain states in reliance on the exemptions provided by Section 4(2) of the </div><div style="text-indent:4%">Securities Act and Regulation D under the Securities Act and in reliance on similar exemptions under </div><div style="text-indent:4%">applicable state laws.  Laurus has represented to the Company that Laurus is a "qualified institutional </div><div style="text-indent:4%">buyer", as that term is defined in Rule 144A under the Securities Act.</font>
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<b>Item 7.01.&nbsp;&nbsp;&nbsp;&nbsp;Regulation FD Disclosure</b></font>
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On December 2, 2004, the Company issued a press release announcing the credit facility </div><div style="text-indent:4%">described in Items 1.01, 2.03 and 3.02 above. A copy of the press release is attached hereto as Exhibit </div><div style="text-indent:4%">99.1.</font>
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<b>Item 9.01.&nbsp;&nbsp;&nbsp;&nbsp;Financial Statements and Exhibits</b></font>
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(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exhibits<p>99.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Press Release, dated December 2, 2004</div><div style="text-indent:4%"></font>
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<b>Signature(s) </b></font>
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Pursuant to the Requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the Undersigned hereunto
duly authorized. </font>
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	&nbsp;&nbsp;&nbsp;&nbsp;DIGITAL LIFESTYLES GROUP INC</font>
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	Date: December 02, 2004.</font>
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	By:</font>
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	/s/&nbsp;&nbsp;&nbsp;&nbsp;J. William Wilson</font>
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	&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;J. William Wilson</font>
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	<div Style="margin-left:9%"><font Face="times New Roman" Size="2" Color="#000000">Vice President and General Counsel</font>
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<b>Exhibit Index </b></font>
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	<b>Exhibit&nbsp;No.</b></font>
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	<b>Description</b></font>
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	EX-99.1</font>
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	Press Release</font>
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[{"type": "8-K", "sequence": "1", "filename": "rrd59783.htm", "description": "LAURUS 8-K", "secsgml_size_bytes": 31095}]
{"company-data": {"conformed-name": "DIGITAL LIFESTYLES GROUP INC", "cik": "0000942650", "assigned-sic": "3571", "irs-number": "133779546", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "000-27828", "film-number": "041179559"}, "business-address": {"street1": "1001 S. CAPITAL OF TEXAS HWY.", "street2": "BUILDING I, SUITE 200", "city": "AUSTIN", "state": "TX", "zip": "78746", "phone": "5126178282"}, "mail-address": {"street1": "1001 S. CAPITAL OF TEXAS HWY.", "street2": "BUILDING I, SUITE 200", "city": "AUSTIN", "state": "TX", "zip": "78746"}, "former-company": [{"former-conformed-name": "NORTHGATE INNOVATIONS  INC", "date-changed": "20020401"}, {"former-conformed-name": "MCGLEN INTERNET GROUP INC", "date-changed": "20000417"}, {"former-conformed-name": "ADRENALIN INTERACTIVE INC", "date-changed": "19980603"}]}
Prepared By R.R. Donnelley Financial -- Form 8-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C., 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date Of Report (Date Of Earliest Event Reported):  11/30/2004
DIGITAL LIFESTYLES GROUP INC
(Exact Name of Registrant as Specified in its Charter)
Commission File Number:  000-27828
DE
13-3779546
(State or Other Jurisdiction Of
(I.R.S. Employer
Incorporation or Organization)
Identification No.)
1001 S. Capital of Texas Hwy. Building I, Suite 200
Austin, TX 78746
(Address of Principal Executive Offices, Including Zip Code)
512-617-8282
(Registrant's Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[  ]  
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]  
Soliciting material pursuant to Rule 14a-12 under the Exchange Act(17CFR240.14a-12)
[  ]  
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act(17CFR240.14d-2(b))
[  ]  
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act(17CFR240.13e-4(c))
Items to be Included in this Report
Item 1.01.    Entry into a Material Definitive Agreement
Digital Lifestyles Group, Inc. (the "Company") announced today that on November 30, 2004, it
closed a financing transaction with Laurus Master Fund, Ltd, a Cayman Islands corporation ("Laurus"), to
obtain a $7,500,000 credit facility.  The financing was completed pursuant to a Security Agreement by
and among the Company, Northgate Operating Company, a California corporation and wholly owned
subsidiary of the Company ("Northgate"), hip-e Operating Company, a Delaware corporation and wholly
owned subsidiary of the Company ("hip-e," and together with Northgate, the "Operating Subsidiaries")
and Laurus (the "Security Agreement"), pursuant to which the Company issued to Laurus a $2,750,000
Secured Convertible Minimum Borrowing Note (the "MB Note") and  a $4,750,000 Secured Convertible
Revolving Note (the "Revolving Note" and, together with the MB Note, the "Notes").
The amount of funds available for borrowing under the credit facility is based upon eligible
inventory and accounts receivable of the Company and the Operating Subsidiaries, with an advance rate
equal to the sum of (i) 50% of eligible inventory of the Company and the Operating Subsidiaries, up to
$1,500,000, and (ii) 90% of eligible accounts receivable of the Company and the Operating Subsidiaries.
The Security Agreement contains representations and warranties, covenants and indemnification
provisions that are typical for similar asset-based credit facilities.
Each of the Notes is dated November 29, 2004, matures on November 29, 2007 and carries an
interest rate of prime plus two percent, subject to potential downward adjustment based upon the future
trading price of the Company's common stock, par value $.03 per share ("Common Stock").  Laurus may
convert all or a portion of the principal amount of the Notes and accrued interest thereon into shares of
Common Stock at a conversion price of $0.39 per share, subject to anti-dilution adjustments. The
conversion price of the Notes will be adjusted upon the occurrence of certain events including but not
limited to:  (i) any recapitalization, reorganization or reclassification involving the Company's Common
Stock; (ii) any stock split, combination or dividend payable in shares of Common Stock; (iii) any merger,
consolidation or sale of substantially all of the Company's assets; and (iv) any issuance of shares of
Common Stock or securities convertible into Common Stock at a consideration per share less than the
conversion price.
Laurus' ability to convert either Note into shares of Common Stock is limited so that Laurus on
any given day may convert a Note into only up to that number of shares equal to 30% of the aggregate
trading volume of the Common Stock for the twenty-two trading days immediately prior to the
conversion date minus the number of shares already issued to Laurus, if any, upon conversions of the
Notes during that twenty-two trading day period. Further, Laurus cannot deliver more than two
conversion notices during any twenty-two day trading period.  The Notes also contain a restriction that
prohibits Laurus from converting either Note into any number of shares that would result in Laurus
becoming the beneficial owner of more than 4.99% of the outstanding shares of Common Stock.
The MB Note is structured as a term note and the Revolving Note is structured as a revolving
balance note.  In the event that the aggregate outstanding balance under the MB Note falls below
$2,750,000 due to conversions, amounts due and payable under the Revolving Note shall be transferred to
a new MB Note, so that, at any given time, the aggregate outstanding balance under all outstanding MB
Notes during the term of the credit facility remains equal to $2,750,000. However, transfers of
outstanding amounts under the Revolving Note are subject to the condition that, after the transfer, the
outstanding principal amount of the Revolving Note shall not be reduced below $1,500,000, which makes
it possible that the aggregate outstanding balance under all outstanding MB Notes during the term of the
credit facility could be less than $2,750,000.
Amounts outstanding under the Revolving Note will also vary as funds are borrowed and repaid
from time to time during the term.  The Security Agreement requires the Company to maintain a lock box
account to receive payments of the Company's accounts receivable, and all funds transmitted to the lock
box account will be applied to amounts outstanding under the Revolving Note.
Because the Revolving Note contemplates multiple repayments and reborrowings during the term
of the credit facility, there is no minimum amount that is required to be outstanding under the Revolving
Note and there is no prepayment penalty associated with the Revolving Note.  However, if the Company
prepays any MB Note prior to November 29, 2007, the Company must also pay a prepayment premium
equal to 20% of all sums due under the MB Notes.
If the Company desires to terminate the credit facility prior to November 29, 2007, the Company
must pay Laurus a fee of (i) $300,000, if such termination occurs prior to November 29, 2005, (ii)
$225,000, if such termination occurs on or after November 29, 2005 and prior to November 29, 2006, and
(iii) $75,000, if such termination occurs on or after November 29, 2006 and prior to November 29, 2007.
As part of the financing, the Company paid Laurus a credit facility management fee of $292,500
and issued to Laurus a Common Stock Purchase Warrant (the "Laurus Warrant") to purchase 3,846,154
shares of Common Stock.  The Laurus Warrant is dated November 29, 2004, has an exercise price of
$0.44 per share of Common Stock, and expires on November 29, 2009.  The exercise price and the
number of shares of Common Stock purchasable upon exercise of the Laurus Warrant is subject to
adjustment (under formulae set forth in the Laurus Warrant) upon the occurrence of certain events,
including, but not limited to stock dividends or other distributions of Common Stock, stock splits or
combinations. The Laurus Warrant also contains a restriction identical to the one found in the Notes that
prohibits Laurus from converting the Laurus Warrant into any number of shares that would result in
Laurus becoming the beneficial owner of more than 4.99% of the outstanding shares of Common Stock.
The Company's obligations to Laurus
under the credit facility are secured by substantially all the
assets (other than intellectual property) of the Company and the Operating Subsidiaries, including the
Company's ownership interests in the Operating Subsidiaries.  The Company entered into a Stock Pledge
Agreement, dated November 29, 2004, with Laurus, pursuant to which the Company pledged the capital
stock of the Operating Subsidiaries as security for the Company's obligations to Laurus under the credit
facility.
The Operating Subsidiaries of the Company have also entered into a Subsidiary Guaranty, dated
November 29, 2004, with Laurus, pursuant to which the Operating Subsidiaries have guaranteed the
obligations of the Company under the credit facility.
In connection with the financing, the Company and Laurus entered into a Registration Rights
Agreement, dated November 29, 2004 (the "Registration Rights Agreement").  Pursuant to the
Registration Rights Agreement, the Company has agreed to use its commercially reasonable efforts to
file, from time to time, with the Securities and Exchange Commission (the "SEC") registration statements
(each, a "Registration Statement") for offerings to be made on a continuous basis pursuant to Rule 415
under the Securities Act of 1933, as amended (the "Securities Act"), and have such Registration
Statements be declared effective by the SEC, with respect to the resale of (i) the shares of Common Stock
issuable upon the conversion of the MB Notes and (ii) the shares of Common Stock issuable upon
exercise of the Laurus Warrant.  The Company has no obligation to file a registration statement with
respect to the resale of the shares of Common Stock issuable upon conversion of the Revolving Note.
With respect to the first Registration Statement to be filed by the Company, the Company is obligated to
file such Registration Statement on or prior to January 13, 2005, and have such Registration Statement
declared effective on or prior to February 25, 2004.   The Company will be obligated to file additional
Registration Statements each time that the aggregate outstanding balance under any particular series of
new MB Notes equals $2,750,000. The Company is obligated to file each such additional Registration
Statement on or prior to thirty days after such outstanding balance is reached and have such Registration
Statement declared effective on or prior to sixty days after the date such Registration Statement is filed
with the SEC.  If (i) the Company does not have a Registration Statement on file with the SEC by the
required date, (ii) the Company does not have a Registration Statement declared effective by the required
date, (iii) a Registration Statement, after it is declared effective, ceases to be effective for more than
twenty consecutive calendar days or more than thirty days in the aggregate during a year, or (iv) the
Common Stock is not listed or quoted or is suspended from trading on any trading market for three
consecutive trading days, and such suspension shall not have been lifted within thirty days or the
Common Stock is not listed on another trading market, then the Company will pay to Laurus, as
liquidated damages,  a cash fee equal to 1.50% of the original principal amount of the MB Note for each
thirty day period until the event that triggered such payment is cured.
The Registration Rights Agreement contains other covenants and indemnification provisions that
are typical for registration rights agreements entered into by public companies in connection with similar
credit facilities.
Item 2.03.    Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
Reference is made to the disclosure provided in response to Item 1.01 of this Form 8-K with respect to the incurrence by the Company of a direct financial obligation of up to an aggregate of $7,500,000 in connection with the execution of the Notes, which disclosure is incorporated herein by this reference.
Subject to certain grace periods, the Notes and related agreements provide for the following events of default (among others):
-        Failure to pay interest and principal when due;
-        A material uncured breach or failure to perform by the Company or the Operating Subsidiaries under any of the Notes or related agreements;
-        An attachment or levy in excess of  $50,000 is made upon the Company's assets or a judgment is rendered against the Company involving a liability of more than $50,000, which is not vacated, discharged, stayed or bonded within thirty days from entry;
-        There occurs an event of default under any indebtedness of the Company or any Operating Subsidiary in excess of $50,000, and any applicable grace or cure period has expired;
-        Any form of bankruptcy or insolvency proceeding is instituted by or against the Company or the Operating Subsidiaries;
-        Any material adverse change in the condition of the Company and the Operating Subsidiaries, taken as a whole; or
-        A change in control of the Company.
If the Company defaults under the agreements with Laurus, Laurus may enforce its rights as a secured party and accelerate payments due under the credit facility and the Company may lose all or a portion of its assets.  In addition to other remedies available, upon such a continuing default, Laurus may elect to require the Company to pay (i) additional interest at the rate of 2% per month and (ii) a penalty fee equal to 120% of the outstanding principal amount of the Notes, which penalty fee shall be applied to the amounts the Company owes Laurus under the credit facility.  The fee for early termination of the credit facility due to a continuing event of default is (i) $300,000, if such termination occurs prior to November 29, 2005, (ii) $225,000, if such termination occurs on or after November 29, 2005 and prior to November 29, 2006, and (iii) $75,000 if such termination occurs on or after November 29, 2006 and prior
to November 29, 2007.
Item 3.02.    Unregistered Sales of Equity Securities
Reference is made to the disclosure provided in response to Item 1.01 of this Form 8-K, with
respect to (i) the issuance by the Company of a $2,750,000 secured convertible MB Note and a
$4,750,000 secured convertible Revolving Note, and (ii) the issuance by the Company to Laurus of the
Laurus Warrant to purchase 3,846,154 shares of Common Stock, which disclosure is incorporated herein
by this reference.
The Notes and the Laurus Warrant were offered and sold without registration under the Securities
Act or the securities laws of certain states in reliance on the exemptions provided by Section 4(2) of the
Securities Act and Regulation D under the Securities Act and in reliance on similar exemptions under
applicable state laws.  Laurus has represented to the Company that Laurus is a "qualified institutional
buyer", as that term is defined in Rule 144A under the Securities Act.
Item 7.01.    Regulation FD Disclosure
On December 2, 2004, the Company issued a press release announcing the credit facility
described in Items 1.01, 2.03 and 3.02 above. A copy of the press release is attached hereto as Exhibit
99.1.
Item 9.01.    Financial Statements and Exhibits
(c)        Exhibits
99.1        Press Release, dated December 2, 2004
Signature(s)
Pursuant to the Requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the Undersigned hereunto
duly authorized.
DIGITAL LIFESTYLES GROUP INC
Date: December 02, 2004.
By:
/s/    J. William Wilson
J. William Wilson
Vice President and General Counsel
Exhibit Index
Exhibit No.
Description
EX-99.1
Press Release