Dauphin Technology, Inc. Reports Second Quarter Gross Profit.

Business Editors

PALATINE, Ill.--(BUSINESS WIRE)--Aug. 9, 2001

Dauphin Technology, Inc. (OTC.BB: DNTK) today announced gross profit of $67,000, or 17.6% of net revenues for the second quarter of 2001 on revenues of $382,000, an increase of $371,000, or 3,372%, over the same period in 2000. The Company reported a net loss for the quarter of $1,829,000 as compared to a net loss of $1,250,000 in 2000. The second quarter of 2001 net loss was affected by the increase in Research and Development costs related to the set-top box of $612,000 and the amortization of goodwill of $275,000 associated with the acquisition of Advanced Digital Designs, Inc.

Selling, general and administrative expenses for the quarter increased to approximately $1,138,000 in 2001 from $727,000 in 2000. For the six months ended June 30, 2001, selling, general and administrative expenses increased from $1,820,000 to $1,889,000. Selling, general and administrative expenses during the six months ended June 30, 2000 consisted of professional fees and financial services expenses related to the private placement and common stock purchase agreement. For the six months ended June 30, 2001, the reduction of these costs were partially offset by the amortization of goodwill in connection with the acquisition of Advanced Digital Designs, Inc. and other increases in expenses for the design engineering operations.

Research and Development costs increased to approximately $778,000 during the second quarter ended June 30, 2001 from $166,000 for the corresponding period in 2000. For the six months ended June 30, 2001, R & D costs were $1,241,000 compared to $251,000 for the six months ended June 30, 2000. R & D costs are primarily related to the development of the OraLynx(TM) set-top box, with a small portion related to further development of the next generation hand-held computers.

Interest expense decreased to approximately $4,000 for the second quarter of 2001 and $12,000 for the six months, compared to $24,000 for the second quarter of 2000 and $1,817,000 for the six months ended June 30, 2000. Interest expense in 2000 was primarily generated from the issuance of common stock at a price below market value and the issuance of warrants during the private placement. Interest expense in 2001 is primarily related to certain capital leases on various equipment.

The consolidated net loss was approximately ($2,844,000) or ($0.05) per share for the six months ended June 30, 2001. The consolidated net loss for the six months ended June 30, 2000 was ($3,982,000) or ($0.07) per share. The loss for 2001 was primarily attributed to the amortization of goodwill associated with the acquisition of Advanced Digital Designs, Inc., Research and Development costs regarding the set-top box and general and administrative expenses, whereas the loss for 2000 consisted primarily of costs associated with the private placement, common stock purchase agreement and interest expense. Loss per common share is calculated based on the monthly weighted average number of shares outstanding which were 61,848,402 for the six-month period ended June 30, 2001 and 57,005,361 for the six-month period ended June 30, 2000.

Total assets for the Company were approximately $8,443,000 at June 30, 2001, a decrease of approximately $2,718,000 from December 31, 2000. The decrease was primarily attributable to the net cash used in operations of approximately $1,925,000, the purchase of approximately $61,000 of equipment, payment of capital leases of $47,000, offset by the proceeds from the exercise of stock warrants and options of $106,000.

Dauphin Technology, Inc., a Palatine, Illinois based technology company with facilities in McHenry, Illinois, and Schaumburg, Illinois, develops and markets broadband communication products and hand-held, pen based computers.

Certain matters discussed in this news release are forward-looking statement involving certain risks and uncertainties including, without limitations, changes in product demand, the availability of products, change in competition, economic conditions, various risks due to changes in market conditions and other risks detailed in the Company's Securities and Exchange Commission filings and reports.

                       Dauphin Technology, Inc.
            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                              (Unaudited)

                           Six Months             Three months
                         Ended June 30,           Ended June 30,

                         2001        2000         2001         2000
                    ----------  ----------  -----------  -----------

NET REVENUE            827,241      16,041      382,087       11,305
COST OF REVENUE        643,400     123,411      314,815      357,561
                    ----------  ----------  -----------  -----------

Gross Profit (Loss)    183,841   (107,370)       67,272    (346,256)


SELLING, GENERAL AND
 ADMINISTRATIVE
  EXPENSE            1,888,869   1,820,049    1,137,885      726,865
RESEARCH AND
 DEVELOPMENT EXPENSE 1,240,896     250,858      778,374      166,144
                    ----------  ----------  -----------  -----------

Loss from Operations(2,945,924) (2,178,277)  (1,848,987)  (1,239,265)

INTEREST EXPENSE        11,780   1,817,141        4,895       24,176
INTEREST INCOME        113,693      13,810       25,033       13,810
                    ----------  ----------  -----------  -----------

Loss before Income
 Taxes              (2,844,011) (3,981,608)  (1,828,849)  (1,249,631)

INCOME TAXES                 -           -            -            -
                    ----------  ----------  -----------  -----------

         NET LOSS   (2,844,011) (3,981,608)  (1,828,849)  (1,249,631)
                    ==========  ==========  ===========  ===========



BASIC AND DILUTED
 LOSS PER SHARE          (0.05)     (0.07)        (0.03)        (0.02)
                    ==========  ==========  ===========   ===========



Weighted Average
 number of Common
 Shares outstanding 61,848,402  57,005,361   61,898,736   57,734,598
                    ==========  ==========   ==========   ==========

                       Dauphin TechnologInc.
                CONDENSED CONSOLIDATED BALANCE SHEETS
                              (Unaudited)

                            June 30, 2001   December 31, 2000
                         ----------------   -----------------
CURRENT ASSETS:
Cash                        $ 756,925            $ 2,683,480
Accounts receivable-
 Trade, net of allowance
 for bad debt of
 $50,621 at June 30, 2001
 and December 31,
 2000, respectively           275,687                321,377
 Employee receivables          18,248                 21,590
Inventory, net of reserve
 for obsolescence of
 $2,491,216 at June
 30, 2001 and December
 31, 2000, respectively       527,241                505,749
Prepaid expenses               84,206                 20,794
                               ------                 ------
 Total current assets       1,662,307              3,552,990

INVESTMENT IN RELATED
 PARTY                        290,000                290,000

PROPERTY AND EQUIPMENT,
 net of accumulated
 depreciation of
 $1,324,774 and
 $1,127,040 at June 30,
 2001 and December 31,
 2000, respectively         1,341,394              1,477,787

ESCROW DEPOSIT                611,491                752,500

GOODWILL, net of
 accumulated amortization
 of $962,500 and $412,500
 at June 30, 2001 and
 December 31, 2000,
 respectively               4,537,500              5,087,500
                             --------              ---------

Total assets               $8,442,692            $11,16,0777
                           ==========            ===========

CURRENT LIABILITIES:
Accounts payable            $ 230,612             $  290,474
Accrued expenses               79,979                 80,433
Current portion of long-
 term debt                     96,254                113,629
Customer Deposits              50,488                 53,244
                               ------                 ------

Total current liabilities     457,333                537,780

LONG-TERM DEBT                 72,856                102,133
COMMITMENTS AND
 CONTINGENCIES                __-___                ___-___
Total liabilities             530,189                639,913

SHAREHOLDERS' EQUITY:
Preferred stock, $0.01
 par value, 10,000,000
 shares authorized but
 unissued                           -                      -

Common stock, $0.001 par
 value, 100,000,000
 shares authorized;
 61,900,069 and
 61,652,069 issued and
 outstanding at  June 30,
 2001 and December 31,
 2000, respectively            61,901                 61,653
Warrants                    3,358,700              3,321,810
Paid-in capital            54,980,011             54,781,499
Accumulated deficit       (50,488,109)           (47,644,098)
                           ------------           ------------
Total shareholders'
 equity                     7,912,503             10,520,864
                            ------------           ------------
Total liabilities and
 shareholders' equity     $ 8,442,692            $11,160,777
                             ===========            ===========