Digital Fusion Reports Second Quarter Results.

Business Editors/High-Tech Writers

HUNTSVILLE, Ala.--(BUSINESS WIRE)--Aug. 12, 2003

Digital Fusion, Inc. (OTCBB:DIGF), a business and information technology (IT) services provider, today announced financial results for the second quarter ended June 30, 2003.

Financial Comparisons

For the quarter ended June 30, 2003, revenues were $1.6 million versus $2.6 million for the same quarter previous year. The decrease in revenues during the first quarter 2003 compared to the same period last year was primarily due to the reduction in IT spending by our customers. Net loss for the quarter ended June 30, 2003 was ($164,000) versus ($170,000) for the same quarter previous year.

For the six months ended June 30, 2003, revenues were $3.2 million versus $5.4 million for the six-month period the previous year. The decrease in revenues during the six months ended 2003 compared to the same period last year was primarily due to the reduction in IT spending by our customers. Net loss for the six months ended June 30, 2003 was ($530,000) compared to net income for the six months ended June 30, 2002 of $1,277,000. During the six months ended June 30, 2002, the Company recorded a gain on forgiveness of legacy debts of $1.5 million and reduced its severance and restructuring accrual by $182,000. The net loss excluding these items for the six months ended June 30, 2002 was ($444,000).

Business Discussion

The gross profit increase of $150,000 on equal revenue between the first and second quarter of 2003 was primarily due to increased consultant utilization. Selling, general and administrative expenses fell an additional $50,000 between the first and second quarter of 2003.

Management Comments

"We are pleased that we significantly narrowed our operational loss compared to last quarter. However, we are disappointed that sluggish new sales prevented us from further closing the gap," said Roy Crippen, president and chief executive officer. "To help grow our sales pipeline in both the commercial and government sectors we have made some organizational changes centered around improved support for our sales team and have decided to hire two new sales representatives."

About Digital Fusion

Digital Fusion is a business and information technology consulting company helping its customers make the most of technology to access business information, enhance the performance of their human resources and meet their business needs.

Digital Fusion provides a range of services in business process and application strategy and development, including Application Development and Data Management, Systems Integration and IT Support. Based in the eastern U.S., Digital Fusion has offices in New York, Washington D.C., Philadelphia, Orlando, Huntsville, and New Jersey. For additional information about Digital Fusion visit http://www.digitalfusion.com.

Forward Looking Statements. All statements other than statements of historical fact included in this release are forward-looking statements. When used in this release, words such as "anticipate,'' "believe,'' "estimate,'' "expect,'' "intend'' and similar expressions, as they relate to the Company or its management, as well as assumptions made by and information currently available to the Company's management, identify forward-looking statements. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors including, but not limited to: the effect of business and economic conditions; the impact of competitive products and pricing; and capacity and supply constraints or difficulties. Such statements reflect the current views of the Company with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the operations, results of operations, growth strategy and liquidity of the Company.

                         DIGITAL FUSION, INC.
                 Condensed Consolidated Balance Sheets

                   (in thousands, except share data)


                                                    June 30,  Dec. 31,
                                                      2003      2002
                      ASSETS                        unaudited
                                                   ---------- --------
Current assets:
 Cash and cash equivalents                        $      408 $    653
 Accounts receivable (net of allowance for doubtful
    accounts of $307 in 2003 and $325 in 2002)           890      978
 Other current assets                                     92       87
                                                   ---------- --------
    Total current assets                               1,390    1,718
Property and equipment, net                               66      185
Intangible assets, net                                 3,347    3,347
Other assets                                              12       28
                                                   ---------- --------
    Total assets                                  $    4,815 $  5,278
                                                   ========== ========

        LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable and accrued expenses            $      845 $    930
 Current maturities of long-term debt                    610      808
 Deferred revenue                                         21       21
                                                   ---------- --------
    Total current liabilities                          1,476    1,759
Interest payable - long term                              15       86
Long-term debt, less current maturities                  923      517
Pension obligation                                       280      280
                                                   ---------- --------
    Total liabilities                                  2,694    2,642
                                                   ---------- --------

Stockholders' equity:
 Common stock, $.01 par value, authorized
  16,000,000 shares, 7,167,671 shares
  issued and outstanding                                  72       72
 Additional paid in capital                           39,919   39,904
 Accumulated deficit                                 (37,870) (37,340)
                                                   ---------- --------
    Total stockholders' equity                         2,121    2,636

                                                   ---------- --------
    Total liabilities and stockholders' equity    $    4,815 $  5,278
                                                   ========== ========


                         DIGITAL FUSION, INC.
            Condensed Consolidated Statements of Operations
       For the three and six months ended June 30, 2003 and 2002
          (unaudited, in thousands, except per share amounts)

                                         Three months     Six months
                                          ended June      ended June
                                              30,             30,
                                         -------------  --------------
                                          2003   2002    2003    2002
                                         ------ ------  ------ -------

Revenues:
    Consulting                          $1,576 $2,557  $3,188 $ 5,366
    Product                                 58      -      58       -
                                         ------ ------  ------ -------
      Total revenue                      1,634  2,557   3,246   5,366
                                         ------ ------  ------ -------
Cost of services and goods sold:
    Consulting                           1,151  1,894   2,485   4,075
    Product                                 55      -      55       -
                                         ------ ------  ------ -------
      Total cost of services and
       goods sold                        1,206  1,894   2,540   4,075
                                         ------ ------  ------ -------
      Gross profit                         428    663     706   1,291
                                         ------ ------  ------ -------
Operating expenses:
    Selling, general and administrative    539    884   1,131   1,714
    Severance and restructuring              -    (62)      -    (182)
    Gain on forgiveness of debt              -      -       -  (1,539)
                                         ------ ------  ------ -------
      Total operating expenses             539    822   1,131      (7)
                                         ------ ------  ------ -------
      Operating income (loss)             (111)  (159)   (425)  1,298
Interest expense (income), net              53     11     105      21
                                         ------ ------  ------ -------
      Income (loss) before income taxes   (164)  (170)   (530)  1,277
Income tax benefit                           -      -       -       -
                                         ------ ------  ------ -------
      Net income (loss)                 $ (164)$ (170) $ (530)$ 1,277
                                         ====== ======  ====== =======

Basic earnings (loss) per share         $(0.02)$(0.02) $(0.07)$  0.18
                                         ====== ======  ====== =======
Basic weighted average common shares
 outstanding                             7,168  7,164   7,168   7,164
                                         ====== ======  ====== =======

Diluted earnings (loss) per share       $(0.02)$(0.02) $(0.07)$  0.17
                                         ====== ======  ====== =======
Diluted weighted average common shares
 outstanding                             7,168  7,164   7,168   7,727
                                         ====== ======  ====== =======