Digital Solutions Reports Fourth Consecutive Quarterof Profitability.

SOMERSET, NJ--(BUSINESS WIRE)--July 30, 1998--Digital Solutions, Inc. (NASDAQ: DGSI), one of the nation's leading Professional Employer Organizations (PEO), today reported results for the third quarter and nine months ended June 30, 1998 slightly higher than was projected in the company's July 16

Third quarter net income was $1,792,000, or nine cents per diluted share, compared with a net loss of $57,000, or less than one cent per diluted share for the same quarter of 1997. Pre-tax income for the third quarter was $322,000. Revenues for the quarter rose 15.1 percent, to $35,885,000 from $31,185,000 for the comparable three months last year.

The increase of $1,849,000 in the third quarter net income is attributable to a $379,000 improvement in pre-tax earnings from an overall improvement in operations and the overhead reductions implemented in the fourth quarter of last year. Another contributing factor was the reflection of a net tax benefit of $1,470,000 relating to a reduction in the company's deferred tax valuation allowance. As of September 30, 1997, the company had established a deferred tax valuation allowance of $2,680,000. In view of the continued earnings improvement of the company over the last four quarters and its current financial position and prospects, management has determined that it is more likely than not that the majority of such valuation allowance will be realized. As of June 30, 1998, the company's valuation allowance approximated $680,000.

Net income for the nine months was $2,496,000, or 13 cents per diluted common share versus a loss of $3,098,000 or 16 cents per diluted common share for the same period a year earlier. Nine-month revenues were $102,122,000, up from revenues of $92,295,000 for the first nine months of the prior fiscal year. The increase in net income for the nine months of 1998 compared to 1997 reflects improved income from operations, $3,100,000 in negative adjustments recorded in fiscal 1997, and the net tax benefit of $1,470,000 recorded in fiscal 1998.

"DSI entered the fourth quarter with a strong financial foundation," stated Donald Kappauf, CEO of Digital Solutions. "The company's working capital position as of June 30, 1998 was $3,300,000 versus a working capital deficit of $1,400,000 as of September 30, 1997. This improvement is due primarily to the company's continued earnings improvement and our successful refinancing of short-term bank borrowings to a long-term facility," he said. As previously reported, on April 29, 1998, the company replaced a former credit facility with a new long-term facility from FINOVA Capital Corporation.

Commenting on the increase in revenues, Kappauf said, "All of the revenue gains this year are due to the efforts of our internal sales force to continually bring in new business. We are also pleased that our gross profit margins, as a percent of sales, improved thanks in part to increases in our higher-margin medical staffing business."

"Since the close of the quarter, we have further strengthened our highly effective board of directors by electing two new directors, and have begun an active investor relations program that will help communicate our commitment to increasing shareholder value," Kappauf concluded.

Digital Solutions, Inc. provides comprehensive human resource management to small and mid-sized companies in a variety of industries. The company's services include professional employer services which provide the administration of the human resource function, workers' compensation, employee benefits, a 401K plan, payroll and payroll tax service preparation. DSI also provides temporary and permanent staffing and payroll services. -0-

DIGITAL SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

                For the Three Months Ended   For the Nine Months Ended
                  6/30/98       6/30/97        6/30/98         6/30/97

Revenues       $35,885,000    $31,185,000   $102,122,000  $92,295,000

Direct expenses 33,182,000     28,908,000     94,588,000   85,911,000
                ----------     ----------     ----------   ----------

Gross profit     2,703,000      2,277,000      7,534,000    6,384,000

Selling, general
and administrative
expenses         2,059,000      2,034,000      5,677,000    8,402,000

Depreciation and
amortization       163,000        213,000        502,000      830,000
                   -------        -------        -------      -------

Income (loss) from
operations         481,000         30,000      1,355,000   (2,848,000)

Other income
 (expense)
 Interest and
 other income       14,000          1,000        37,000       34,000
 Interest expense (173,000)       (88,000)     (366,000)    (284,000)
                  ---------       --------     ---------    ---------
                  (159,000)       (87,000)     (329,000)    (250,000)
                   -------         ------      --------     ---------
Income (loss)
before tax         322,000        (57,000)     1,026,000  (3,098,000)

Income tax
 benefit         1,470,000          -----      1,470,000       -----
                 ----------         ------    ----------       ------

Net income
(loss)          $1,792,000      $ (57,000)    $2,496,000 $(3,098,000)
                ===========    ============= ===========  ============

Basic earnings
(loss) per common
 share:
                    $.09           ($.00)         $.13        ($.16)

Weighted average
shares outstanding:
                19,298,010    19,103,854    19,263,097    19,048,901

Diluted earnings
(loss) per common
 share:              $.09         ($.00)         $.13         ($.16)

Diluted shares
 outstanding:  19,548,671    19,103,854    19,504,058     19,048,901

DIGITAL SOLUTIONS, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED BALANCE SHEET INFORMATION

                                6/30/98                 9/30/97

Cash                         $1,806,000                $841,000

Total assets                 15,784,000              14,163,000

Shareholders' equity          7,618,000               4,872,000

Working capital               3,299,000              (1,401,000)

Tangible net worth            3,460,000                 528,000


  CONTACT: Donald Kappauf, Chief Executive Officer
            732/748-1700
                  or
            Porter, LeVay & Rose, Inc., New York
            L. B. Stauffer, Sr. VP, 212/564-4700