Hauppauge Digital, Inc. Announces June 30, 1998 Third Quarter Results; Sales and Income Increase 55% and 161% Compared to Prior Year Fiscal Quarter

Business Wire, August 7, 1998

HAUPPAUGE, N.Y.--(BUSINESS WIRE)--Aug. 7, 1998--Hauppauge Digital, Inc. (NASDAQ symbol HAUP, Boston Stock Exchange symbol HAU), the leader in TV and data broadcast receiver products for personal computers, today announced the Company's third quarter and nine month results for the period ending June 30, 1998.

Net sales for the quarter increased 55% to $9,042,704 from $5,843,431 for the prior year's third quarter. Net sales for the nine month period ended June 30, 1998 increased 41% to $26,443,939 from $18,695,544 for the prior year nine month period.

Third quarter net income increased 161% to $311,161 or $0.07 per share on a basic and diluted basis compared to $118,641, or $0.03 per share on a basic and diluted basis for the corresponding quarter in the previous year. Net income for the nine month period increased 49% to $1,110,866, or $0.25 and $0.24 per share on a basic and diluted basis respectively, as opposed to $752,151, or $0.17 per share on a basic and diluted basis for the prior year's nine month period.

The increase in sales for the quarter and nine month period was primarily due to the expansion of the Company's domestic distribution and retail channels, promotions and retail inventory increases in anticipation of the launch of Windows98 and continued strong sales growth in Europe. The stabilization of the German Mark, the company's foreign currency hedging program, and an increase in domestic sales helped lift gross margins to 26% and 25% for the three and nine month periods ending June 30, 1998.

During the third fiscal quarter the Company introduced a new line of WinTV products which work with Windows98, retailing at $79 for the basic model, $99 for a model with a high end dbx stereo sound feature, and $129 for a model that includes an FM stereo radio receiver in addition to dbx stereo. The company also announced that this new line of products has earned the Microsoft Corp. "Windows Hardware Quality Labs" (WHQL) certification, which indicates that the product is fully compatible with Windows98, and allows Hauppauge to affix the "Designated for Windows98" logo to approved Hauppauge products.

Ken Plotkin, Hauppauge's Chief Executive Officer, stated "we believe that greater product awareness plus consumer anticipation of Windows98 and products that work with Windows98 were the catalysts in helping us increase the retail locations handling our product from about 1,000 at the start the quarter to about 3,000 by the end of the quarter. We experienced strong product placement on the retail level leading up to the launch of Windows98."

ABOUT HAUPPAUGE DIGITAL

Hauppauge Digital, Inc., through its Hauppauge Computer Works, Inc. subsidiary, designs and manufactures digital video boards for TV-in-a-window, digital video editing and video conferencing. The Company is headquartered in Hauppauge, New York, with sales offices in Germany, London, Paris and California. The Company's Internet web site can be found at: http://www.hauppauge.com.

For further information, contact Jerry Tucciarone, Chief Financial Officer. Telephone number 516-434-1600 ext. 306, by fax at 516-434-3198 or by e-mail at jtucciarone@hauppauge.com.

The forward looking statements included in this news release are based on management's current expectations. In light of the assumptions and uncertainties inherent in forward looking information, the inclusion of such information should not be regarded as a representation by the Company or any other person that the plans of the Company will be realized or that positive trends in financial results will occur. -0-

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

                                       Three Months ended
                                            June  30,
                                       1998           1997

Net Sales                       $    9,042,704  $  5,843,431
Cost of  Sales                       6,628,542     4,531,054
                                    ----------    ----------

Gross Margins                        2,414,162     1,312,377
Gross Margin %                              26            22

SG&A and R&D Expenses                2,028,782     1,213,484
                                    ----------     ---------
Income from operations                 385,380        98,893

Other income                            79,781        54,748
                                    ----------     ---------

Net income before taxes                465,161       153,641
Tax provision                          154,000        35,000
                                       -------       -------
Net income                     $       311,161    $  118,641

Net income per
 share-diluted                           $0.07         $0.03
Net income per
 share-basic                             $0.07         $0.03

Weighted average
 shares-basic                        4,406,870     4,411,893
Weighted average
 shares-diluted                      4,750,454     4,416,703


                                        Nine Months ended
                                             June 30,
                                       1998           1997

Net Sales                    $      26,443,939   $  18,695,544
Cost of  Sales                      19,820,546      14,426,315

                                    ----------      ----------
Gross Margins                        6,823,393       4,269,229
Gross Margin %                              25              23

SG&A and R&D Expenses                5,226,527       3,467,169
                                   -----------       ---------
Income from operations               1,396,866         802,060

Other income                           260,815         171,018
                                      --------       ---------

Net income before taxes              1,657,681         973,078
Tax provision                          546,815         220,927
                                      --------         -------
Net income                   $       1,110,866        $752,151

Net income per share-diluted             $0.25           $0.17
Net income per share-basic               $0.24           $0.17

Weighted average shares-basic        4,404,545       4,434,630
Weighted average shares-diluted      4,611,170       4,444,816


    CONTACT: Gerald Tucciarone
              Chief Financial Officer
              516/434-1600 ext.306