<PAGE>


                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-Q

                                   (Mark one)
    [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                  For the quarterly period ended July 31, 2000

                                       OR

    [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

             For the transition period from __________ to ________

                          Commission File No. 0-24015

                           DUNN COMPUTER CORPORATION
             (Exact name of Registrant as specified in its charter)

                                    VIRGINIA
         (State or other jurisdiction of incorporation or organization)

                                   54-1890464
                      (I.R.S. Employer Identification No.)

                     1306 Squire Court, Sterling, VA. 20166
              (Address of principal executive offices) (zip code)

                                 (703) 450-0400
              (Registrant's telephone number, including area code)


          (Former name or former address, if changed since last report)
    Indicate by check mark whether the registrant (1) has filed all reports
    required to be filed by Section 13 or 15(d) of the Securities Exchange
    Act of 1934 during the preceding 12 months (or for such shorter period
    that the Registrant was required to file such reports), and (2) has
    been subject to such filing requirements for the past 90 days.
    Yes  X     No      .
        -----    ------

    As of September 1, 2000 there were 9,649,409 shares of the registrant's
    common stock outstanding.


<PAGE>

                           Dunn Computer Corporation
                                Form 10-Q Index
                  For the Quarterly period ended July 31, 2000



Description                                                               Page

Part I.    Financial Information.........................................   3

Item 1.    Financial Statements..........................................
           Consolidated Balance Sheets as of July 31, 2000
             and October 31, 1999........................................   3
           Consolidated Statements of Operations for the three month
             and nine month periods ended July 31, 2000 and 1999 ........   4
           Consolidated Statements of Cash Flows for the nine month
             periods ended July 31, 2000 and 1999 .......................   5
           Notes to the Consolidated Financial Statements................   6

Item 2.    Management's Discussion and Analysis of Financial Condition
             and Results of Operations ..................................   9


Part II.   Other Information.............................................  11

Item 1.    Legal Proceedings.............................................  11
Item 4.    Submission of Matters to a Vote of Security Holders...........  12
Item 6.    Exhibits and Reports on Form 8-K..............................  13






<PAGE>



PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DUNN COMPUTER CORPORATION
CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
                                                                    October 31,      July 31,
                                                                       1999            2000
                                                                   ------------    ------------
                    ASSETS                                                          (unaudited)

<S>                                                                <C>             <C>
Current assets
   Cash and cash equivalents                                       $    655,450    $    434,795
   Accounts receivable, net                                           5,063,041       4,760,802
   Inventory, net                                                     5,497,634       7,128,455
   Deferred tax asset                                                 1,282,695       1,330,263
   Income tax receivable                                                585,769         404,407
   Prepaid expenses and other current assets                            118,594         232,918
                                                                   ------------    ------------

Total current assets                                                 13,203,183      14,291,640

   Property and equipment, net                                        1,323,696         948,386
   Equipment on lease, net                                            3,906,011       2,002,026
   Goodwill and other intangible assets, net                          3,559,005       3,274,431
   Investments                                                          150,000         150,000
   Other assets                                                         145,121         129,936
                                                                   ------------    ------------

Total assets                                                       $ 22,287,016    $ 20,796,419
                                                                   ============    ============


          LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
    Accounts payable                                               $  4,822,979    $  5,184,579
    Accrued expenses                                                  2,515,653       3,735,133
    Accrued litigation costs                                          2,000,000              --
    Line of credit                                                    3,790,705       1,374,585
    Notes payable, current                                              324,933         601,838
    Unearned revenue                                                  1,170,417       1,127,196
                                                                   ------------    ------------

Total current liabilities                                            14,624,687      12,023,331

   Notes payable, long-term portion                                     545,250          25,467
   Line of credit - long-term                                         2,300,000              --

Stockholders' equity
    Preferred Stock $.001 par value; 2,000,000 shares                        --               3
      authorized, 3,000 shares issued and outstanding
    Common Stock, $.001 par value: 20,000,000 shares authorized,          9,420           9,650
       9,419,509 & 9,649,409 shares issued and outstanding
       at October 31, 1999 and July 31, 2000, respectively;
    Additional paid in capital                                       37,721,749      41,589,458
    Treasury Stock, 400,000 shares;                                  (3,432,500)     (3,432,500)
    Accumulated deficit                                             (29,481,590)    (29,418,990)
                                                                   ------------    ------------

Total Stockholders' equity                                            4,817,079       8,747,621
                                                                   ------------    ------------

Total liabilities and stockholders' equity                         $ 22,287,016    $ 20,796,419
                                                                   ============    ============

</TABLE>


The accompanying notes are an integral part of these consolidated financial
statements.

<PAGE>

DUNN COMPUTER CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

<TABLE>
<CAPTION>

                                                           Three Months Ended                Nine Months Ended
                                                                July 31,                         July 31,
                                                        1999              2000             1999            2000
                                                     ------------     ------------     ------------     ------------
<S>                                                  <C>              <C>              <C>              <C>
Net revenues                                         $  7,255,482     $ 10,328,950     $ 28,407,906     $ 28,059,561
Cost of revenue                                         6,905,927        8,531,879       23,381,954       22,773,825
                                                     ------------     ------------     ------------     ------------
Gross profit                                              349,555        1,797,071        5,025,952        5,285,736
Selling and marketing                                     377,206          246,313        1,745,723          838,095
General and administrative                              2,657,241        1,301,703        6,090,823        3,919,473
Amortization of goodwill                                  193,249           98,554          555,796          273,486
Impairment of goodwill                                 20,638,187               --       20,638,187               --
                                                     ------------     ------------     ------------     ------------
Income (loss) from operations                         (23,516,328)         150,501      (24,004,577)         254,682

Interest (expense) income                                (185,803)        (150,659)        (555,316)        (448,587)
Other (expense) income                                   (166,237)         228,223         (126,735)          73,416
                                                     ------------     ------------     ------------     ------------
Net (loss) income from operations before
extraordinary item and income taxes                   (23,868,368)         228,065      (24,686,628)        (120,489)
Extraordinary gain - early extinguishment of debt              --               --               --          750,000
                                                     ------------     ------------     ------------     ------------
Net (loss) income from operations                     (23,868,368)         228,065      (24,686,628)         629,511

Benefit from income taxes                               1,012,350               --        1,237,350               --
                                                     ------------     ------------     ------------     ------------
Net (loss) income before preferred dividends          (22,856,018)         228,065      (23,449,278)         629,511

Dividends to preferred stockholders                            --          (37,500)              --          (37,500)
                                                     ------------     ------------     ------------     ------------
Net (loss) income                                    $(22,856,018)    $    190,565     $(23,449,278)    $    592,011

Preferred stock accretion                                      --               --               --         (529,411)
                                                     ------------     ------------     ------------     ------------
Net loss (income) available to common stockholders
                                                     $(22,856,018)    $    190,565     $(23,449,278)    $     62,600

Basic (loss) earnings per share                      $      (2.56)    $        .02     $      (2.62)    $        .01

Diluted (loss) earnings per share                    $      (2.56)    $        .02     $      (2.62)    $        .01

</TABLE>

The accompanying notes are an integral part of these consolidated statements.





<PAGE>



DUNN COMPUTER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

<TABLE>
<CAPTION>

                                                                 Nine Months Ended
                                                                     July 31,
                                                              1999             2000
                                                           ------------     ------------
<S>                                                        <C>              <C>
Operating activities
Net income (loss)                                          $(23,449,278)    $    592,011
Adjustments to reconcile net income (loss) to net cash
  provided by (used in) operating activities:
Gain on sale of leases                                               --         (272,710)
Depreciation and amortization of property and equipment       1,958,147        2,097,410
Amortization of goodwill and other intangibles                  477,450          284,574
Provision for income tax benefit                             (1,237,350)              --
  Impairment of goodwill                                     20,631,187               --
  Changes in operating assets and liabilities:
  Accounts receivable                                         8,177,205          302,239
  Investment in sales-type leases                             2,949,490               --
  Inventory                                                   4,055,073       (1,630,821)
  Prepaid expenses and other assets                            (351,576)         (99,139)
  Accounts payable                                           (8,449,260)         361,600
  Accrued expenses                                           (2,826,797)        (780,520)
  Income tax receivable                                              --          181,362
  Deferred tax asset (credit)                                        --          (47,568)
  Other Assets                                                   63,710               --
  Unearned revenue and other liabilities                     (2,709,827)         (43,221)
                                                           ------------     ------------
Net cash provided by operating activities                      (704,826)         945,217

Investing activities
(Purchase) sale of property and equipment                    (1,336,398)         454,595
                                                           ------------     ------------
Net cash (used in) provided by investing activities          (1,336,398)         454,595


Financing activities
Proceeds from issuance of preferred stock                            --        2,725,803
Proceeds from issuance of common stock                               --          612,728
Payments on notes payable                                      (931,805)        (242,878)
Purchase of treasury stock                                       (2,125)              --
Proceeds from (repayments on) lines of credit, net            3,798,405       (4,716,120)
Other long term liabilities                                    (137,155)              --
                                                           ------------     ------------


Net cash provided by (used in) financing activities           2,727,320       (1,620,467)
Net increase (decrease) in cash and cash equivalents            686,096         (220,655)
Cash and cash equivalents at beginning of period                     --          655,450
                                                           ------------     ------------

Cash and cash equivalents at end of period                 $    686,096     $    434,795


Supplemental cash flow information
Interest paid                                              $    185,305     $    448,587
Income taxes paid                                                   $--              $--

</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.



<PAGE>



DUNN COMPUTER CORPORATION
NOTES TO  CONSOLIDATED FINANCIAL STATEMENTS

1.   Basis of Presentation

The consolidated financial statements for the three and nine month periods ended
July 31, 2000 and 1999 are unaudited and include all adjustments which, in the
opinion of management, are necessary to present fairly the results of operations
for the periods then ended. All such adjustments are of a normal and recurring
nature. These consolidated financial statements should be read in conjunction
with the Annual Report on Form 10-K of Dunn Computer Corporation (the "Company")
which includes consolidated financial statements and notes thereto for the years
ended October 31, 1999 and 1998.

2.   Early Extinguishment of Debt

In conjunction with the purchase of IDP, the Company assumed a credit facility
of $25,000,000 secured by inventory and accounts receivable of IDP. The
outstanding balance on this line of credit at October 31, 1999 was approximately
$4,622,000. The interest rate applicable to this line of credit at that date was
8.05%.

On November 8, 1999, the Company executed an agreement with the financial
institution to terminate this facility. Under the terms of the agreement, the
Company repaid approximately $3.0 million of the outstanding principal balance
prior to December 31, 1999. In conjunction with the agreement, approximately
$750,000 ($.08 per share) was forgiven by the financial institution and the
remaining principal balance of approximately $832,000 was converted into a two
year note maturing in January 2002 bearing interest at the prime rate. The
Company has properly reflected the $750,000 as an extraordinary gain for the
nine months ended July 31, 2000 and resulted in income of approximately $.08 per
share.

3.  Lease Transaction

In December 1999, the Company assigned payments from one of its operating leases
to a financing company in exchange for the present value of the minimum lease
payments. The Company has recorded this amount as unearned revenue and will
recognize the revenue over the lease term. The lease term expires on September
30, 2000.

4.  Restructure of Loan

On February 11, 2000, the Company amended its primary line of credit facility
whereby the maximum availability was reduced from $15 million to $5 million and
the interest rate was increased to the prime rate plus 1%. The amended line of
credit expires Novmeber 30, 2000.



<PAGE>


5.  Private Placement

On March 13, 2000, the Company sold 3,000 shares of it Series A Convertible
Preferred Stock in a private placement which is exempt from registration
provided by Regulation D Rule 506 promulgated by the Securities and Exchange
Commission under the Securities Act of 1933, as amended. The Company received
net proceeds of approximately $2.7 million which will be used to fund current
and future operations. The Series A Convertible Preferred Stock is convertible
into common stock at the price equal to the lesser of 85% of the average of the
three lowest closing bid prices of the common stock for the 25 days prior to the
conversion date or $3.64. The Company recorded a deemed dividend of $529,411 for
the nine month period ended July 31, 2000 for the beneficial conversion feature.
The terms of the agreement require the Company to pay the preferred shareholders
a 5% dividend per annum. In accordance with the agreement, the Company recorded
a preferred stock dividend in the amount of $37,500 for the three month period
ended July 31, 2000.

6.  Earnings Per Share

Basic and diluted earnings per common share is calculated by dividing the net
earnings (loss) available to common shareholders by the weighted average number
of common shares outstanding. Due to their antidilutive effects, outstanding
shares of preferred stock, stock options and warrants to purchase shares of
common stock were excluded from the computation of diluted earnings per share
for the three months ended July 31, 1999 and the nine months ended July 31, 2000
and 1999.

7.  Contingencies

Professional Services Malpractice Claim

In August of 2000, the Company's former legal counsel, Venable, Baetjer and
Howard, LLP filed a claim against the Company for approximately $343,087 for
legal fees and costs. In response to the claim, the Company filed a counter
claim for professional malpractice and breach of fidiciary duty in the amount of
$1,568,000. The matter is currently in litigation. An outcome for this matter
cannot be predicted.

Microsoft Licensing Agreement

IDP entered into a Government Integrator Agreement, as amended, with Microsoft
Corporation (Microsoft) in 1998 for the licensing of certain Microsoft software.
During 1999, Microsoft asserted that IDP owed approximately $800,000 under this
agreement due primarily to amended billings by Microsoft concerning sales by
IDP. The Company has accrued for amounts due Microsoft based on the original
billing terms. The Company believes that it has meritorious defenses to
Microsoft's allegations and intends to vigorously defend itself if a suit is
filed. The Company cannot estimate at this time the amount of the liability to
be incurred, if any, but does not believe that this matter will have a material
adverse effect upon the Company's financial position or results of operations
and as such, the Company has not recorded any amount relating to this matter,
beyond amounts accrued as noted above, in the accompanying financial statements.


<PAGE>


Monarch Technology, Inc.

In July 1999, Monarch Technology, Inc. ("Monarch") named the Company as a
cross-claim defendant in a legal action pending in Orange County, California in
which Worldnet Computers, Inc. had filed suit against Monarch. Monarch's cross
claims are that the Company is liable for actions of a former employee who
allegedly engaged in a scheme that resulted in Monarch paying $130,000 to the
employee and not receiving products which the employee allegedly stated that the
Company would sell to Monarch or its agent. Monarch claims that the Company is
liable for the $130,000 plus interest, attorneys fees and other consequential
damages totaling approximately $60,000. The Company cannot estimate at this time
the amount of the liability to be incurred, if any, but does not believe that
this matter will have a material adverse effect upon the Company's financial
position or results of operations and as such, the Company has not recorded any
amount relating to this matter in the accompanying financial statements.

Teaming Partnership Agreement

In May 1999, a former contract teaming partner filed a demand for arbitration
with the American Arbitration Association, alleging breach of certain contract
agreement with the Company. The issue relates to disputed commissions due to the
former teaming partner. In June 2000, the Company executed a settlement
agreement with the former teaming partner for $110,000. The Company properly
accrued this amount in the fiscal 1999 results.


<PAGE>



ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Certain statements contained in this section are forward-looking statements (as
such term is defined in the Private Securities Litigation Reform Act of 1995).
Because such statements include risks and uncertainties, actual results may
differ materially from those expressed or implied by such forward-looking
statements. Factors that could cause actual results to differ materially
include, but are not limited to, risks associated with the integration following
an acquisition, comptetitors with broader product lines and greater resources,
the termination of any of the Company's significant contracts or the Company's
inability to attract and retain highly qualified management, technical and sales
personnel.

Overview

Dunn Computer Corporation (together with its wholly-owned subsidiaries, the
"Company" or "Dunn") manufactures custom computer systems and provides related
services to departments, agencies and offices of the federal government (the
"Government") and selected businesses. The Company provides its customers with
single-source solutions by manufacturing its own brand of desktop and portable
computers and high performance network client servers and offering services,
which include network consulting, project implementation, and technical support.
The Company currently derives revenues from hardware sales to the Government and
to medium and large businesses. The Company sells its products and services to
more than 300 customers, including entities within the Department of Defense,
Lockheed Martin Corporation, Blue Cross and Blue Shield Association, the
District of Columbia Government and the Puerto Rican Government.

For the nine month period ended July 31, 2000, the Company dervied a portion of
its revenues from Government contracts. Government contracts, by their terms,
generally can be terminated at anytime, without cause for the convenience of the
Government. If a Government contract is so terminated, the contractor generally
is entitled to receive compensation for the services provided or certain costs
incurred at the time of termination and a reasonable profit on the contract work
performed prior to the date of termination. In addition, all Government
contracts require compliance with various contract provisions and procurement
regulations and in certain cases, accounting and audit requirements. If not
cured, certain violations of these regulations could result in the termination
of the contract, imposition of fines, and suspension or debarment from competing
for or receiving awards of additional Government contracts. Exclusion of the
Company from federal procurements, the termination of any of the Company's
significant Government contracts or the imposition of such penalties could have
a material adverse effect on the Company.

RESULTS OF OPERATIONS

For the three and nine months ended July 31, 2000 compared to the three and nine
months ended July 31, 1999

Net revenues for the three months ended July 31, 2000 were $10,328,950 as
compared to $7,255,482 for the three months ended July 31, 1999, an increase of
approximately 42%. The increase is primarily attributable to the commencement of
a significant contract with the Puerto Rican Government in April 2000.

Net revenues for the nine months ended July 31, 2000 were $28,059,561 compared
to $28,407,906 for the nine months ended July 31, 1999. Despite the loss of a
significant government contract in fiscal 1999, the Company has maintained a
constant revenue stream due to several signifcant contracts awarded during
fiscal 2000.


<PAGE>

Gross margin, as a percentage of sales, increased to 17.4% for the three months
ended July 31, 2000 from 4.8% for the three months ended July 31, 1999. For the
nine months ended July 31, gross margin was 18.8% in fiscal 2000 compared to
17.7% in fiscal 1999. It should be noted that in fiscal 1999, the Company
recorded certain one-time charges which resulted in a significantly lower gross
profit percentage. The gross margin percentages for fiscal 2000 three month and
nine month periods ended July 31 are consistent with the industry average.

For the three months ended July 31, selling and marketing expenses decreased to
$246,313 in fiscal 2000 from $377,206 in fiscal 1999. For the nine months ended
July 31, selling and marketing expenses decreased to $838,095 in fiscal 2000
from $1,745,723 in fiscal 1999. The decrease is attributable to the elimation of
expensive marketing programs as well as the utilization of co-operative
marketing arrangements with certain vendors which reduced the overall marketing
costs.

General and administrative expenses decreased to $1,301,703 for the three months
ended July 31, 2000 from $2,657,241 for the three months ended July 31, 1999.
For the nine month period ended July 31, general and administrative expenses
decreased to $3,919,473 in fiscal 2000 from $6,090,823 in fiscal 1999, a
decrease of approximately 36%. The decrease resulted primarily from the
Company's efforts to manage general and administrative expenses relative to its
net revenue and gross margin.

Interest expense, net of interest income, decreased to $150,659 for the three
months ended July 31, 2000 from $185,303 for the three months ended July 31,
1999. For the nine months ended July 31, interest expense, net of interest
income, decreased to $448,587 in fiscal 2000 from $555,316 in fiscal 1999. This
decrease is a direct result of the Company's reduction of its outstanding debt
in the first quarter of fiscal 2000.

The Company reported net income of $190,565 for the three months ended July 31,
2000 as compared to a net loss of $22,856,018 for the same period in the prior
year. For the nine months ended July 31, the Company reported net income before
preferred stock accretion of $592,011 for fiscal 2000 as compared to a net loss
of $23,449,278 for the comparable period during fiscal 1999. This is the result
of the Company's management of costs relative to net revenue as well as
additional contracts awarded in the third quarter of fiscal 2000 and the
one-time write-off of goodwill of $20.6 million in the third quarter of fiscal
1999.


<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

For the nine months ended July 31, 2000, the Company produced positive cash flow
of $945,217 from its operating activities. The Company generated net income
before preferred dividends of $592,011 and collected $302,239 on its
receivables. The purchase of inventory of $1,630,821 and goods and services of
$418,920 were the principal use of funds.

Funds provided by investing activities consisted of the sale of property,
equipment and leased assets of $454,595. Net cash used for financing activities
consisted of net repayments on the line of credit of $4,716,120 and payments on
notes payable of $242,878. In February 2000, the Company restructured its
existing line of credit from $15 million to $5 million with an expiration date
of November 30, 2000 bearing interest at the prime rate plus 1%. As of July 31,
2000, the Company's outstanding balance on the line of credit is $1,374,585.

As of July 31, 2000, the Company had working capital of approximately
$2,268,309. The Company believes the bank facility, together with cash on hand,
cash generated from operations, and sales of certain lease agreements will
provide sufficient financial resources to finance the current operations of the
Company through fiscal 2000. In addition, the Company sold 3,000 shares of its
Series A Convertible Preferred Stock on March 13, 2000 which generated
approximately $2.7 million in net proceeds which will be used to fund current
and future operations.

From time to time, the Company may pursue strategic acquisitions or mergers
which may require significant additional capital, and additional capital may be
required to satisfy unusual or infrequent expenses. In such event, the Company
may seek additional financing of debt and/or equity.

YEAR 2000 DISCLOSURE

To date, the Company has experienced no failures or disruptions in its internal
operating systems, its products or in its third party vendors or suppliers
caused by any computer applications used by the Company being unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999 (the "Year 2000 Problem"). The
Company believes that there will be no compliance issues related to the Year
2000 Problem that could have a material effect on its financial condition or
results of operations.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

By letter dated April 15, 1998, DDI, a competitor of IDP, asserted that IDP is
bound by a settlement agreement entered into in connection with certain
litigation, calling for payments to the competitor of 1.8% of the first $250
million of IDP's gross sales under the Desktop V contract. IDP and the Company
dispute this claim. On June 1, 1998, the Company filed a Complaint for
Declaratory Judgment in the U.S. District Court of the Eastern District of
Virginia seeking a declaration that DDI is not entitled to receive payments
under the settlement agreement. The defendant counter-claimed against the
Company claiming it did not breach the settlement agreement and is entitled to


<PAGE>

the payments. These matters were litigated and on February 26, 1999, DDI was
awarded $1,500 in satisfaction of its claim. DDI subsequently filed an appeal of
the judgment. On May 9, 2000, the appeals court upheld the verdict awarded to
DDI in the amount of $1,500. This matter is now closed.

On July 31, 1998, the Company received notice from the SBA that it was denying
the request of the U.S. Air Force to waive the requirement to terminate IDP's
Desktop V contract for the convenience of the Government upon the change in
control of IDP to the Company. The Company appealed the denial of the SBA to the
SBA's Office of Hearings and Appeals. On August 31, 1999, the SBA denied the
appeal and ruled that the U.S. Air Force must terminate-for-convenience the
Desktop V contract. Under a termination-for-convenience, the government is
required generally to reimburse a contractor for all costs incurred in the
performance of the contract. The Company is in the process of attempting to
recover from the government a portion or all of unreimbursed costs associated
with the Desktop V Contract. Prior to this ruling by the SBA, the U.S. Air Force
determined not to exercise any of the remaining option years under the Desktop V
contract on May 1, 1999.

In August of 2000, the Company's former legal counsel, Venable, Baetjer and
Howard, LLP filed a claim against the Company for approximately $343,087 for
legal fees and costs in the Circuit Court of Fairfax, Virginia. In response to
the claim, the Company filed a counter claim for professional malpractice and
breach of fidiciary duty in the amount of $1,568,000. The matter is currently in
litigation. An outcome for this matter cannot be predicted.

There are routine legal claims pending against the Company, that occur in the
ordinary course of business but in the opinion of management, liabilities, if
any, arising from such claims will not have a material adverse effect on the
financial condition and results of operation of the Company.

Other than the above, we are not a party in any other material legal
proceedings.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On May 15, 2000, the Company held its 1999 Annual Meeting of Shareholders. At
the annual meeting, the Company's shareholders were asked to vote upon: (i) the
election of two Class II directors and one Class III director, (ii) the
appointment of an independent accounting firm for the ensuing year, (iii) to
approve common stock issuable upon the exercise of the Company's Series A
Convertible Preferred Stock, in excess of 19.9% of the Company's outstanding
common stock, (iv) to approve an amendment to the Company's certificate of
incorporation increasing the authorized number of shares of common stock that
may be issued to 50,000,000 shares from 20,000,000 shares and (v) the approval
of an amendment to the Company's certificate of incorporation to give the Board
of Directors authority to effect one or more stock splits in the future.

The following persons were elected as directors of the company for the ensuing
year by the votes next to such persons name:

                      For          Withheld       Against

Daniel Sinnott      8,161,441       43,179            0
VADM Burkhalter     8,160,221       44,399            0
Benjamin Krieger    8,158,171       46,449            0

Daniel Sinnott and VADM Burkhalter were duly elected as Class II Directors of
the Company to serve for the next three years and Benjamin Krieger was duly
elected as a Class III Director to serve until the next Annual Meeting of
Shareholders, additionally each shall serve until their respective successors
have been duly elected and qualified.

Ernst & Young, LLP was approved to act as the Company's independent certified
public accountants for the ensuing year by the following vote:

                      For           Against         Abstain

                    8,182,743        9,912           11,965

The issuance, if necessary, upon conversion of the Company's Series A
Convertible Preferred Stock of more than 1,875,511 shares of common stock,
representing 19.9% of the Company's outstanding shares of common stock on the
date of sale of the Series A Convertible Preferred Stock, as required by Nasdaq
rules was approved by the following vote:


                  For          Against       Abstain        Not Voted

                3,657,814      147,257        13,510        4,386,039

The approval of an amendment to the Company's certificate of incorporation
increasing the authorized number of shares of common stock that may be issued to
50,000,000 shares from 20,000,000 shares was approved by the following vote:.

                      For           Against           Abstain

                    8,036,827       157,128           10,665

The approval of an amendment to the Company's certificate of incorporation to
give the Board of Directors authority to effect one or more stock splits in the
future was approved by the following vote:

                      For              Against        Abstain

                    8,071,068          126,017         7,535

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

Exhibit 11.1: Statement of computation of earnings per share.
Exhibit 27: Financial Data Schedule.

(b) Reports on Form 8-K

On May 15, 2000, the Company filed a report on Form 8-K which included
information reported pursuant to Item 5-Other Events. The report included an
unaudited consolidated balance sheet as of March 31, 2000 to reflect the
issuance of 3,000 shares of Series A Convertible Preferred Stock.


<PAGE>


SIGNATURES
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 thereunto duly authorized.

                                       Dunn Computer Corporation
                                       (Registrant)



Date:    September 14, 2000            By:  /s/ Thomas P. Dunne
                                           -------------------------------------
                                           Thomas P. Dunne
                                           Chief Executive Officer and President





Date:    September 14, 2000            By:  /s/ Kevin M. Murphy
                                           -------------------------------------
                                            Kevin M. Murphy
                                            Vice President, Finance