"We are very pleased that despite the tough economy, the Company was able to increase consolidated revenue by $342,000 or 18.3% and decrease its consolidated net loss by $656,000 or 69.1% during this quarter as compared to the second quarter of last year," said Charles Ying, Chief Executive Officer. "By increasing revenue and reducing the Company's net loss, we have also been able to minimize our cash burn, which was $304,000 for the six months ended June 30, 2002."

Bitstream is composed of three different businesses: (1) its type and technology business, whose primary revenue is generated from the licensing of font rendering software and fonts to the embedded, set-top box, wireless device and information appliance markets; (2) MyFonts.com, a wholly owned subsidiary that was formed in late 1999 as the first e-commerce site to aggregate fonts from multiple vendors on one easy-to-use Web site ("MyFonts.com"); and (3) Pageflex, a wholly owned subsidiary that was formed in early 1999 to establish the Company as a leader in dynamic page composition technologies ("Pageflex"). The performance of each business segment is discussed in greater detail below.

Type and Technology Results

Type and technology revenue for the three months ended June 30, 2002 decreased $45,000 or 3.6% to $1,189,000 from $1,234,000 for the three months ended June 30, 2001. Cost of revenue increased $48,000 or 25.9% to $233,000 for the three months ended June 30, 2002 from $185,000 for the three months ended June 30, 2001. Cost of revenue increased during the quarter primarily because of an increase in royalties due to an increase in sales of products developed by third parties. Operating expenses for the three months ended June 30, 2002 decreased $90,000 or 8.3% to $996,000 as compared to $1,086,000 for the three months ended June 30, 2001. Loss from operations for the Company's type and technology business segment increased $3,000 or 8.1% to $(40,000) for the three months ended June 30, 2002 as compared to a loss of $(37,000) for the three months ended June 30, 2001.

"During the second quarter, the type and technology segment continued to enter into new agreements for its premier font rendering technology, Font Fusion, allowing it to continue to build its customer base and minimize the recent effect that the economy has had on the embedded, set-top box, wireless device and information appliance markets," said Anna M. Chagnon, President and Chief Operating Officer. "We also received a very favorable response to our release of the end user version of ThunderHawk in late May, including a number of favorable reviews by notable trade publications including PC Magazine. As of June 30, 2002, we had over 1,975 end users register for our free 30 day trial of the software. We also plan to release a corporate server version of the product in the next week which we expect will appeal to a wide range of corporations that can deploy ThunderHawk on their networks, enabling their mobile workforce access to crucial corporate wireless data through Internet or intranet Web pages, whether on the road or in the office. With access to intranet and Internet Web sites, a mobile workforce can make database inquiries, update inventories, order products and publications, communicate with clients in the field, and schedule services and repairs."

MyFonts.com Results

MyFonts.com revenue for the three months ended June 30, 2002 increased $218,000 or 192.9% to $331,000 from $113,000 for the three months ended June 30, 2001. Revenue attributable to this segment, before elimination of intercompany royalties due on the resale of Bitstream products, for the three months ended June 30, 2002 increased $245,000 or 145.8% to $413,000 from $168,000 for the three months ended June 30, 2001. Cost of revenue, which primarily represents royalties paid to non-related foundries whose products MyFonts.com resells, for the three months ended June 30, 2002 increased $184,000 or 214.0% to $270,000 from $86,000 for the three months ended June 30, 2001. Operating expenses for the three months ended June 30, 2002 decreased $47,000 or 23.9% to $150,000 from $197,000 for the three months ended June 30, 2001. Loss from operations for the MyFonts.com business decreased $81,000 or 47.6% to $(89,000) for the three months ended June 30, 2002 as compared to $(170,000) for the three months ended June 30, 2001.

"We are delighted that second quarter revenue for MyFonts.com increased by over 192% resulting in a 47.6% decrease in operating loss for the three months ended June 30, 2002 as compared to the three months ended June 30, 2001," said John Collins, Vice President and Chief Technology Officer. "Before elimination of intercompany royalties due on the resale of Bitstream products, MyFonts.com revenue also reached the milestone of exceeding $400,000 in revenue for the quarter as compared to $168,000 a year ago and achieved double-digit quarterly growth for the eighth successive quarter."

Pageflex Results

Revenue from the Company's Pageflex business for the three months ended June 30, 2002 increased $169,000 or 32.3% to $693,000 from $524,000 for the three months ended June 30, 2001. Cost of revenue for the three months ended June 30, 2002 decreased $5,000 or 5.6% to $84,000 from $89,000 for the three months ended June 30, 2001. Operating expenses for the three months ended June 30, 2002 decreased $338,000 or 29.8% to $796,000 from $1,134,000 for the three months ended June 30, 2001. Operating loss decreased by $512,000 or 73.2% to $(187,000) for the three months ended June 30, 2002 from $(699,000) for the three months ended June 30, 2001.

"We are very pleased with the 32.3% increase in revenue for the second quarter of 2002 as compared to the second quarter of 2001. This increase in revenue resulted from the continued adoption of Pageflex technologies and the corresponding growth in our customer base, which now includes a wide variety of corporations, including Web-to-print and application service providers, consumer products companies, advertising agencies and print service providers," said Charles Ying, Chief Executive Officer. "We are also pleased that our focus on profitability for this segment has led to a $512,000 or 73.2% decrease in this segment's operating loss as compared to the operating loss for the same quarter last year."

On Wednesday, July 31, 2002, at 12:00 p.m. EST, Bitstream will host a conference call with the financial community to discuss its first quarter results. Interested participants should call 1-888-428-4472 (international callers please dial 612-333-4911) no sooner than five minutes before the call begins and ask the operator for the Bitstream Inc. earnings release call.

This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations. Actual performance and results of operations may differ materially from those projected or suggested in the forward-looking statements due to certain risks and uncertainties, including, without limitation, market acceptance of the Company's products, competition and the timely introduction of new products. Additional information concerning certain risks and uncertainties that would cause actual results to differ materially from those projected or suggested in the forward-looking statements is contained in the Company's filings with the Securities and Exchange Commission, including Bitstream's Annual Report on Form 10-K for the year ended December 31, 2001.

About

Bitstream Inc.
Bitstream Inc. ( Nasdaq:BITS ) is the leading developer of font technology, digital fonts, and custom font designs. Bitstream licenses its award-winning TrueDoc and Font Fusion technologies to Web and application developers, and to manufacturers of information appliances, wireless and handheld devices, set-top boxes, embedded systems, and printers. Setting the standard for excellence in font technology, Bitstream holds numerous key patents that cover the creation of portable fonts for the Internet. Building on this experience, Bitstream has recently released an end user version of ThunderHawk, a full-featured browser for the wireless Web.

Pageflex
Pageflex ( www.pageflexinc.com) is a leading developer of dynamic page composition technologies for a wide variety of markets including Web-to-print, cross-media publishing, document customization and on-demand marketing. Pageflex licenses its award-winning products worldwide to Web-to-print companies, application service providers, customer relationship management (CRM) companies, and print service providers. The Company was established in 1999 as a wholly-owned subsidiary of Bitstream Inc.

MyFonts.com
MyFonts.com, Inc., a venture funded by Bitstream Inc. and established as a wholly owned subsidiary in 1999, is a showcase of the world's fonts available from one easy-to-use Internet portal. It provides the largest collection of fonts ever assembled for on-line delivery, and offers easy ways to find and purchase fonts on-line, unique typographic resources, and a forum for interacting with font experts. For more information, visit http://www.myfonts.com , the Web site for finding, trying, and buying fonts on line.

Bitstream and TrueDoc are registered trademarks and Font Fusion and ThunderHawk are trademarks of Bitstream Inc. Pageflex, Mpower, Mpower and NuDoc are trademarks of Pageflex, a wholly-owned subsidiary of Bitstream Inc. MyFonts.com is a trademark of MyFonts.com, Inc., a wholly-owned subsidiary of Bitstream Inc. All other trademarks mentioned are for identification purposes only and may be trademarks of their respective owners.

Bitstream Inc.

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Contact

Anna M. Chagnon
President, Chief Operating Officer
and Chief Financial Officer
Bitstream Inc.
617.520.8619