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                              DIGITAL FUSION, INC.
                             4940-A Corporate Drive
                              Huntsville, AL 35805
                                  July 26, 2005

BY ELECTRONIC TRANSMISSION
Securities and Exchange Commission
Division of Corporation Finance
450 Fifth Avenue, N.W.
Washington, DC 20549-0303
Attn:  Brad Skinner, Accounting Branch Chief

       Re:  Digital Fusion, Inc.
            Form 10-KSB for the Fiscal Year Ended December 31, 2004

            Forms 10-QSB for the Fiscal Quarter Ended March 31, 2005
            File No. 0-24073

Dear Mr. Skinner:

       This letter  provides our responses to your comment letter dated July 12,
2005 with respect to the above referenced  filings of Digital Fusion,  Inc. (the
"Company").  For  convenience  of  reference,  we have included in this response
letter  the same  captions  and  paragraph  numbers,  as well as the text of the
comments, from your letter of July 12, 2005, followed by our responses.

Form 10-KSB For Fiscal Year Ended December 31, 2004
---------------------------------------------------

Note 2. Significant Accounting Policies
---------------------------------------
(b) Revenue Recognition, page F-7
---------------------------------

Comment:

1.     We note that you design and develop customized software  applications and
       implement third party solutions to fulfill your customers' needs.  Please
       tell us whether you are  recognizing  this revenue in accordance with SOP
       97-2.  If  so,  explain  how  your  revenue  policies  comply  with  this
       literature. If you are not following SOP 97-2, explain how you considered
       paragraph 2 of the SOP.

Response:

       The  Company is  recognizing  revenue in  accordance  with SOP 97-2.  The
Company's  software  product sales are a separate  element that is contractually
independent from any software consulting work. The software products the Company

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Securities and Exchange Commission
July 26, 2005
Page 2

sells are commercial off-the-shelf products and the customer may or may not need
our consulting services. The Company recognizes software product revenue when:

       o      Persuasive evidence of an arrangement exists.
       o      Delivery has occurred.
       o      The vendor's fee is fixed or determinable.
       o      Collectibility is probable.

       The design,  development,  and customization of software applications and
implementation  of third party  solutions are done on a time and material basis.
There is no right of return,  no upgrades or any other post sale liability,  and
these sales contracts do not have multiple elements.

Comment:

2.     Please  describe to us your revenue  recognition  policies in cases where
       there are "significant  performance  obligations yet to be fulfilled" and
       revenue  is  deferred.  Provide  us  with a  typical  example  of such an
       arrangement  and  explain  how  you  recognize   revenue.   Identify  the
       accounting  literature  that you follow in  recognizing  this revenue and
       explain how your polices comply with that literature.

Response:

       The Company's revenue recognition policy is based on SAB 101 guidance and
follows the proportional  performance concept.  Revenue is recognized as time is
expended and or materials are delivered.  The Company's deferred revenue relates
to payments we have received in advance of services (hours worked). The majority
of the Company's  current contracts are with Federal  Government  Departments or
Agencies,  or  subcontracts  to  companies  whose prime  contracts  are with the
Federal Government.  Most of these contracts are Time and Material (T&M) or Firm
Fixed Price Level of Effort (FFP LOE).  The FFP LOE contract is  generally  used
for studying a specific research and development area with a report as the final
product.  The LOE clause  requires the Company to have a certain number of labor
hours and that these hours are worked by personnel  qualified  to perform  under
certain labor  categories.  The price is based on effort  expended,  not results
achieved.  The revenue on these  contracts is  recognized  by hours worked which
serves as a proxy for output. All of our contracts or subcontracts in support of
the Federal Government are subject to audit by various Government  Agencies such
as Defense Contract Audit Agency or GSA Audit

Comment

3.     Please  tell  us  the  amount  of  fixed-fee  service  revenue  that  you
       recognized using the percentage of completion  method during 2004 and the

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Securities and Exchange Commission
July 26, 2005
Page 3

       subsequent  interim period.  In addition,  explain how you considered the
       guidance  in  footnote 1 to SOP 81-1 that  prohibits  the use of contract
       accounting for service transactions.

Response:

       We assume you are  referring to "fixed  price" versus fixed fee contracts
as defined in the Federal Acquisition Regulations (FAR). In 2004 the Company had
no fixed  price  service  revenue  and in the first  fiscal  quarter of 2005 the
Company had $178,000 of fixed price service revenue.  Generally, the deliverable
in these types of contracts  is a report or study and the period of  performance
is usually  less than one year.  Typically,  these  types of  contracts  have no
interim deliverables or milestones (except program cost reports).  The Company's
revenue  recognition  policy  for  fixed  price  contracts  is  based on SAB 101
guidance and follows the proportional  performance concept. The revenue on these
contracts is  recognized  by hours  worked.  In future  filings the Company will
revise our revenue recognition policy footnote and critical accounting policy to
fully address our revenue recognition policies.

Note 6. Borrowings, page F-12
-----------------------------

Comment:

4.     We note that you have  modified  the terms of  several  significant  debt
       agreements  over  the  past  two  years.  Please  explain  to us how  you
       accounted for each of the significant  modifications  made to the Digital
       Shareholders' and Laurus notes. As part of your response, explain how you
       considered the guidance in EITF 96-19.

Response:

       The Company  considered the guidance of FAS 15 which is for restructuring
of debt in a  troubled  debt  restructuring.  EITF 96-19  guidance  is for how a
debtor should account for a substantial modification in the terms of an existing
debt  agreement  (other  than a  troubled  debt  restructuring);  therefore  the
guidance in FAS 15 was used instead of EITF 96-19.

       In the current  text  D22.104 it states if the  creditor  for economic or
legal reasons related to the debtor's financial difficulties grants a concession
to the debtor that it would not otherwise  consider,  it  constitutes a troubled
debt  restructuring.  The Digital Shareholder note and the Laurus note were both
restructured under these circumstances.

       D22.104  further  states that  concessions  either stem from an agreement
between the creditor and the debtor or is imposed by law/court.  For example,  a
creditor  may  restructure  the terms of a debt to  alleviate  the burden of the
debtor's  near-term  cash  requirements,  and many troubled debt  restructurings
involve  modifying terms to reduce or defer cash payments required of the debtor
in the near future to help the debtor attempt to improve its financial condition

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Securities and Exchange Commission
July 26, 2005
Page 4

and eventually be able to pay the creditor.  The lack of near term cash flow for
the Company was what caused the Digital  Shareholder note holders and the Laurus
note holder to substantially modify the terms of their respective debt.

       On March 2, 2003, the Digital Shareholder note extended its maturity from
March 1, 2003 to March 1, 2005.  The interest rate increased from 6% to 8% as an
incentive to accomplish this  extension.  The Digital  Shareholder  note holders
preferred  to be paid;  however  due to cash flow at the time of note  maturity,
that was not  possible.  The Digital  Shareholder  note  holders  would not have
granted this  extension of debt  concession  except for the  near-term  economic
condition of the Company.

       The Company  accounted for this  modification in terms in accordance with
current text  D22.112  which  states a debtor in a troubled  debt  restructuring
involving  only  modification  of terms of a  payable  that is not  involving  a
transfer of assets or grant of an equity interest-shall  account for the effects
of the restructuring prospectively from the time of restructuring, and shall not
change  the  carrying  amount of the  payable  at the time of the  restructuring
unless the carrying  amount exceeds the total future cash payments  specified by
the new terms. That is, the effects of change in the amounts or timing (or both)
of future cash payments  designated  as either  interest or face amount shall be
reflected in future periods.  Interest expense shall be computed in a way that a
constant  effective  interest  rate is  applied  to the  carrying  amount of the
payable at the beginning of each period between  restructuring  and maturity (in
substance the interest  method).  The new  effective  interest rate shall be the
discount  rate that  equates  the  present  value of the  future  cash  payments
specified by the new terms with the carrying  amount of the payable.  There were
no  fees  associated  with  this  extension.  The 8% of  interest  was  recorded
prospectively from 3/1/05 to note payment.

       If however,  the total future cash payments specified by the new terms of
a payable,  including both payments  designated as interest and those designated
as face  amount,  are less than the carrying  amount of the payable,  the debtor
shall  reduce the  carrying  amount to an amount  equal to the total future cash
payments  specified by the new terms and shall recognize a gain on restructuring
of payables equal to the amount of the reduction.

       A debtor shall not recognize a gain on a restructured  payable  involving
indeterminate  future cash  payments as long as the  maximum  total  future cash
payments may exceed the carrying amount of the payable.

       The  future  cash  flow  to the  Digital  Shareholders  note  holders  in
accordance with the modified note equaled the debt and interest payable that was
recorded, therefore no gain on a restructured payable was recorded.

       The Laurus note was also a troubled debt  restructuring  resulting from a
near-term  lack of cash flow  during  April  2003.  The future  cash flow to the
Laurus note holder  equaled the debt and  interest  payable  that was  recorded,
therefore no gain on a restructured payable was recorded.

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Securities and Exchange Commission
July 26, 2005
Page 5

5.     Please  explain to us how you  initially  allocated  the  proceeds of the
       Laurus Note in  accordance  with the  paragraph  16 of APB 14 and how you
       applied the guidance in EITF 98-5 and 00-27 to any beneficial  conversion
       feature at issuance or upon modification.

Response:

       The  initial  Laurus  debt of  $800,000  had a warrant  that had a FMV of
$12,000.  The Company booked $12,000 of interest  expense and equity  associated
with the warrant. If it would have been allocated based upon the FMV, the amount
of interest expense would have been 11,823, not 12,000, an immaterial difference
of $177.

                           Present
                            Values          %    Allocation       Diff

PV of Debt                  800,000        99%     788,177       11,823
PV of Warrants               12,000         1%      11,823          177
                       -----------------        -------------------------
                            812,000                800,000       12,000
                       =================        =========================

       At the time of  issuance  of this Laurus  debt,  the  initial  conversion
feature  was at a price of $0.922  which was above the  quoted  market  price of
$0.83;  therefore,  no portion of the proceeds from the issuance of  convertible
debt was accounted for as attributable  to the conversion  feature in accordance
with APB14 P12.

       On April 29,  2003,  the  conversion  feature was reduced  from $0.922 to
$0.4375.  The FMV of the Company's  stock was $0.365;  therefore the  conversion
feature was not "in the money" on April 29,  2003,  and no value was  associated
with the revised conversion feature.

       On April 29, 2003, Laurus loaned the Company $266,667 which had a warrant
valued at $15,000.  DFI booked $15,000 of interest expense and equity associated
with the warrant. If it would have been allocated based upon the FMV, the amount
of interest expense would have been 14,201, not 15,000, an immaterial difference
of $799.

                           Present
                            Values          %    Allocation       Diff

PV of Debt                  266,667        95%     252,466       14,201
PV of Warrants               15,000         5%      14,201          799
                       -----------------        -------------------------
                            281,667                266,667       15,000
                       =================        =========================

       At the time of  issuance  of this Laurus  debt,  the  initial  conversion
feature  was at a price of $0.35 and the FMV was $0.365.  The amount  related to
the conversion  feature was  approximately  $11,400.  This was not booked by the
Company as it was not  significant.  The $11,400  associated with the conversion

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Securities and Exchange Commission
July 26, 2005
Page 6

feature would have been expensed to interest  expense over a 2-year period if it
had been booked.

Form 10-QSB for Fiscal Quarter Ended March 31, 2005
---------------------------------------------------

Note 6. Summit Acquisition, page 6
----------------------------------

Comment:

6.     We note that it does not appear that you recorded any significant  amount
       of amortizable  intangible  assets in connection with your acquisition of
       Summit Research  Corporation.  However, it appears that the co-founder of
       Summit  will  continue to manage his  current  customers  for you and you
       indicated  in a recent press  release  that you acquired a customer  base
       that  includes the U.S.  Army  Aviation  and Missile  Command in Alabama.
       Please  identify  any amounts  that were  allocated  to  customer-related
       intangible  assets  and  explain  how  you  considered  the  guidance  in
       paragraph 39 of SFAS 141 and EITF 02-17.

Response:

       The  Company  allocated  $2,594,564  to  intangible  assets in the second
fiscal  quarter  of 2005 and has  begun  the  amortization  of these  intangible
assets. Of this amount $2,227,873 was allocated to customer base intangibles and
$366,691 was allocated to employment agreements and non-compete agreements.  The
Company  will  amortize  these  intangible  assets  over  five and  four  years,
respectively.  The  Company  noted in Form 10-QSB for the fiscal  quarter  ended
March 31, 2005 that it was still in the process of  evaluating  the  intangibles
purchased and the purchase price allocation had not been finalized.

       Non-contractual   customer   relationships  provide  the  basis  for  the
intangible  assets  recognized  by the Company.  Summit  Research  Corporation's
contracts  were  generally of a  short-term  nature(less  than 1 year);  however
Summit Research  Corporation's two executives have strong customer relationships
defined in EITF 02-17  paragraph 3. The  employment and  non-compete  agreements
with the Summit  executives  min