DigitalFX International, Inc. Reports First Quarter 2008 Results

The Company reported revenue of $4.8 million for the quarter ended March 31, 2008, down from $6.4 million for the same quarter in 2007. In addition, the Company reported a net loss of $3.1 million for the quarter ended March 31, 2008, as compared to reported income of $56,000 for the quarter ended March 31, 2007. This equates to a loss per share for the current quarter of ($0.12) on weighted average shares outstanding of 25.3 million.

Mr. Craig Ellins, Chief Executive Officer for DigitalFX International, Inc. commented, "During the first quarter of 2008, we continued the restructuring begun in 2007. Our first quarter bottom line was adversely affected by one-time adjustments related to the restructuring of our debt and market value adjustments on one of our investments, which accounted for the majority of our loss. We were able to favorably renegotiate our debt structure and reduced corporate liabilities by $4 million. Additionally, in 2008, we further fortified our management team with the addition of three seasoned executives, all designed to lower our dependency on outside contractors and attorneys. Sales and marketing initiatives were undertaken that have begun to show positive results. Our subscription revenues and customer base appear to be stabilizing. We continued to make significant investments in product improvements and new product launches designed to increase affiliate membership, business to business subscribers and retail customers. These investments in the growth side of the company should yield significant benefits as the company launches a number of product and services packages during the second and third quarter of 2008. This should have a positive impact on both revenue and the bottom line going forward."

In accordance with the terms of the amended and restated notes issued as of November 30, 2007, the Company is not in breach of the financial covenants included in such notes.

About DigitalFX International, Inc.

DigitalFX International, Inc. (Amex: DXN) is a creator of web-based products such as streaming live and on-demand video, video email and digital storage that because of their extremely low cost for the first time brings the next generation Internet revolution to individuals through its www.helloworld.com website and small and medium-sized businesses via its www.firststream.com website. The company also develops and markets proprietary communication and collaboration services, and social networking software applications, including its flagship product, called The Studio. The Studio is a cost-effective, all-in-one, web-based solution that allows users to send email and video email, group chat with video, conduct a private, public or pay-per-view live webcast, upload digital content, and post videos on demand in multiple media formats. For more information about DigitalFX, please visit us at http://www.digitalfx.com.

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FORWARD-LOOKING STATEMENTS

The information contained herein includes forward-looking statements. These statements relate to future events or to our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Examples of forward-looking statements include statements related expenditures on product development, growth in our affiliate base and retail customer base, new product launches and our overall growth. You should not place undue reliance on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could, and likely will, materially affect actual results, levels of activity, performance or achievements. Any forward-looking statement reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. We assume no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. The safe harbor for forward-looking statements contained in the Securities Litigation Reform Act of 1995 protects companies from liability for their forward-looking statements if they comply with the requirements of the Act.

                DigitalFX International, Inc. and Subsidiaries
                    Condensed Consolidated Balance Sheets
                      (In thousands, except share data)

                                                    March 31,   December 31,
                                                        2008           2007
    Assets                                        (unaudited)
    Current assets:
      Cash and cash equivalents                       $2,046         $5,319
      Accounts receivable                                507             50
      Inventories, net                                   672            849
      Prepaid bandwidth charges, affiliate               192             51
      Prepaid expenses and other assets                  609            411
      Deferred income taxes, net                          43             45
        Total current assets                           4,069          6,725

    Restricted cash                                        -          2,000
    Investment in and convertible secured
     promissory note due from related party              325            225
    Investments, net                                   1,077          1,102
    Deferred financing costs                             442            961
    Property and equipment, net of accumulated
     depreciation and amortization of $669 and
     $576, respectively                                  535            628
    Deposits, merchant processors                        746            789
    Other assets                                          12             12
    Deferred income taxes, net                         1,856          1,995
        Total assets                                  $9,062        $14,437

    Liabilities and Stockholders' Equity

    Current liabilities:
      Accounts payable                                  $154           $383
      Accrued expenses                                 1,041          1,114
      Accrued commissions                              1,624          1,619
        Total current liabilities                      2,819          3,116

    Convertible Notes Payable, net                     2,624          5,600

    Commitments and Contingencies

    Stockholders' equity:
      Preferred stock, $0.01 par value,
       5,000,000 shares authorized, no shares
       issued and outstanding                              -              -
      Common stock, $0.001 par value, 100,000,000
       shares authorized, 25,919,710 and 24,919,710,
       shares issued and outstanding, respectively        25             25
      Additional paid in capital                      13,592         12,882
      Other comprehensive income (loss)                   15           (286)
      Accumulated deficit                            (10,013)        (6,900)
        Total stockholders' equity                     3,619          5,721
        Total liabilities and stockholders' equity    $9,062        $14,437



                DigitalFX International, Inc. and Subsidiaries
               Condensed Consolidated Statements of Operations
          (In thousands, except share and per share data, unaudited)

                                                  Three Months Ended March 31,
                                                        2008           2007

    Revenues                                          $4,818         $6,396
    Cost of revenues                                   1,000            965


    Gross profit                                       3,818          5,431

    Commission expenses                                1,818          2,819
    Other operating expenses                           2,461          2,508

    Operating income (loss)                             (461)           104


    Other income (expense):
    Unrealized loss on investment                       (439)
    Loss on modification of debt                      (1,920)             -
    Financing costs, net                                (301)             -
    Other income, net                                      9             70

    Other income (expense), net                       (2,651)            70

    Income (loss) before provision for income taxes   (3,112)           174

    Provision for income taxes                             1            118

    Net income (loss)                                $(3,113)           $56


    Net income (loss) per share:
        Basic                                         $(0.12)         $0.00

        Fully diluted                                 $(0.12)         $0.00

    Weighted average shares outstanding:
        Basic                                     25,253,043     23,502,446

        Fully diluted                             25,253,043     24,390,688

SOURCE DigitalFX International, Inc.

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Copyright © 2008, NewsBlaze, Daily News

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