DXN Digitalfx International, Inc.

LAS VEGAS, May 15 /PRNewswire-FirstCall/ -- DigitalFX International, Inc. (AMEX:DXN), a streaming video and digital communications company, announced today its results for the quarter ended March 31, 2008. 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 http://www.helloworld.com/ website and small and medium-sized businesses via its http://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/. To receive public information, including press releases, conference calls, SEC filings, profiles, investor kits, News Alerts and other pertinent information, please click on the following link: http://www.b2i.us/irpass.asp?BzID=1407&to=ea&s=0 . 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 DATASOURCE: DigitalFX International, Inc. CONTACT: Investor Relations, Mike Flanigan or Ted Tackaberry, both of Communication Initiatives, 1-888-724-0208, ; or Mickey Elfenbein, Chief Operating Officer of DigitalFX International, Inc., +1-702-938-9300 Web site: http://www.digitalfx.com/ http://www.b2i.us/irpass.asp?BzID=1407&to=ea&s=0

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