DigitalFX International, Inc. Reports Record Revenue in 2007

- Revenue increases 3.1%

LAS VEGAS, March 31 /PRNewswire-FirstCall/ -- DigitalFX International,
Inc. (Amex: DXN), a streaming video and digital communications company,
announced today its financial results for the year ended December 31, 2007.
The company reported that revenue rose a modest 3.1% to a record $23.5
million in 2007 from $22.8 million for 2006. The company reported a net loss
of $2.58 million, or a loss of $0.11 per share, compared with net income of
$480,000, or $.02 per share, in 2006. The 2007 loss included a one-time tax
benefit of $812,000.
The Company reported its subscriber base grew a modest 8% to 28,000 in
2007 from 26,000 in 2006.
Gross profit climbed 5.6% to approximately $19.4 million in 2007 from
$18.4 million in 2006. The increase stemmed from cost reductions on overall
cost of sales which improved 7.3% dropping to $4.1 million in 2007 versus $4.4
million for the same period in 2006.
The company said that as a percentage of net sales, operating expenses
rose 87% to $12.6 million in 2007 as compared with only $6.7 million in 2006.
These expenses included compensation, corporate expenses, product development,
international expansion, marketing expenses, and general and administrative
costs.
In 2007 the company reported it had made significant investment (a 354%
increase over 2006) for the expansion of its marketing and sales division,
VMdirect, into European countries; in particular Germany, Spain and Ireland.
The company also launched helloWorld, its streaming video social network in
over 10 countries, primarily in Eastern Europe.
The company showed an increase of 180% in corporate related expenses, most
of which related to costs associated with being a newly publicly traded
company on the American Stock Exchange.
Craig Ellins, DigitalFX chief executive officer said, "In 2007 we knew we
had to invest heavily into our staffing and systems infrastructure, technology
platform, and prepare for expansion outside of the US. The increased spending
was on the increased costs of being a public company, staffing additions and
salary changes, merchant fees directly related to sales volume, and most
significantly, with international operations expenses including international
facilities and operation costs."
Ellins continued, "Management expects in 2008, to continue to grow our
business through product enhancements with additional features and
functionality; the extension of the DigitalFX Studio to small business and
enterprise customers; and by offering ancillary products and services through
the affiliate program."
Recurring revenue from subscription fees for access plans from Affiliates
and retail customers increased in total by $5.8 million, from $11.8 million in
2006 to $17.6 million in 2007. Affiliate business package revenue decreased
by $3.6 million to $4.1 million in 2007 from $7.8 million in 2006, partially
due to affiliates enrolling at different levels.
"During 2007, our attention was focused primarily on product enhancements
and international growth. In 2008, we intend to continue to pursue the
recruitment of new Affiliate business through new marketing initiatives, such
as an upcoming infomercial, and the promotion of upgrades, Ellins said.
2007 Highlights

-- Restructured the Executive Management to support ongoing growth

-- Commenced sales of the VMdirect opportunity to affiliates and retail
customers in Ireland, Spain and Germany. (Germany being the largest and
most successful direct selling market in the European Union, accounting
for over $8 billion in sales, and boasting over 50 million Germans
connected to the Internet.)

-- Commenced sales of the helloWorld product to retail (individual)
customers in Austria, Belgium, Finland, Germany, Greece, Ireland,
Italy, The Netherlands, Portugal, Slovenia and Spain.

-- Released a more scalable and enhanced version of the 5.0 studio in
February 2007, and continually launched feature and performance
upgrades throughout the year.

-- Released an enhanced FirstStream Studio and a more user friendly
FirstStream sales website.

-- Moved from the OTC: Bulletin Board to the American Stock Exchange in
August.

-- Made investments in strategic partnerships

-- Developed and integrated helloPhone, a new video enabled digital phone
service into the Studio, allowing Affiliates to call each other for
free, launched two paid package alternatives offering more features,
and prepared for expansion to all retail customers in 2008.

-- Hosted DigitalU, our annual International Business Summit in November
2007, with over 1,500 affiliates, customers, and guests in attendance.

-- Introduced The Learning Media System (LMS) which is customizable and
has a comprehensive back-end administration system. The LMS can
support thousands of users with accountability and certification.

-- Launched The One Vision Tour traveling seminar which encompassed
marketing techniques to facilitate expansion of existing businesses and
leadership skills to manage growing organizations.

-- Developed our website www.digitalfxsolutions.com, which offers a video-
enabled web platform to enterprise-sized businesses.

-- Commenced development, in conjunction with RazorStream, LLC, of the Set
Top Box, which will allow users the ability to access their Studio
features, stream high resolution on demand audio and video content and
participate in the social network, all from their television.

-- Expanded the implementation of a customer relationship management
system (RightNow) and a business intelligence system (Cognos) for
additional insight into managing our business.

Ellins added, "The expanded helloWorld and FirstStream suites of services,
and the ancillary products developed for 2008 introduction along with our
international expansion should provide an excellent framework for our growth
on a worldwide basis."

DigitalFX International, Inc. and Subsidiaries

Consolidated Balance Sheet
December 31, 2007
(In thousands, except share data)

Assets
Current assets:
Cash and cash equivalents $ 5,319
Accounts receivable 50
Inventories, net 849
Prepaid bandwidth charges, affiliate 51
Prepaid expenses and other assets 411
Deferred financing costs 961
Deferred income taxes, net 45
Total current assets 7,686

Restricted cash 2,000
Convertible secured promissory note from
related party 225
Investments, net 1,102
Property and equipment, net of accumulated
depreciation and amortization of $576 628
Deposits, merchant processors 789
Other assets 12
Deferred income taxes, net 1,995

Total assets $ 14,437

Liabilities and Stockholders' Equity

Current liabilities:
Accounts payable $ 383
Accrued expenses 1,114
Accrued commissions 1,619

Total current liabilities 3,116

Convertible Notes Payable, net 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, 24,919,710 shares issued
and outstanding 25
Additional Paid In Capital 12,882
Other comprehensive loss (286)
Accumulated deficit (6,900)

Total stockholders' equity 5,721

Total liabilities and
stockholders' equity $ 14,437

DigitalFX International, Inc. and Subsidiaries

Consolidated Statements of Operations
(In thousands, except share and per share data)

Years Ended December 31,
2007 2006

Revenues $ 23,511 $ 22,800
Cost of revenues 4,121 4,444

Gross profit 19,390 18,356

Commission expenses 10,117 10,459
Other operating expenses 12,577 6,732

Operating income (loss) (3,304) 1,165

Other income (expense):
Expenses relating to exchange
transaction - (635)
Financing costs (111) -
Other income, net 24 63

Other expense, net (87) (572)

Income (loss) before provision for
income taxes (3,391) 593

Benefit (provision) for income taxes 812 (113)

Net income (loss) $ (2,579) $ 480

Net income (loss) per share:
Basic $ (.11) $ .02

Fully diluted $ (.11) $ .02

Weighted average shares outstanding:
Basic 23,952,916 21,032,218

Fully diluted 23,952,916 22,832,198

For more information, or to review the company financial reports in whole,
please visit www.DigitalFX.com.
About DigitalFX International, Inc. DigitalFX International (Amex: DXN) is
a creator of digital communications and social networking solutions, as
showcased on its social network http://www.helloWorld.com . The company
develops and markets proprietary communication and collaboration services, and
social networking software applications, including video email, video instant
messaging and live webcasting. DigitalFX International, Inc. is democratizing
the world of online streaming video and digital media archiving with its
flagship product, called The Studio. The Studio is an affordable, cross
digital platform web-based solution. Only the DigitalFX Studio brings together
all this capability, simply and in one place.
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
regarding anticipated growth in 2008, recruiting additional affiliates and
international expansion. 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.
Contact Info.
Alison Simard
Media Relations
Stern & Co.
323-650-7117

Investor Relations: Mike Flanigan or Ted Tackaberry
Communication Initiatives
888-724-0208
IR@digitalfx.com

Corporate Development
Amy Black
Founder and President
VMdirect, L.L.C.
702-743-9412

SOURCE DigitalFX International, Inc.

Alison Simard, Media Relations, Stern & Co., +1-323-650-7117, for DigitalFX
International, Inc.; Investor Relations, Mike Flanigan or Ted Tackaberry,
Communication Initiatives, +1-888-724-0208, IR@digitalfx.com; Corporate
Development, Amy Black, Founder and President, VMdirect, L.L.C.,
+1-702-743-9412