SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549

                                   FORM 10-QSB

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2001

OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the transition period

Commission file number 000-25111

                                 Directrix, Inc.
             (Exact name of registrant as specified in its charter)

           Delaware                                              13-4015248
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                               Identification No.)

                    230 Pegasus Avenue, Northvale, NJ  07647
                    (Address of principal executive offices)

                                 (201) 750-8000
              (Registrant's telephone number, including area code)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant  was  required  to file such  reports),  and (2) has been  subject to
filing requirements for the past 90 days.

Yes        [X]               No        [ ]

Number of shares outstanding of Registrant's Common Stock as of
February 28, 2002 was 2,564,098.


<PAGE>

                        DIRECTRIX, INC. and SUBSIDIARIES
                                   FORM 10-QSB
                                TABLE OF CONTENTS

                                                                        PAGE
                                                                        ----
  PART I.     FINANCIAL INFORMATION

   Item 1.    Financial Statements.(*)

              Condensed Consolidated Balance Sheet as of
              December 31, 2001 (Unaudited)........................       3

              Condensed Consolidated Statement of Operations
              for the three and nine months ended December 31, 2001
              and 2000 (Unaudited).................................       4

              Condensed Consolidated Statement of
              Stockholders' Deficit for the nine months ended
              December 31, 2001 (Unaudited)........................       5

              Condensed Consolidated Statement of Cash Flows
              for the nine months ended December 31, 2001
              and 2000 (Unaudited).................................       6

              Notes to Condensed Consolidated Financial
              Statements (Unaudited)...............................    7-15

   Item 2.    Management's Discussion and Analysis of
              Financial Condition and Results of Operations........   16-25

PART II.      OTHER INFORMATION

   Item 1.    Legal Proceedings....................................      26

   Item 2.    Changes in Securities and Use of Proceeds............      26

   Item 6.    Exhibits and Reports on Form 8-K.....................      26

              SIGNATURES...........................................      27



(*) The accompanying unaudited financial statements have not yet been reviewed
by Directrix' independent auditors. Directrix expects that the review will be
completed as soon as practicable.



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                                               PART I

ITEM 1:  FINANCIAL STATEMENTS
DIRECTRIX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
-----------------------------------------------------------------------------------------------------

                                                                             Dec 31,
                                                                              2001
                                                                         ---------------
                                                                           (unaudited)
<S>                                                                            <C>
                              ASSETS:
Current assets:
     Cash and cash equivalents........................................     $     17,000
     Marketable securities............................................          282,000
     Accounts receivable, billed......................................          176,000
     Accounts receivable, unbilled....................................           18,000
     Prepaid expenses and other current assets........................          113,000
                                                                         ---------------
                    Total current assets..............................          606,000
Property and equipment, net...........................................        3,232,000
Library of movies, net................................................           81,000
Deferred financing costs..............................................          410,000
Deferred lease costs..................................................          499,000
Other assets..........................................................           31,000
                                                                         ---------------
                    Total assets......................................      $ 4,859,000
                                                                         ===============

               LIABILITIES AND STOCKHOLDERS' DEFICIT:

Current liabilities:
    Accounts payable..................................................      $ 2,745,000
    Transponder lease liability......................................        10,726,000
    Accrued expenses and other current liabilities....................          535,000
    Customer deposits.................................................          287,000
    Interim Financing.................................................          362,000
                                                                         ---------------
                    Total current liabilities.........................        14,655,000

Deferred rent.........................................................           15,000
Revolving line of credit..............................................        4,168,000
Subordinated convertible debentures...................................          906,000
                                                                         ---------------
                    Total liabilities.................................       19,744,000
                                                                         ---------------

Commitments and contingencies

Stockholders' deficit
    Common stock, $.01 par value; authorized 25,000,000 shares;
      2,545,802 shares issued and outstanding at December 31, 2001....           26,000
    Additional paid-in capital........................................       22,923,000
    Deferred Compensation.............................................         (129,000)
    Accumulated other comprehensive loss..............................          (59,000)
    Accumulated deficit...............................................      (37,646,000)
                                                                         ---------------
                    Total stockholders' deficit.......................      (14,885,000)
                                                                         ---------------
                    Total liabilities and stockholders' deficit.......      $ 4,859,000
                                                                         ===============


             The accompanying notes are an integral part of these financial statements.



                                       3
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<CAPTION>

DIRECTRIX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS of OPERATIONS (unaudited)
___________________________________________________________________________________________________________________________________


                                                              THREE MONTHS ENDED                            NINE MONTHS ENDED
                                                                 DECEMBER 31,                                 DECEMBER 31,
                                                           2001                 2000                    2001                 2000
                                                  -------------------------------------        -------------------------------------
<S>                                                        <C>                  <C>                      <C>                 <C>
Revenues                                            $     518,000        $   1,203,000           $   2,376,000        $   4,013,000
                                                  ----------------     ----------------        ----------------     ----------------

Operating expenses:
    Salaries, wages and benefits..................        847,000              828,000               2,556,000            2,464,000
    Library amortization .........................        130,000              155,000                 406,000              488,000
    Satellite costs ..............................         71,000            1,427,000                 552,000            4,790,000
    Broadband expenses ...........................             --                   --                 660,000              113,000
    Selling, general and administrative expenses .        404,000              499,000               1,220,000            1,767,000
    Depreciation .................................        422,000              353,000               1,120,000            1,051,000
                                                  ----------------     ----------------        ----------------     ----------------
           Total operating expenses ..............      1,874,000            3,262,000               6,514,000           10,673,000
                                                  ----------------     ----------------        ----------------     ----------------

           Loss from operations ..................     (1,356,000)          (2,059,000)             (4,138,000)          (6,660,000)

Other expenses:
    Interest expense .............................       (307,000)            (300,000)             (1,133,000)            (650,000)
    Transponder penalty ..........................             --                   --              (4,620,000)                  --
                                                  ----------------     ----------------        ----------------     ----------------
           Total other expenses ..................       (307,000)            (300,000)             (5,753,000)            (650,000)

                                                  ----------------     ----------------        ----------------     ----------------
           Net loss ..............................  $  (1,663,000)       $  (2,359,000)          $  (9,891,000)       $  (7,310,000)
                                                  ================     ================        ================     ================

Net loss per common share:
    Basic & Diluted ..............................  $       (0.67)        $      (1.06)          $       (4.11)       $       (3.33)
                                                  ================     ================        ================     ================


Weighted average number of common shares outstanding:
    Basic & Diluted ..............................      2,474,032            2,230,002               2,409,396            2,196,585
                                                  ================     ================        ================     ================


                               The accompanying notes are an integral part of these financial statements.



                                       4
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<CAPTION>

DIRECTRIX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT of STOCKHOLDERS' DEFICIT (unaudited)
FOR THE NINE MONTHS ENDED DECEMBER 31, 2001
___________________________________________________________________________________________________________________________________



                                                                                  Accumulated
                                     Number             Additional                   Other
                                       of      Common    Paid-in      Deferred   Comprehensive  Accumulated
                                     Shares    Stock     Capital    Compensation     Loss         Deficit       Total
                                    --------- -------- ------------ ------------ ------------- ------------- ------------
<S>                                     <C>      <C>       <C>         <C>            <C>           <C>           <C>        <C>
Balance at March 31, 2001 ........  2,239,785 $ 23,000 $ 21,170,000 $        --  $        --   $(27,755,000) $(6,562,000)

    Restricted stock issued
     in connection with
     salary reductions ...........    163,655    2,000      473,000    (129,000)          --             --      346,000

    Intrinsic value of
     benenficial conversion
     feature of debentures .......         --       --      438,000          --           --             --      438,000

    Stock issued in connection
     with PIK credit facility
     interest ....................    106,726    1,000      272,000          --           --             --      273,000

    Stock issued in connection
     with PIK interim financing
     interest ....................     35,636       --       87,000          --           --             --       87,000

    Adjust value of stock issued
     in connection with credit
     facility interest to fair
     market value ................         --       --       (8,000)         --           --             --       (8,000)

    Warrants issued in connection
      with the West Coast
      facility ...................         --       --      224,000          --           --             --      224,000

    Warrants issued in connection
     with credit facility ........         --       --      267,000          --           --             --      267,000

    Net loss .....................         --       --           --          --           --     (9,891,000)  (9,891,000)

    Comprehensive loss due to
     decline in market
     value of marketable
     securities ..................         --       --           --          --      (59,000)            --      (59,000)
                                                                                                             ------------
    Comprehensive loss ...........         --       --           --          --           --             --   (9,950,000)
                                                                                                             ------------
                                    --------- -------- ------------ ------------ ------------- ------------- ------------
Balance at December 31, 2001 .....  2,545,802 $ 26,000 $ 22,923,000 $  (129,000) $   (59,000)  $(37,646,000)$(14,885,000)
                                    ========= ======== ============ ============ ============= ============= ============


                          The accompanying notes are an integral part of these financial statements.



                                       5
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<CAPTION>
DIRECTRIX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
___________________________________________________________________________________________________________________________________



                                                                            Nine months ended December 31,
                                                                               2001               2000
                                                                         ----------------    ----------------
<S>                                                                             <C>                 <C>
Cash flows from operating activities:
    Net loss ...........................................................   $ (9,891,000)       $ (7,310,000)
                                                                         ----------------    ----------------

Adjustments to reconcile net loss to net cash used in
   operating activities:
    Depreciation of property and equipment .............................      1,120,000           1,051,000
    Amortization of library of movies ..................................        406,000             488,000
    Amortization of deferred financing costs ...........................        237,000             233,000
    Bad debt expense ...................................................         38,000             200,000
    Non-cash rent expense ..............................................        (34,000)            (20,000)
    Non-cash interest for beneficial conversion feature of debentures ..        438,000                  --
    Non-cash interest for PIK of credit facility interest ..............        265,000                  --
    Amortization of non-cash interest for PIK of interim financing notes         11,000                  --
    Deferred compensation ..............................................        346,000                  --
    Increase in transponder penalty ....................................      4,620,000                  --
    Changes in assets and liabilities:
         Decrease (increase) in accounts receivable ....................        382,000            (337,000)
         Increase in prepaid expenses and other current assets .........        (55,000)                 --
         Decrease in other assets ......................................        136,000              51,000
         Increase in deferred lease costs ..............................       (275,000)                 --
         Increase in accounts payable, accrued expenses and other
           current liabilities..........................................      1,511,000           3,589,000
         (Decrease) increase in customer deposits ......................       (107,000)            110,000
         Increase in other liabilities..................................         31,000                  --
                                                                         ----------------    ----------------
                   Total adjustments ...................................      9,070,000           5,365,000
                                                                         ----------------    ----------------

                                                                         ----------------    ----------------
                   Net cash used in operating activities ...............       (821,000)         (1,945,000)
                                                                         ----------------    ----------------

Cash flows from investing activities:
         Purchase of property and equipment ............................       (173,000)           (373,000)
                                                                         ----------------    ----------------
                   Net cash used in investing activities ...............       (173,000)           (373,000)
                                                                         ----------------    ----------------

Cash flows from financing activities:
         Officer loans .................................................         (8,000)                 --
         Borrowings under revolving line of credit .....................          2,000           2,121,000
         Proceeds from issuance of subordinated convertible debentures .        500,000                  --
         Proceeds from issuance of interim financing notes .............        438,000                  --
                                                                         ----------------    ----------------
                   Net cash provided by financing activities ...........        932,000           2,121,000
                                                                         ----------------    ----------------


Net decrease in cash and cash equivalents ..............................        (62,000)           (197,000)
Cash and cash equivalents, beginning of the period .....................         79,000             324,000
                                                                         ----------------    ----------------
Cash and cash equivalents, end of the period ...........................   $     17,000        $    127,000
                                                                         ================    ================


Supplemental disclosures of cash flow information:
         Cash paid during the period for:
                   Interest ............................................   $    118,000        $    245,000
                                                                         ================    ================


Supplemental schedule of non-cash investing and financing activities:
         Reduction of accounts receivable in exchange for
           marketable securities .......................................   $   (342,000)       $         --
         Warrants issued in connection with the West Coast facility ....   $    224,000        $         --
         Warrants issued in connection with the credit facility ........   $    267,000        $         --

         Adjustment to value of warrants issued in connection with the
           revolving line of credit ....................................   $         --        $    (15,000)


                       The accompanying notes are an integral part of these financial statements.



                                       6
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<PAGE>

DIRECTRIX, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE & NINE MONTHS ENDED DECEMBER 31, 2001 (unaudited)
--------------------------------------------------------------------------------

1.       Basis of Presentation. The accompanying unaudited financial statements
have been  prepared in  accordance  with  accounting  principles  generally
accepted in the United States of America for interim  financial  information and
the  instructions  to Form  10-QSB and do not include  all the  information  and
footnotes  required by accounting  principles  generally  accepted in the United
States  of  America  for  complete  financial   statements.   Furthermore,   the
accompanying  unaudited  financial  statements  have  not yet been  reviewed  by
Directrix'  independent  auditors.  Directrix  expects  that the review  will be
completed as soon as practicable.  In the opinion of management, all adjustments
consisting  of  normal  recurring  accruals,  considered  necessary  for a  fair
presentation of the results for the interim period have been included. Operating
results  for  the  three  and  nine  months  ended  December  31,  2001  are not
necessarily  indicative  of the results  that may be expected for the year ended
March 31, 2002. The accompanying condensed consolidated financial statements and
the information included under the heading "Management's Discussion and Analysis
of Financial  Condition and Results of Operations" should be read in conjunction
with the condensed  consolidated  financial statements and related notes thereto
included in Directrix'  Annual Report for the year ended March 31, 2001 as filed
with our Form 10-KSB.

2.       Business Organization. Directrix, Inc. ("Directrix"), a Delaware
corporation,  is a full service  provider of network  origination,  digital
video asset management and digital content delivery  services,  primarily to the
adult entertainment industry. Directrix was originally a wholly owned subsidiary
of  Spice   Entertainment   Companies,   Inc.  ("Spice")  and  provided  network
origination  and technical  services for Spice's  networks.  Directrix  became a
stand-alone  company  when,  as part of the March 15, 1999 merger  ("Merger") of
Spice into Playboy Enterprises Group, Inc. ("Playboy"), Spice spun off Directrix
by distributing  approximately  2,075,000 shares of Directrix common stock, $.01
par value  ("Common  Stock") to the Spice  stockholders.  As part of the Merger,
Spice contributed  certain assets to Directrix including its New York City based
master control and playback facility and related  technical  service  agreements
and its transponder services agreement.  Directrix is in the process of building
out a 109,000 square foot teleport,  master control,  and soundstage  complex in
Los Angeles (the "West Coast Facility"). Under a transaction which was completed
on September 20, 2001, Directrix will provide network origination and production
services, digital archiving, studio facilities and personnel, and production and
post-production  offices  to  Playboy  at  the  facility  over  a  15-year  term
(collectively,  the  "Playboy  Transaction").  See  Note 4 for a  more  complete
description of the Playboy Transaction.

3.       Financial Condition & Liquidity. The accompanying financial statements
have been  prepared in  conformity  with  accounting  principles  generally
accepted in the United  States of America,  which  contemplate  continuation  of
Directrix as a going concern.  However,  since becoming a stand-alone company on
March 15, 1999,  Directrix incurred net losses of $6.1 million and $10.3 million
for the years ended March 31, 2000 and March 31, 2001,  respectively,  and a net
loss of $9.9  million for the nine months ended  December 31, 2001.  At December
31, 2001,  Directrix has a working  capital  deficiency of $14.0 million.  These
matters raise substantial doubt about Directrix'  ability to continue as a going
concern.  Directrix'  continued  existence  is dependent  upon several  factors,
including  management's ability to successfully implement the restructuring plan
described  below and its ability to  generate  operating  cash flow  through the
successful execution of its long-term business plan. To date, management has not
yet secured the consent of Loral SpaceCom Corporation ("Loral"), which is one of
the parties to a July 13, 2001 letter  agreement and term sheet (the "Settlement
Agreement")  (described  in  Note  4,  "Termination  of  Directrix'  Transponder
Services  Agreement"),  to the final phase of the restructuring  plan which is a
precondition  to Directrix'  ability to raise needed  capital.  If management is
unable to secure the required consent,  Directrix will be forced to pursue other
alternatives  which may include filing a petition under the Bankruptcy Code. The
financial   statements   do  not  include  any   adjustments   relating  to  the
recoverability  and  classification  of  recorded  asset  amounts or amounts and
classification of liabilities that might be necessary should Directrix be unable
to continue in existence.  Management's  plans and  intentions in regard to this
matter are described below in Note 4.

4.       Restructuring Plan. Management developed and is in the process of
implementing  a multi-phase



                                       7
<PAGE>

restructuring  plan.  The  restructuring  plan  addresses  the  areas  that
management  believes are critical to the  realization  of  Directrix'  short and
long-term  plans which include (i) the  termination  of  Directrix'  transponder
services agreement, (ii) the establishment of the West Coast Facility, (iii) the
transition of its existing  business to the West Coast  Facility and  attracting
new business,  (iv) the  restructuring of Directrix'  capital  structure and (v)
securing new financing. As noted above in Note 3, management has not yet secured
the consent of Loral,  which is one of the parties to the  Settlement  Agreement
(described  immediately  below),  to the final phase of the  restructuring  plan
which is a  precondition  to  Directrix'  ability to raise  needed  capital.  If
Directrix is unable to implement the final phase of the  restructuring  plan and
thereby  secure  new  financing,  it may  forced  to file a  petition  under the
Bankruptcy Code.

         Termination of Directrix' Transponder Services Agreement. In May 2001,
Directrix   terminated  its  Agreement  for  SkyNet  Transponder   Services
("Transponder  Agreement")  with Loral and transferred  its transponder
service customers to Loral. When the Transponder  Agreement was terminated,
Directrix owed Loral  approximately $6.1 million for past due service fees and a
$4.6 million early  termination  charge.  The parties  entered into a Settlement
Agreement  which  provided for Loral to extinguish  its receivable and the early
termination charge in exchange for Directrix'  issuance to Loral of: (i) a
$1.65  million note under  Directrix'  $4.5 million  credit  facility  (the
"Credit  Facility"),  (ii) $3.0  million  face  amount of a new  Series B junior
preferred stock ("Series B Preferred") which has not yet been issued and (iii) a
five-year  warrant to acquire  200,000  shares at an exercise price of $3.00 per
share.  The terms of the Series B  Preferred  if and when  issued are  described
below in Note 6.

         The Settlement Agreement was to take effect with the consummation of
the Playboy  Transaction on September 20, 2001 but was contingent  upon the
parties entering into definitive documentation by January 14, 2002. To date, the
parties have not entered into definitive  documentation  or agreed to extend the
drop-dead date of the  Settlement  Agreement.  In addition,  Loral and Directrix
have been unable to agree on the terms of the global restructuring as it impacts
Loral.  While  Directrix  is  prepared  to  extend  the  term of the  Settlement
Agreement,  it will do so only if Loral and  Directrix can agree on the terms of
the global  restructuring.  As a consequence  of the  foregoing,  the Settlement
Agreement as it impacts Loral is not currently in effect.

         Management terminated the Transponder Agreement because (i) Emerald
Media ("EMI"), Directrix' major customer of subleased transponder services,
had failed to pay in full amounts owed for  transponder  services and ultimately
ceased  operations  and (ii) it believed  that the direct  leasing of  satellite
transponders no longer fit into Directrix'  long-term  plans. By terminating the
Transponder  Agreement,  Directrix  eliminated  its  largest  recurring  monthly
charge.

         Directrix recognized $0.8 million and $2.7 million, respectively, of
revenue  attributable to the leasing of transponders for the three and nine
months  ended  December  31,  2000 of  which  $0.7  million  and  $2.3  million,
respectively,  related to Emerald Media,  Inc.  ("EMI").  As a result of the May
2001   termination   of  the   Transponder   Agreement,   Directrix   recognized
approximately  $0.1  million of revenue  from  transponder  leasing for the nine
months ended December 31, 2001.

         Establishment of the West Coast Facility. Management believes that the
establishment  of the West Coast Facility is critical to the realization of
its  long-term  business  plan.  To  finance  the  acquisition,  renovation  and
outfitting  of the West Coast  Facility  Directrix  entered  into a three  party
letter of intent with Kingston Investors Corp.  ("Kingston") and Playboy,  under
which  Kingston  agreed to purchase the building  and make  improvements  to the
property and enter into a triple net lease of the property  with  Directrix  for
fifteen years.  During final  negotiation,  the transaction was restructured and
under the revised arrangement among the parties,  Kingston acquired the property
on September  20, 2001 and triple net leased the property to Playboy  under a 15
year Master Lease. Playboy then subleased, on a triple net basis,  approximately
55% of the  property to Directrix  under a 15-year  Sublease  that  provides for
monthly sublease payments of approximately $100,000 in the first year increasing
3% per year for the first 10 years. For the last five years of the sublease, the
sublease  payment will be 110% of the tenth year payment.  Directrix is required
to pay its proportionate



                                       8
<PAGE>

share of the  insurance,  real estate taxes and  operating  expenses of the
facility.  The Sublease commences in stages;  rent on Studio A commences 30 days
after Kingston delivers Studio A renovated in accordance with specifications set
forth in the Master Lease,  anticipated  to occur in the calendar  quarter ended
September  30, 2002;  the balance  commences 30 days after the  remainder of the
subleased  premises are renovated in accordance with the work letter attached to
the Master Lease.

         On September 19, 2001, the parties executed a binding agreement under
which  Directrix  will  provide  to  Playboy  network  origination,  studio
facilities and related technical  services in consideration of Playboy's payment
of the service fees provided for in the most recent draft of the Master Services
Agreement.  In the September  19th  agreement the parties  agreed to execute the
long form Master  Services  Agreement  once the financing  arrangements  for the
equipment and  integration  services  associated  with outfitting the West Coast
Facility were  finalized.  The letter  agreement  also provides for Directrix to
manage the West Coast  Facility  and charge  back to Playboy  its  proportionate
share of the operating expenses.

         Under the Master Services Agreement, the minimum monthly service
payments will be $257,500 per month, increasing 3% per year. Directrix will
begin providing  studio services when Studio A is operational in accordance with
technical  specifications  set  forth  in an  exhibit  to  the  Master  Services
Agreement,  anticipated to occur approximately 30 days after Kingston delivers a
renovated Studio A. Network origination services will commence when Directrix is
capable  of  originating  the  networks  from the West Coast  Facility.  Playboy
granted  Directrix a right of first refusal to provide  substantially all of its
technical service needs.

         In July 2001, Playboy acquired the four networks operated by Califa
and VODI.  Directrix will provide network  origination  services for theses
four networks in addition to providing network  origination  services for all of
Playboy's  other  networks from the West Coast  Facility.  The parties agreed to
extend the existing  service  agreements  until the networks are originated from
the West Coast Facility. When the parties execute the Master Services Agreement,
Directrix  will issue a warrant to  Playboy  to  acquire  650,000  shares of its
common stock at an exercise price of $3.45 per share.

         Under the Master Services Agreement, Directrix is to provide equipment,
integration  and technical  improvements  necessary to provide the services
under the agreement when the facility is  operational.  To finance the equipment
and  improvements,  Playboy has entered into a Memorandum of Understanding  with
Sony Financial  Services,  LLC ("SFS") under which SFS will provide between $7.0
million  and  $8.0  million  of  equipment  lease  financing  (including  system
integration fees and maintenance  agreements) for the facility.  The parties are
currently finalizing the amount of financing to be provided. Directrix will have
the  right to use the  equipment  on a  pass-through  basis  under an  agreement
currently  being  finalized  with Playboy.  There can be no assurances  that the
equipment lease financing arrangements will be finalized.

         Directrix has recorded approximately $500,000 of expenses attributable
to the  establishment  of the West Coast  facility  including  legal  fees,
financing  fees and the  issuance  of  warrants  to Kingston as part of its fee.
These amounts have been  capitalized as deferred lease costs on the accompanying
balance sheet and will be amortized over the 15-year term of the Master Services
Agreement.

         Transition of its Existing Business to the West Coast Facility and
Attract New Business.  Although Playboy will serve as the anchor tenant for
the West Coast Facility,  the facility will have the capacity to provide network
origination,  studio  facilities  and other  technical  services  to  additional
customers  and will have two  additional  studios  that  will only be  partially
utilized  by  Playboy.  Management  intends to  transition  Directrix'  existing
service  agreements for the networks operated by Playboy (including the networks
formerly owned by Califa and VODI) to the West Coast  Facility,  and anticipates
providing services to additional customers from the facility.

         After transitioning Directrix' existing service agreements for the
networks  operated by Playboy to the



                                       9
<PAGE>

West Coast Facility, Directrix will have substantial unused capacity at its
Northvale  facility.  Management would prefer to maintain the Northvale facility
and have  operation  centers on both coasts and is currently  exploring  several
options for the productive  utilization of the facility,  including diversifying
its East Coast customer base or subleasing the facility to a third party.  There
can be no assurances that Directrix will be successful in obtaining new business
sufficient to maintain  operation centers on both coasts or finding a lessee for
the Northvale facility.

         Restructuring of the Credit Facility and Settlement Agreement.Directrix
is attempting to complete a global  restructuring of its capital  structure
and raise  additional  capital.  To date,  management  has not yet  secured  the
required  consent  of  Loral,  which  is one of the  parties  to the  Settlement
Agreement, to the proposed restructuring plan. If management is unable to secure
the consent of all the parties, Directrix may be forced to file a petition under
the Bankruptcy  Code. The status of these  negotiations  and Directrix'  options
should it be unable to implement the  restructuring  plan are described below in
Proposed Global Restructuring and New Financing.

         In July 2001, Directrix entered into a Settlement Agreement with Loral
which also modified the terms of the Credit  Facility.  As noted above, the
Settlement  Agreement  was to take effect with the  consummation  of the Playboy
Transaction on September 20, 2001 but was contingent  upon the parties  entering
into definitive documentation by January 14, 2002. To date, the parties have not
entered into definitive  documentation or agreed to extend the drop-dead date of
the Settlement  Agreement.  While those aspects of the  Restructuring  Agreement
that  deal  with  Loral's  agreement  to  extinguish  its  receivable  and early
termination  charge  have not taken  effect,  the  aspects of the  Restructuring
Agreement that modified the Credit Facility have taken effect.

         As of December 31, 2001, Directrix had drawn down $4.2 million under
the Credit  Facility.  While the Credit Facility was to mature on March 15,
2002,  Directrix could not draw down any further  advances after March 15, 2001.
The Credit Facility was secured by a first lien on all of Directrix'  assets. To
facilitate  the agreement with Loral and enhance  Directrix'  ability to attract
new capital, Directrix negotiated a restructuring of the Credit Facility as part
of the Settlement Agreement.  Under the Settlement Agreement, the holders of the
Credit  Facility  agreed to (i) extend the maturity date by one year until March
31, 2003, (ii) permit Directrix to pay in kind ("PIK") the interest payment with
shares  of  Directrix  common  stock  ("Common  Stock")  and  (iii)  revise  the
stockholders'  equity covenant.  In  consideration  of the foregoing,  Directrix
issued  to the  holders  of the  Credit  Facility,  excluding  Loral and the two
executive  officers of Directrix  who agreed to swap their portion of the Credit
Facility for a new Series A of senior preferred stock ("Series A Preferred") and
warrants  to acquire  200,000  shares of Common  Stock  (which have not yet been
issued as described  below),  warrants to acquire 125,000 shares of Common Stock
at an  exercise  price of  $3.00  per  share.  As noted  above,  the  Settlement
Agreement  was to take effect on the  consummation  of the  Playboy  Transaction
which occurred on September 20, 2001.

         Under the Settlement Agreement, the Credit Facility notes held by two
executive  officers  of  Directrix,   which  aggregated  $1.65  million  at
September  20, 2001,  were to be cancelled  and replaced with $1.65 million face
amount of a Series A Preferred.  Directrix  was also to issue five year warrants
to acquire 200,000 shares of Common Stock with an exercise price of $3.00 to the
two  officers.  Because this aspect of the  Restructuring  Agreement has not yet
taken  effect,  the Series A Preferred and warrants have not been issued and
the officers currently retain their $1.65 million of Credit Facility notes.
The terms of the Series A Preferred  if and when issued are  described  below in
Note 6.

         The holders of the Credit Facility agreed to permit Directrix to PIK
the  interest  payment  owed on the Credit  Facility  with shares of Common
Stock for the period from June 1, 2001 through  September  19, 2001.  (Under the
Settlement Agreement, Directrix can PIK the interest on the Credit Facility on a
going  forward  basis.)  Directrix  issued 53,230 shares of Common Stock with an
aggregate  fair market  value of $156,000  as the PIK  interest  payment for the
period from June 1, 2001 through  September 30, 2001 and issued 54,500



                                       10
<PAGE>

shares of Common Stock with an  aggregate  fair market value of $117,156 as
the PIK interest  payment for the three months ended  December 31, 2001. The PIK
interest payments are accounted for at its fair market value on the accompanying
statement of stockholders' deficit.

         Proposed Global Restructuring and New Financing. The final phase of
management's plan is to locate a new source of working capital.  Management
forecasts  that  Directrix  will  require  additional  funding to  complete  the
buildout of the West Coast Facility and to provide for the deficiency in working
capital until Directrix generates  operating cash flow.  Directrix had initially
planned to put the West Coast facility into operation  during the first calendar
quarter of 2002 but because of delays in  finalizing  the  Playboy  Transaction,
this date has been  pushed  back into the third  calendar  quarter of 2002.  The
delay in the  completion of the West Coast  facility has  heightened  Directrix'
need for additional funding.

         As a preliminary step, Directrix secured an aggregate of $611,500 of
interim financing ("Interim  Financing") in a private placement to existing
shareholders  and investors of which $437,500 was placed during the three months
ended December 31, 2001 and the balance during the next two months. The terms of
the Interim  Financing include a one year note secured by a perfected first lien
on Directrix'  assets.  (Under a letter  agreement  dated October 28, 2001,  the
Credit  Facility  holders agreed to subordinate  their security  interest to the
Interim  Financing  holders' first lien.) The interim  financing  notes bear 20%
interest  payable upfront in shares of Directrix common stock which Directrix is
recognizing  as interest  expense  over the term of the notes.  During the three
months ended December 31, 2001,  Directrix  issued 35,635 shares of Common Stock
as payment of interest on the notes and  discounted  the principal  value of the
notes by the unamortized portion of the interest expense.  During the two months
ended February 2002,  Directrix  issued 18,297 shares of Common Stock as payment
of interest on the notes.

         To date, management has been unable to secure financing beyond the
Interim  Financing,  and  believes  that  it will  not be  able  to  secure
additional  financing  unless it can first  restructure  its capital  structure.
Directrix  proposed a  comprehensive  restructuring  plan that would convert the
interests of the holders of the Interim Financing,  Credit Facility,  Debentures
(as described  below in Note 5) and Series A and Series B Preferred  into Common
Stock.  These  steps were based on the  assumption  that all of the terms of the
Settlement  Agreement would be in effect. As part of this plan,  Directrix would
implement a revised  business  plan which  provided  for,  among  other  things,
further reductions in its executives' salaries.

         If Directrix was able to implement a restructuring plan along the lines
described above,  Directrix could have secured preliminary  commitments for
$2.0  million of new  financing.  However,  Directrix  has not yet  secured  the
consent of Loral, which is one of the parties to the Settlement  Agreement,  and
has been forced to consider other options, including filing a petition under the
Bankruptcy  Code.  If  Directrix is forced to file a  bankruptcy  petition,  its
business will most likely be adversely affected. Moreover, there is no assurance
that Directrix will be able to file a reorganization plan that will enable it to
remain in business and it may be forced to cease operations and liquidate.

         Even if Directrix is able to implement a restructuring plan along the
lines described above and secure new financing,  there is no assurance that
Directrix  will be able to  realize  its  long-term  business  plan and  achieve
profitability.   Moreover,  there  can  be  no  assurance  that  the  successful
implementation of the business plan will improve operating results and/or result
in  Directrix  achieving  profitability.  There  also can be no  assurance  that
unforeseen circumstances could prevent Directrix from achieving its goal.

5.       Subordinated Convertible Debentures. Directrix placed $500,000 of
convertible debentures  ("Debentures") in an offering completed on June 30,
2001.  In July 2001,  Directrix  offered up to  $600,000  of a second  series of
convertible  debentures with the same terms as the Debentures.  Through December
31,  2001,  Directrix  placed  $375,000 of  Debentures  from the second  series;
$50,000 of Debentures were issued to an executive officer of Directrix.



                                       11
<PAGE>

         The Debentures are convertible into shares of Common Stock at any time,
at the option of the holders,  at a  conversion  rate of $1.50 per share of
Common Stock.  The conversion  rate is subject to  anti-dilution  protection for
stock splits, stock dividends,  stock  reclassifications and mergers.  Directrix
can require  conversion  at any time if the average  trading price of its common
stock is over $5.00 for any ten consecutive trading days prior to maturity.  The
Debentures  mature on March 31,  2003,  are  senior to all of  Directrix'  other
obligations  other than the  Credit  Facility  and  Interim  Financing  and bear
interest at 6% per annum,  payable at maturity.  Directrix  can elect to PIK the
interest payment in Common Stock in lieu of a cash interest  payment.  Directrix
granted  the  Debenture  holders'  registration  rights for the shares of common
stock into which the  Debentures are  convertible  and has committed to file the
registration statement during the year ended March 31, 2002.

         During the three and nine months ended December 31, 2001, Directrix
recorded non-cash  interest expense  attributable to the intrinsic value of
the beneficial conversion feature of the convertible  debentures of $125,000 and
$437,500, respectively, based on the difference between the conversion price and
the fair market  value of  Directrix  common  stock on the February 28, 2001 and
July 16, 2001 commitment dates. Through December 31, 2001, Directrix recorded an
aggregate of $31,000 of accrued  interest  attributable  to the first and second
series of the  Debentures.  As  discussed  above in Note 4,  Directrix  proposed
converting  the  Debentures  into Common  Stock as part of the  proposed  global
restructuring.

6.       Preferred Stock. The Restructuring Agreement sets forth the terms of
the Series A and Series B Preferred to be issued if and when the portion of
the  Restructuring  Agreement  relating  to  the  extinguishment  of  the  Loral
receivable and early termination charge takes effect. If this occurs,  Directrix
will issue $1.65  million of Series A Preferred to two of  Directrix'  executive
officers and $3.0 million of Series B Preferred to Loral. As noted above in Note
4,  Directrix  has not yet issued  the  preferred  stock and this  aspect of the
Settlement   Agreement  has  not  taken  effect.   Under  the  proposed   global
restructuring  (described  in Note 4), all aspects of the  Settlement  Agreement
will  take  effect;  the  Series A and B  Preferred  will be deemed  issued  and
converted  into Common Stock.  If issued,  the Series A Preferred will bear a 6%
cumulative  dividend which  Directrix  may, at its option,  PIK in Common Stock,
will be senior in  liquidation  preference to the Series B Preferred and will be
convertible at $1.50 per share. The conversion price will be subject to standard
anti-dilution  adjustments for stock splits and dividends and recapitalizations,
and adjustments for issuances of Common Stock or convertible  securities with an
issue or conversion price less than the Series A Preferred conversion price. The
Series A Preferred  will also be entitled to vote on an as  converted  basis and
the holders will have the right to appoint two members to the Directrix Board of
Directors.  The holders of the Series A Preferred  will have the right to demand
redemption  after 10 years or upon change in control of Directrix  (such as if a
person or group acquires more than 35% of the  outstanding  voting  securities).
Directrix  will have the option of paying the  redemption  price in cash or as a
PIK in Common Stock. If issued,  the Series B Preferred will have the same terms
as the  Series  A  Preferred  except  that it will be  junior  to the  Series  A
Preferred  on  liquidation  preference,  will have a $3.00 per share  conversion
price  which will be subject to volume  weighted  adjustment  for  issuances  of
Common Stock or convertible  securities  with an issue or conversion  price less
than the Series B Preferred  conversion price, and will have no voting rights or
rights to appoint Board members.

7.       Warrants. As part of the fee arrangement for assisting with the
Playboy  Transaction,  Directrix issued to Kingston a five-year  warrant to
acquire  100,000 shares of Directrix  common stock at an exercise price of $2.90
per share,  the fair market  value of  Directrix  stock on the grant  date.  The
aggregate  fair  market  value  of the  warrants  (preliminarily  determined  by
management using the Black-Scholes  pricing model) amounts to approximately $0.2
million and is capitalized as a deferred lease cost on the accompanying  balance
sheet.  As noted above in Note 4,  Directrix  has  committed to issue to Playboy
upon execution of the Master Services Agreement,  a five year warrant to acquire
650,000 shares at an exercise price of $3.45 per share. As noted above in Note 4
and as part of the Settlement Agreement,  Directrix issued five year warrants to
acquire 125,000 shares of Directrix common stock to the Credit Facility holders.
Directrix  will also issue  warrants to acquire  200,000 shares to each of Loral
and the two  executive  officers  of  Directrix  (as a  group)  if and  when the
Restructuring  Agreement  as it  relates  to the  extinguishment  of  the  Loral
receivable and early termination  charge takes effect.  All of the warrants have
an exercise  price of $3.00 per share.  The  aggregate  fair market value of



                                       12
<PAGE>

the   warrants   (preliminarily   determined   by   management   using  the
Black-Scholes  pricing model) issued to the Credit  Facility  holders amounts to
approximately  $0.3 million and is being  amortized  over the term of the Credit
Facility.  The final  determination  of the valuation of the warrants  described
above will be based on an analysis done by Directrix.

8.       Net Loss per Share. Net loss per share for the three and nine months
ended  December 31, 2000 and December 31, 2001 are calculated in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share."  Since  Directrix  reported  a loss  before  extraordinary  item for all
periods presented, basic and diluted earnings per share exclude dilution and are
computed  by  dividing  net loss  attributable  to  common  shareholders  by the
weighted-average common shares outstanding for the period. Options, warrants and
convertible  debentures were excluded from the  calculation of diluted  earnings
per share because their effect would be anti-dilutive. Directrix had 280,886 and
312,973  common stock options  outstanding  as of December 31, 2001 and December
31, 2000, respectively. At December 31, 2001 and 2000, all common stock purchase
warrants were exercised except for the warrants described above in Note 7.

9.       Significant Customers; Litigation. In May 2001, EMI (which was
Directrix'  major  customer) shut down its networks,  and sold its customer
list to its largest competitor, a wholly owned subsidiary of New Frontier Media,
Inc.  ("New  Frontier"),  for cash and  94,137  shares  of New  Frontier  stock.
Directrix entered into an agreement with EMI dated May 1, 2001 that provided for
the  extinguishment  of the option  Directrix  held to acquire  the  business or
assets of EMI (the "EMI  Option")  and for EMI's  transfer of the cash and stock
proceeds  from the sale of its customer  list to Directrix in  settlement of the
EMI receivable which amounted to approximately $0.6 million. At May 1, 2001, the
94,137  shares of New  Frontier  stock were  recorded  at a value of $3.63 each,
which was the per share market value, aggregating  approximately $0.3 million of
marketable securities. During the nine months ended December 31, 2001, Directrix
recorded  approximately  $0.1  million of cash  basis  revenue  associated  with
recovery of amounts owed in excess of the EMI receivable.

         In accordance with SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity  Securities,"  on May 1,  2001,  Directrix  classified  the
94,137  shares of New Frontier  stock as  "available  for sale  securities."  At
December 31, 2001,  the 94,137  shares of New Frontier  stock were recorded at a
value of $3.00 each,  which was the per share market value.  In accordance  with
SFAS No. 130, "Reporting Comprehensive Income," the $59,000 loss associated with
the decrease in per share market value  through  December 31, 2001 is classified
as  equity  in  the  accompanying   balance  sheet  under   "Accumulated   other
comprehensive loss."

         EMI had acquired some of its networks from Logix Development
Corporation ("Logix") under an agreement dated January 18, 1997. Under that
agreement,  EMI engaged  Logix to operate its call center for the EMI  networks.
After  the  sale of the  customer  list to the New  Frontier  subsidiary,  Logix
brought an action in the Los Angels County  Superior  Court  (Logix,  et. al. v.
Emerald Media,  Inc., et. al., Case No. BC250732) in May 2001,  naming Directrix
as a defendant to the suit.  Logix also named as  defendants in the action Spice
(now a  subsidiary  of Playboy  Enterprises,  Inc.) and New  Frontier.  The suit
alleges,  among other things, that the sale of the customer list to New Frontier
was in derogation of Logix' rights to the customer list. The suit alleged breach
of contract, fraud and negligent misrepresentation. Logix was seeking damages in
excess of $10  million.  Directrix  is obligated to defend the suit on behalf of
Spice.


         On July 12, 2001, New Frontier filed a cross complaint against Logix,
EMI, Roger Faherty and Donald McDonald, Directrix' Chief Executive Officer and
President, respectively, and Daniel J. Barsky, counsel to EMI in the New
Frontier transaction. The cross complaint alleges, among other things, that EMI
breached its representations and warranties concerning its rights to the
customer list and that Messrs. Faherty, McDonald and Barsky had misrepresented
EMI's rights to the customer list. Directrix has undertaken the defense of the
cross complaint on behalf of Messrs. Faherty, McDonald and Barsky. Subsequently,
Mr. Barsky was dismissed from the action. A June hearing is scheduled.



                                       13
<PAGE>

         On March 7, 2002 Logix filed a Motion for Leave to Amend Complaint
which  proposed to add new parties to the action and  additional  causes of
action. Logix is now seeking damages of not less than $90 million plus exemplary
damages.  Directrix believes the Logix suit and the New Frontier cross complaint
are  without  merit and is  engaged in a vigorous  defense  of the  action.

10.       Executive   Compensation.   To  assist   Directrix  in  achieving  its
business objectives,  Messrs.  Faherty,  McDonald and Kirby,  Directrix'  Chief
Executive Officer, President and Chief Operating Officer, respectively,
voluntarily  agreed to extend the prior  year  reductions  in their  annual
salaries through March 31, 2002. The reductions took effect on June 24, 2000 and
provided for  reductions in their annual  salaries of $200,000 for Mr.  Faherty,
$24,750 for Mr.  McDonald  and $22,584 for Mr.  Kirby.  In  addition,  the three
officers and Terry Taylor, the Executive  Vice-President of Sales and Marketing,
voluntarily  agreed to an  additional  reduction  in their  annual  salaries  of
$25,000 on an annualized  basis. The additional salary reductions took effect on
May 1, 2001 and will  continue for the  remainder of the fiscal year ended March
31, 2002.

         In consideration of their agreements to the June 24, 2000 salary
reduction,  the  Compensation  Committee of the Board of Directors  granted
each of Messrs.  McDonald and Kirby 5,000 fully vested options to acquire shares
of the common stock of  Directrix  exercisable  at $4.00 per share,  the closing
price of Directrix' stock on June 22, 2000. Mr. Faherty was granted 25,000 fully
vested  stock  options  exercisable  at $2.25 per share,  the  closing  price of
Directrix' stock on September 18, 2000.

         In consideration of their agreement to continue the salary reductions
through March 31, 2002, the Compensation Committee awarded Messrs. Faherty,
McDonald and Kirby 96,552, 11,948 and 10,903 restricted shares, respectively, of
Directrix  common stock under a restricted stock plan which provides for vesting
of the shares on March 31, 2003 if the holders are then  employed by  Directrix.
In consideration  of the additional  salary reduction that took effect on May 1,
2001,  the  Compensation   Committee  granted  each  of  the  executives  11,063
restricted  shares of  Directrix  common stock under the  restricted  stock plan
described  above. All the shares of restricted stock were issued on May 1, 2001.
Directrix recorded  approximately  $475,000 of deferred  compensation,  of which
$345,000  was  expensed at December  31,  2001.  The  remaining  amounts will be
amortized over the remainder of the fiscal year.

         Effective February 1, 2002, Mr. Faherty's employment agreement was
amended  and  restated.  Under  the  amended  agreement,  the  term  of Mr.
Faherty's employment will expire on March 31, 2004 (his previous agreement had a
five-year  rolling term) and his salary was fixed at $180,000 per annum.  If Mr.
Faherty is required to relocate to Los Angeles, Directrix and Mr. Faherty agreed
to negotiate  in good faith a  relocation  allowance  and an  adjustment  in Mr.
Faherty's compensation.

         Under the proposed global restructuring described above in Note 4,
senior executives have agreed to further salary reductions.

         On May 1, 2000, pursuant to employment agreements, Directrix granted
employees an aggregate of 50,000 options to acquire shares of the common stock
of Directrix exercisable at $5.75 per share, the fair market value of the common
stock on the date of grant.

         In accordance with APB Opinion No. 25, "Accounting for Stock Issued to
Employees,"  and  related  interpretations  in  accounting  for  its  stock
incentive plans,  Directrix did not recognize compensation expense in connection
with the above mentioned option grants because the exercise price of the options
was equal to the market value of the stock on the grant date.

         In May 2000, Directrix entered into a four-month agreement with an
individual  who, at the time,  was a one of its  non-employee  directors to
provide various consulting services to Directrix. In consideration for providing
these services, Directrix agreed to pay an aggregate of $20,000 over the term of
the agreement.



                                       14
<PAGE>

11.      Library of Movies. Directrix capitalizes the acquisition costs for
the rights to movie titles purchased or licensed. The acquisition costs are
amortized  on a  straight-line  basis over the shorter of the useful life or the
license  period,  ranging  from one to five  years.  Effective  April  1,  2000,
Directrix reduced the estimated life of its library of movies to two years.

12.      Explicit Rights Agreement. As part of the Merger and under an
Explicit Rights Agreement,  Directrix was to receive a royalty free license
of the explicit  rights for  distribution  in the domestic C-band market and via
the  Internet  for adult  movies  licensed  by  Playboy  under  Spice's  license
agreements which Playboy succeeded to after the Merger where the adult licensors
executed licensor  consents.  Approximately 30 adult licensors executed licensor
consents.  Directrix was unable to secure theses rights because Playboy acquired
these rights itself,  refused to make these rights available to Directrix and/or
frustrated Directrix' efforts to secure these rights.  Directrix noticed Playboy
of its breach of the Explicit Rights Agreement shortly after the Merger and most
recently  in  December  2001  and to date  Playboy  has not  cured  the  breach.
Directrix estimates that its damages  attributable to the failure to receive the
C-band  Explicit  Rights  and the  Internet  Explicit  Rights  are  substantial.
Directrix is attempting to negotiate a resolution of this matter with Playboy.

13.      Recent Accounting Pronouncements. In August 2001, the FASB issued
statement of  Financial  Accounting  Standard  No.144  "Accounting  for the
Impairment or Disposal of Long Lived  Assets",  ("SFAS144").  This  statement is
effective for fiscal years  beginning  after December 15, 2001 and will commence
on April 1, 2002 for Directrix.  This  supercedes SFAS 121, while retaining many
of the requirements of such statement.  The Company is currently  evaluating the
impact of the statement.

14.      Litigation - Collection Actions. Directrix is a party to several
collection   actions.   The  amount  sought  to  be  recovered   aggregates
approximately $217,000. The largest amount sought is in a suit instituted by the
Xerox Corporation in the Supreme Court of the Sate of New York filed February 4,
2002 which seeks  damages of  approximately  $82,000  plus  counsel  fees and is
attributable to alleged breaches of leases for office equipment. The other suits
seek damages of amounts less than  $50,000.  Directrix  intends to contest these
suits and/or seek to settle these and other outstanding  payables.  There are no
assurances that Directrix will be able to negotiate  favorable terms on which to
settle these amounts. Directrix has not filed or paid its employment withholding
taxes since September 30, 2001. The amount, exclusive of any penalties which may
be  assessed,  is recorded as an other  current  liability  on the  accompanying
balance sheet.



                                       15

<PAGE>

DIRECTRIX, INC. AND SUBSIDIARIES
ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------

Except for the historical information contained therein, the matters discussed
in "Management's Discussion and Analysis of Financial Condition and Results
of Operations" are not historical facts, but are  "forward-looking  statements,"
as that term is defined in the Private Securities Litigation Reform Act of 1995.
In addition, Directrix or its representatives have made and may continue to make
forward-looking statements,  orally or in writing, in other contexts, such as in
reports filed with the  Securities  and Exchange  Commission,  press releases or
statements made with the approval of an authorized  Directrix executive officer.
These forward-looking statements can be identified by the use of forward-looking
terminology  such as "believes,"  "expects,"  "plans,"  "may," "will,"  "would,"
"could,"  "should,"   "anticipates,"   "estimates,"  "projects,"  "intends,"  or
"outlook" or the negative of these words or other  variations  of these words or
other  comparable  words,  or by  discussion  of strategy that involve risks and
uncertainties. These forward-looking statements are only predictions, and actual
events or results may differ materially as a result of a wide variety of factors
and conditions, many of which are beyond Directrix' control.

Overview

         Directrix, a Delaware corporation, is a full service provider of
network  origination,  digital video asset  management and digital  content
delivery  services,  primarily to the adult  entertainment  industry.  Directrix
offers a complete  range of network  origination  services  for the creation and
distribution of traditional television networks using advanced video file server
based playback  capabilities.  Directrix provides digital content management and
delivery  services using The Directrix  Content  Delivery  Network that provides
media owners with the ability to manage their  content and  distribute  it using
Directrix' satellite, fiber optic and Internet connectivity.

         Directrix was originally a wholly owned subsidiary of Spice
Entertainment  Companies,  Inc. ("Spice") and provided network  origination
and  technical  services for Spice's  networks.  Directrix  became a stand-alone
company  when,  as part of the March 15,  1999 merger  ("Merger")  of Spice into
Playboy  Enterprises  Group,  Inc.  ("Playboy"),  Spice  spun off  Directrix  by
distributing  approximately  2,075,000  shares of Directrix  common stock to the
Spice stockholders.  As part of the Merger,  Spice contributed certain assets to
Directrix including its New York City based master control and playback facility
and  related  technical  services   agreements  and  its  transponder   services
agreement.  The  transferred  assets  included the agreements to provide network
origination  services  for the three  networks  acquired  by Playboy  and Califa
Entertainment Group, Inc. ("Califa") as part of the Merger and the agreements to
provide  transponder  and network  origination  services for the C-Band networks
operated by Emerald Media,  Inc.  ("EMI").  Spice also transferred its option to
acquire  the  network  business  or stock of EMI (the "EMI  Option").  Directrix
assumed certain liabilities related to the transferred assets.

         Directrix is in the process of building out a 109,000 square foot
teleport,  master control, and soundstage complex in Los Angeles (the "West
Coast Facility"). Under a transaction which was completed on September 20, 2001,
Directrix will provide  network  origination  and production  services,  digital
archiving,  studio facilities and personnel,  and production and post-production
offices  to Playboy  at the  facility  over a 15-year  term  (collectively,  the
"Playboy  Transaction").  In June  2001,  Playboy  acquired  the  four  networks
operated by Califa  Entertainment  Group, Inc. ("Califa") and its affiliate VOD,
Inc.  ("VODI")  and  Directrix  will  continue  to provide  network  origination
services for these networks under its 15-year agreement with Playboy.

Results of Operations

         Basis of Presentation. The accompanying unaudited financial statements
have been  prepared in  accordance  with  accounting  principles  generally
accepted in the United States of America for interim  financial  information and
the  instructions  to Form  10-QSB and do not include  all the  information  and
footnotes  required by accounting  principles  generally  accepted in the United
States  of  America  for  complete  financial   statements.   Furthermore,   the
accompanying  unaudited  financial  statements  have  not yet been  reviewed  by
Directrix'



                                       16
<PAGE>

independent  auditors.  Directrix  expects  that the review  will be
completed as soon as practicable.

         Revenues. Total revenue for the nine and three months ended
December 31, 2001 decreased by approximately $1.6 million and $0.7 million,
respectively,  as compared to the same periods in 2000.  The decrease in revenue
for the nine months ended  December  31, 2001 was  primarily  attributable  to a
decrease in revenue from EMI of $2.5 million, offset by the inclusion of revenue
attributable  to broadband  services of $0.7 million and revenue from additional
networks  operated  by Playboy  and Califa of $0.2  million  for the nine months
ended December 31, 2001.

         The inclusion of broadband revenue was attributable to Directrix'
resale of Internet media delivery services provided by Akamai Technologies,
Inc.  ("Akamai")  under an Amended and Restated Akamai Reseller  Agreement dated
August 15, 2000, as amended (the "Reseller Agreement"). The parties had disputes
concerning  services  and  payments  which could not be resolved and on July 30,
2001, the Reseller  Agreement was  terminated.  As a result of the  termination,
Directrix  ceased  providing  broadband  services  and will  not have  broadband
revenue  until a  replacement  services  provider  can be  found  and  customers
secured. There can be no assurance that Directrix will be successful in securing
a  replacement  broadband  services  provider or whether the terms on which such
services  can be  secured  will be  acceptable  or whether  Directrix  can again
attract customers for these services.

         For the nine and three months ended December 31, 2001, revenue from
video-on-demand  services  increased  by $0.2  million  and  $0.1  million,
respectively, as compared to the corresponding periods in 2000.

         The decrease in revenue for the three months ended December 31, 2001
was  primarily  attributable  to a  decrease  in  revenue  from EMI of $0.8
million  which related to the shut down of the EMI  networks.  In May 2001,  EMI
(which was  Directrix'  major  customer)  shut down its  networks,  and sold its
customer  list to its  largest  competitor,  a wholly  owned  subsidiary  of New
Frontier  Media,  Inc.  ("New  Frontier"),  for cash and  94,137  shares  of New
Frontier stock.  Directrix  entered into an agreement with EMI that provided for
the  extinguishment  of the  EMI  Option  and  for  the  settlement  of the  EMI
receivable,  which amounted to approximately  $0.6 million,  in consideration of
EMI's transfer of the cash and stock proceeds from the sale of its customer list
to  Directrix.  At May 1, 2001,  the 94,137  shares of New  Frontier  stock were
recorded  at a value  of $3.63  each,  which  was the per  share  market  value,
aggregating  approximately $0.3 million of marketable  securities.  For the nine
months ended December 31, 2001, Directrix recorded approximately $0.1 million of
cash basis revenue associated with recovery of amounts owed in excess of the EMI
receivable.

         Salaries, Wages and Benefits. Salaries, wages and benefits for the nine
months ended December 31, 2001 increased by $0.1 million as compared to the
same period in 2000. The increase in salaries,  wages and benefits was primarily
attributable  to the  recording  of  compensation  expense  associated  with the
issuance of restricted stock issued in consideration of salary  reductions taken
by key executives during the nine months ended December 31, 2001, which exceeded
the amount  that would  have been  recorded  had the  executives  received  cash
compensation.

         Salaries, wages and benefits for the three months ended December 31,
2001 were comparable to salaries, wages and benefits for the same period in
2000.  Decreases in salaries,  wages and benefits  during the three months ended
December  31,  2001  were  offset  by  the  recording  of  compensation  expense
associated  with the  issuance  of  restricted  stock for the salary  reductions
described above.

         Library Amortization.  Library amortization for the nine and three
months ended December 31, 2001 was comparable to library amortization for the
same periods in 2000.

         Satellite Costs. Satellite costs for the nine and three months ended
December 31, 2001 decreased by approximately $4.2 million and $1.4 million,
respectively, as compared to the same periods in 2000. The decrease in satellite
costs was primarily attributable to the termination of Directrix' Agreement for
SkyNet



                                       17
<PAGE>

Transponder Services ("Transponder Agreement") with Loral SpaceCom
Corporation ("Loral") in May 2001, as more fully described in "Liquidity and
Capital Resources, Restructuring Plan, Termination of Directrix' Transponder
Agreement."

         Broadband Expenses. Broadband expenses for the nine months ended
December 31, 2001 increased by approximately $0.5 million as compared to the
same period in 2000. The increase in broadband expenses was attributable to
Directrix' resale of Internet media delivery services provided by Akamai under
the Reseller Agreement. As noted above, the parties terminated the Reseller
Agreement on July 30, 2001 and Directrix did not incur any broadband expenses
for the three months ended December 31, 2001.

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the nine and three months ended December 31, 2001
decreased by approximately $0.5 million and $0.1 million, respectively, as
compared to the nine and three months ended December 31, 2000. The decrease in
selling, general and administrative expenses was attributable to decreases in
various expenses including bad debt expense, production costs, public relation
costs, convention and trade show costs and office cleaning costs.

         Depreciation of Fixed Assets. Depreciation of fixed assets for the nine
and three months ended December 31, 2001 increased by approximately $0.1 million
as compared to the corresponding periods in 2000. The increase in depreciation
of fixed assets was primarily attributable to accelerated depreciation relating
to the relocation of the executive offices to Northvale, New Jersey in December
2001.

         Interest Expense. Interest expense for the nine months ended December
31, 2001 increased by approximately $0.5 million as compared to the nine months
ended December 31, 2000. The increase in interest expense was primarily
attributable to the recording of non-cash interest associated with the intrinsic
value of the beneficial conversion feature of the convertible debentures issued
during the nine months ended December 31, 2001.

         Interest expense for the three months ended December 31, 2001 was
comparable to interest expense for the corresponding period in 2000. For the
three months ended December 31, 2001, an increase in interest expense
attributable to the recording of non-cash interest associated with the intrinsic
value of the beneficial conversion feature of the Convertible Debentures was
offset by a decrease in interest expense associated with the transponder
agreements and a decrease in the amortization of deferred financing costs due to
the extension of the term of the Credit Facility to March 31, 2003.

          Transponder Penalty. When the Transponder Agreement was terminated in
May 2001,  Directrix  owed Loral  approximately  $6.1  million for past due
service  fees and a $4.6  million  early  termination  charge that was  recorded
during the nine months ended December 31, 2001. The parties  entered into a July
13,  2001  letter  agreement  and Term  Sheet  ("Settlement  Agreement"),  which
provided for Loral to extinguish its receivable and the early termination charge
for a note  under  the  credit  facility,  preferred  stock  and  warrants.  The
Settlement  Agreement  was to take effect with the  consummation  of the Playboy
Transaction on September 20, 2001 but was contingent  upon the parties  entering
into definitive documentation by January 14, 2002. To date, the parties have not
entered into definitive  documentation or agreed to extend the drop-dead date of
the Settlement  Agreement.  As a consequence  of the  foregoing,  the Settlement
Agreement  as it  impacts  Loral is not  currently  in  effect.  The  Settlement
Agreement as it relates to the Transponder  Agreement is further described below
under  "Liquidity  and Capital  Resources,  Restructuring  Plan,  Termination of
Directrix' Transponder Services Agreement ".

         Directrix recognized $0.8 million and $2.7 million, respectively, of
revenue attributable to the leasing of transponders for the three and nine
months ended December 31, 2000 of which $0.7 million and $2.3 million,
respectively, related to EMI. As a result of the May 2001 termination of the
Transponder Agreement,



                                       18
<PAGE>

Directrix recognized approximately $0.1 million of revenue from transponder
leasing for the nine months ended December 31, 2001.

         Net Loss. For the nine and three months ended December 31, 2001,
Directrix reported net losses of $9.9 million and $6.9 million, respectively, as
compared to net losses of $7.3 million and $2.4, respectively, for the
corresponding periods in 2000. The increase in the net losses for the nine
months ended December 31, 2001 and the decrease in the net loss for the three
months ended December 31, 2001 were attributable to all the factors noted above.
Management expects to continue to incur net losses at least until the
restructuring plan described below is fully implemented. See, Liquidity and
Capital Resources, Restructuring Plan.

Liquidity and Capital Resources

Working Capital. Directrix had a working capital deficiency of $14.0 million on
December 31, 2001 as compared to a working capital deficiency of $11.4 million
on March 31, 2001. The increase in working capital for the nine months ended
December 31, 2001 was primarily attributable to the inclusion of a $4.6 million
early termination charge associated with the termination of the Transponder
Agreement. Directrix' working capital deficiency, coupled with the fact that it
is has incurred net losses since inception of $6.1 million and $10.3 million for
the years ended March 31, 2000 and March 31, 2001, respectively, and a net loss
of $9.9 million for the nine months ended December 31, 2001 raise substantial
doubt about Directrix' ability to continue as a going concern. Directrix'
continued existence is dependent upon several factors, including management's
ability to successfully implement the restructuring plan described below and its
ability to generate operating cash flow via execution of its long-term business
plan. To date, management has not yet secured the consent of Loral, which is one
of the parties to the Settlement Agreement) (described below in "Restructuring
Plan, Termination of Directrix' Transponder Services Agreement"), to the final
phase of the restructuring plan which is a precondition to Directrix' ability to
raise needed capital. If management is unable to secure the required consent,
Directrix will be forced to pursue other alternatives which may include filing a
petition under the Bankruptcy Code. If Directrix is forced to file a bankruptcy
petition, its business will most likely be adversely affected. Moreover, there
is no assurance that Directrix will be able to file a reorganization plan that
will enable it to remain in business and it may be forced to cease operations
and liquidate. Even if Directrix is able to implement a restructuring plan along
the lines described below and secure new financing, there is no assurance that
Directrix will be able to realize its long-term business plan and achieve
profitability. Moreover, there can be no assurance that the successful
implementation of the business plan will improve operating results and/or result
in Directrix achieving profitability. There also can be no assurance that
unforeseen circumstances could prevent Directrix from achieving its goal.

Credit Facility. Directrix has a $4.5 million revolving line of credit ("Credit
Facility") pursuant to the terms of a March 15, 1999 Loan and Security
Agreement, as amended by the Amended and Restated Loan and Security Agreement
dated February 15, 2000 (as amended, the "Loan Agreement"). As of December 31,
2001, Directrix had drawn down approximately $4.2 million under the Credit
Facility and is not permitted to make any further drawdowns. The Chief Executive
Officer, the President and four unrelated parties (collectively, the "Lenders")
provided the Credit Facility. The Credit Facility bears interest at 11% per
annum, which was originally payable monthly, and was to mature on March 15,
2002. Directrix pledged substantially all of its assets as collateral for this
obligation.

         The Credit Facility was amended under the Settlement Agreement
(described below under "Restructuring Plan, Restructuring of the Credit Facility
and Settlement Agreement") to extend the maturity date to March 31, 2003, revise
the stockholder's equity financial covenant and permit interest to be paid in
kind in Directrix common stock ("Common Stock"). Under the proposed global
restructuring, (described below under "Restructuring Plan, Proposed Global
Restructuring and New Financing"), the Lenders proposed converting the Credit
Facility into Common Stock.



                                       19
<PAGE>

Subordinated Convertible Debentures. Directrix placed $500,000 of convertible
debentures ("Debentures") in an offering completed on June 30, 2001. In July
2001, Directrix offered up to $600,000 of a second series of convertible
debentures with the same terms as the Debentures. Through December 31, 2001,
Directrix placed $375,000 of Debentures from the second series; $50,000 of
Debentures were issued to an executive officer of Directrix.

         The Debentures are convertible into shares of Common Stock at any time,
at the option of the holders, at a conversion rate of $1.50 per share of Common
Stock. The conversion rate is subject to anti-dilution protection for stock
splits, stock dividends, stock reclassifications and mergers. Directrix can
require conversion at any time if the average trading price of its common stock
is over $5.00 for any ten consecutive trading days prior to maturity. The
Debentures mature on March 31, 2003, are senior to all of Directrix' other
obligations other than the Credit Facility and Interim Financing and bear
interest at 6% per annum, payable at maturity. Directrix can elect to PIK the
interest payment in Common Stock in lieu of a cash interest payment. Directrix
granted the Debenture holders' registration rights for the shares of common
stock into which the Debentures are convertible and has committed to file the
registration statement during the year ended March 31, 2002.

         During the three and nine months ended December 31, 2001, Directrix
recorded non-cash interest expense attributable to the intrinsic value of the
beneficial conversion feature of the convertible debentures of $125,000 and
$437,500, respectively, based on the difference between the conversion price and
the fair market value of Directrix common stock on the February 28, 2001 and
July 16, 2001 commitment dates. Through December 31, 2001, Directrix recorded an
aggregate of $31,000 of accrued interest attributable to the first and second
series of the Debentures. Under the proposed global restructuring, Directrix
proposed converting the Debentures into Common Stock as discussed below in
"Restructuring Plan, Proposed Global Restructuring and New Financing".

Warrants. As part of the fee arrangement for assisting with the Playboy
Transaction, Directrix issued to Kingston a five-year warrant to acquire 100,000
shares of Directrix common stock at an exercise price of $2.90 per share, the
fair market value of Directrix stock on the grant date. The aggregate fair
market value of the warrants (preliminarily determined by management using the
Black-Scholes pricing model) amounts to approximately $0.2 million and is
capitalized as a deferred lease cost on the accompanying balance sheet.
Directrix has committed to issue to Playboy upon execution of the Master
Services Agreement, a five-year warrant to acquire 650,000 shares at an exercise
price of $3.45 per share. As part of the Settlement Agreement, Directrix issued
five-year warrants to acquire 125,000 shares to the Credit Facility holders.
Directrix will also issue warrants to acquire 200,000 shares to each of Loral
and the two executive officers of Directrix (as a group) if and when the
Restructuring Agreement as it relates to the extinguishment of the Loral
receivable and early termination charge takes effect. All of the warrants have
an exercise price of $3.00 per share. The aggregate fair market value of the
warrants (preliminarily determined by management using the Black-Scholes pricing
model) issued to the Credit Facility holders amounts to approximately $0.3
million and is being amortized over the term of the Credit Facility.

         The final determination of the valuation of the warrants described
above will be based on an analysis done by Directrix.

Restructuring Plan. Management developed and is in the process of implementing a
multi-phase restructuring plan. The restructuring plan addresses the areas that
management believes are critical to the realization of Directrix' short and
long-term plans which include (i) the termination of Directrix' transponder
services agreement, (ii) the establishment of the West Coast Facility, (iii) the
transition of its existing business to the West Coast Facility and attracting
new business, (iv) the restructuring of Directrix' capital structure and (v)
securing new financing. As noted above in "Working Capital", management has not
yet secured the consent of Loral, which is one of the parties to the Settlement
Agreement (described immediately below), to the final phase of the restructuring
plan which is a precondition to Directrix' ability to raise needed capital. If
Directrix is unable to implement the final phase of the restructuring plan and
thereby secure new financing, it may forced to file a petition under the
Bankruptcy Code.



                                       20
<PAGE>

         Termination of Directrix' Transponder Services Agreement. In May 2001,
Directrix terminated its Transponder Agreement with Loral and transferred its
transponder service customers to Loral. When the Transponder Agreement was
terminated, Directrix owed Loral approximately $6.1 million for past due service
fees and a $4.6 million early termination charge. The parties entered into a
Settlement Agreement which provided for Loral to extinguish its receivable and
the early termination charge in exchange for Directrix' issuance to Loral of:
(i) a $1.65 million note under Directrix' $4.5 million credit facility (the
"Credit Facility"), (ii) $3.0 million face amount of a new Series B junior
preferred stock ("Series B Preferred") and (iii) a five-year warrant to acquire
200,000 shares at an exercise price of $3.00 per share.

         The Settlement Agreement was to take effect with the consummation of
the Playboy Transaction on September 20, 2001 but was contingent upon the
parties entering into definitive documentation by January 14, 2002. To date, the
parties have not entered into definitive documentation or agreed to extend the
drop-dead date of the Settlement Agreement. In addition, Loral and Directrix
have been unable to agree on the terms of the global restructuring as it impacts
Loral. While Directrix is prepared to extend the term of the Settlement
Agreement, it will do so only if Loral and Directrix can agree on the terms of
the global restructuring. As a consequence of the foregoing, the Settlement
Agreement as it impacts Loral is not currently in effect.

         Management terminated the Transponder Agreement because (i) Emerald
Media ("EMI"), Directrix' major customer of subleased transponder services, had
failed to pay in full amounts owed for transponder services ands ultimately
ceased operations and (ii) it believed that the direct leasing of satellite
transponders no longer fit into Directrix' long-term plans. By terminating the
Transponder Agreement, Directrix eliminated its largest recurring monthly
charge.

         Directrix recognized $0.8 million and $2.7 million, respectively, of
revenue attributable to the leasing of transponders for the three and nine
months ended December 31, 2000 of which $0.7 million and $2.3 million,
respectively, related to EMI. As a result of the May 2001 termination of the
Transponder Agreement, Directrix recognized approximately $0.1 million of
revenue from transponder leasing for the nine months ended December 31, 2001.

         As noted above, Directrix has not yet issued the preferred stock and
this aspect of the Settlement Agreement has not taken effect. If issued, the
Series B Preferred will have the same terms as the Series A Preferred (which is
described below in Restructuring of the Credit Facility and Settlement
Agreement) except that it will be junior to the Series A Preferred on
liquidation preference, will have a $3.00 per share conversion price which will
be subject to volume weighted adjustment for issuances of Common Stock or
convertible securities with an issue or conversion price less than the Series B
Preferred conversion price, and will have no voting rights or rights to appoint
Board members. Under the proposed global restructuring, (described below under
"Restructuring Plan, Proposed Global Restructuring and New Financing"), all
aspects of the Settlement Agreement will take effect; the Series A Preferred and
Series B Preferred will be deemed issued and converted into Common Stock.

         Establishment of the West Coast Facility. Management believes that the
establishment of the West Coast Facility is critical to the realization of its
long-term business plan. To finance the acquisition, renovation and outfitting
of the West Coast Facility Directrix entered into a three party letter of intent
with Kingston Investors Corp. ("Kingston") and Playboy, under which Kingston
agreed to purchase the building and make improvements to the property and enter
into a triple net lease of the property with Directrix for fifteen years. During
final negotiation, the transaction was restructured and under the revised
arrangement among the parties, Kingston acquired the property on September 20,
2001 and triple net leased the property to Playboy under a 15 year Master Lease.
Playboy then subleased, on a triple net basis, approximately 55% of the property
to Directrix under a 15-year Sublease that provides for monthly sublease
payments of approximately $100,000 in the first year increasing 3% per year for
the first 10 years. For the last five years of the sublease,



                                       21
<PAGE>

the sublease  payment will be 110% of the tenth year payment.  Directrix is
required to pay its proportionate share of the insurance,  real estate taxes and
operating expenses of the facility.  The Sublease  commences in stages;  rent on
Studio A  commences  30 days  after  Kingston  delivers  Studio A  renovated  in
accordance  with  specifications  set forth in the Master Lease,  anticipated to
occur in the calendar quarter ended September 30, 2002; the balance commences 30
days after the remainder of the  subleased  premises are renovated in accordance
with the work letter attached to the Master Lease.

         On September 19, 2001, the parties executed a binding agreement under
which Directrix will provide to Playboy network origination, studio facilities
and related technical services in consideration of Playboy's payment of the
service fees provided for in the most recent draft of the Master Services
Agreement. In the September 19th agreement the parties agreed to execute the
long form Master Services Agreement once the financing arrangements for the
equipment and integration services associated with outfitting the West Coast
Facility were finalized. The letter agreement also provides for Directrix to
manage the West Coast Facility and charge back to Playboy its proportionate
share of the operating expenses.

         Under the Master Services Agreement, the minimum monthly service
payments will be $257,500 per month, increasing 3% per year. Directrix will
begin providing studio services when Studio A is operational in accordance with
technical specifications set forth in an exhibit to the Master Services
Agreement, anticipated to occur approximately 30 days after Kingston delivers a
renovated Studio A. Network origination services will commence when Directrix is
capable of originating the networks from the West Coast Facility. Playboy
granted Directrix a right of first refusal to provide substantially all of its
technical service needs.

         In July 2001, Playboy acquired the four networks operated by Califa and
VODI. Directrix will provide network origination services for theses four
networks in addition to providing network origination services for all of
Playboy's other networks from the West Coast Facility. The parties agreed to
extend the existing service agreements until the networks are originated from
the West Coast Facility. When the parties execute the Master Services Agreement,
Directrix will issue a warrant to Playboy to acquire 650,000 shares of its
common stock at an exercise price of $3.45 per share.

         Under the Master Services Agreement, Directrix is to provide equipment,
integration and technical improvements necessary to provide the services under
the agreement when the facility is operational. To finance the equipment and
improvements, Playboy has entered into a Memorandum of Understanding with Sony
Financial Services, LLC ("SFS") under which SFS will provide between $7.0
million and $8.0 million of equipment lease financing (including system
integration fees and maintenance agreements) for the facility. The parties are
currently finalizing the amount of financing to be provided. Directrix will have
the right to use the equipment on a pass-through basis under an agreement
currently being finalized with Playboy. There are can be no assurances that the
equipment lease financing arrangements will be finalized.

         Directrix has recorded approximately $500,000 of expenses attributable
to the establishment of the West Coast facility including legal fees, financing
fees and the issuance of warrants to Kingston as part of its fee. These amounts
have been capitalized as deferred lease costs on the accompanying balance sheet
and will be amortized over the 15-year term of the Master Services Agreement.

         Transition of its Existing Business to the West Coast Facility and
Attract New Business. Although Playboy will serve as the anchor tenant for the
West Coast Facility, the facility will have the capacity to provide network
origination, studio facilities and other technical services to additional
customers and will have two additional studios that will only be partially
utilized by Playboy. Management intends to transition Directrix' existing
service agreements for the networks operated by Playboy (including the networks
formerly owned by Califa and VODI) to the West Coast Facility, and anticipates
providing services to additional customers from the facility.

         After transitioning Directrix' existing service agreements for the
networks operated by Playboy, to the



                                       22
<PAGE>

West Coast Facility, Directrix will have substantial unused capacity at its
Northvale  facility.  Management would prefer to maintain the Northvale facility
and have  operation  centers on both coasts and is currently  exploring  several
options for the productive  utilization of the facility,  including diversifying
its East Coast customer base or subleasing the facility to a third party.  There
can be no assurances that Directrix will be successful in obtaining new business
sufficient to maintain  operation centers on both coasts or finding a lessee for
the Northvale facility.

         Restructuring of the Credit Facility and Settlement Agreement.
Directrix is attempting to complete a global restructuring of its capital
structure and raise additional capital. To date, management has not yet secured
the required consent of Loral, which is one of the parties to the Settlement
Agreement, to the proposed restructuring plan. If management is unable to secure
the consent of all the parties, Directrix may be forced to file a petition under
the Bankruptcy Code. The status of these negotiations and Directrix' options
should it be unable to implement the restructuring plan are described below in
Proposed Global Restructuring and New Financing.

         In July 2001, Directrix entered into a Settlement Agreement with Loral
which also modified the terms of the Credit  Facility.  As noted above, the
Settlement  Agreement  was to take effect with the  consummation  of the Playboy
Transaction on September 20, 2001 but was contingent  upon the parties  entering
into definitive documentation by January 14, 2002. To date, the parties have not
entered into definitive  documentation or agreed to extend the drop-dead date of
the Settlement  Agreement.  While those aspects of the  Restructuring  Agreement
that  deal  with  Loral's  agreement  to  extinguish  its  receivable  and early
termination  charge  have not taken  effect,  the  aspects of the  Restructuring
Agreement that modified the Credit Facility have taken effect.

         As of December 31, 2001, Directrix had drawn down $4.2 million under
the Credit Facility. While the Credit Facility was to mature on March 15, 2002,
Directrix could not draw down any further advances after March 15, 2001. The
Credit Facility was secured by a first lien on all of Directrix' assets. To
facilitate the agreement with Loral and enhance Directrix' ability to attract
new capital, Directrix negotiated a restructuring of the Credit Facility as part
of the Settlement Agreement. Under the Settlement Agreement, the holders of the
Credit Facility agreed to (i) extend the maturity date by one year until March
31, 2003, (ii) permit Directrix to pay in kind ("PIK") the interest payment with
shares of Directrix common stock ("Common Stock") and (iii) revise the
stockholders' equity covenant. In consideration of the foregoing, Directrix
issued to the holders of the Credit Facility, excluding Loral and the two
executive officers of Directrix who agreed to swap their portion of the Credit
Facility for a new Series A of senior preferred stock ("Series A Preferred") and
warrants to acquire 200,000 shares of Common Stock (which have not yet been
issued as described below), warrants to acquire 125,000 shares of Common Stock
at an exercise price of $3.00 per share. As noted above, the Settlement
Agreement was to take effect on the consummation of the Playboy Transaction
which occurred on September 20, 2001.

         Under the Settlement Agreement, the Credit Facility notes held by two
executive officers of Directrix, which aggregated $1.65 million at September 20,
2001, were to be cancelled and were intended to be replaced with $1.65 million
face amount of Series A Preferred, which has not yet been issued. Warrants to
acquire 200,000 shares of Directrix common stock were also to be issued. The
warrants were to have an exercise price of $3.00 per share and were to be
exercisable for five years. Because this aspect of the Restructuring Agreement
has not yet taken effect, the Series A Preferred and warrants have not been
issued and the officers currently retain their $1.65 million of Credit Facility
notes. Under the proposed global restructuring, (described below under
"Restructuring Plan, Proposed Global Restructuring and New Financing"), all
aspects of the Settlement Agreement will take effect; the Series A Preferred
will be deemed issued and converted into Common Stock. If issued, the Series A
Preferred will bear a 6% cumulative dividend which Directrix may, at its option,
PIK in Common Stock, will be senior in liquidation preference to the Series B
Preferred and will be convertible at $1.50 per share. The conversion price will
be subject to standard anti-dilution adjustments for stock splits and dividends
and recapitalizations, and adjustments for issuances of Common Stock or
convertible securities with an issue or conversion price less than the Series A
Preferred conversion price. The Series A Preferred will also be entitled to vote
on an as converted basis and the holders will have the right to appoint two
members to the Directrix Board of Directors. The holders of the Series A
Preferred will have the right to demand redemption after 10 years or upon change
in control of



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<PAGE>

Directrix  (such as if a  person  or group  acquires  more  than 35% of the
outstanding  voting  securities).  Directrix  will have the option of paying the
redemption price in cash or as a PIK in Common Stock.

         The holders of the Credit Facility agreed to permit Directrix to PIK
the interest payment owed on the Credit Facility with shares of Common Stock for
the period from June 1, 2001 through September 19, 2001. (Under the Settlement
Agreement, Directrix can PIK the interest on the Credit Facility on a going
forward basis.) Directrix issued 53,230 shares of Common Stock with an aggregate
fair market value of $156,000 as the PIK interest payment for the period from
June 1, 2001 through September 30, 2001 and issued 54,500 shares of Common Stock
with an aggregate fair market value of $117,156 as the PIK interest payment for
the three months ended December 31, 2001. The PIK interest payments are
accounted for at its fair market value on the accompanying statement of
stockholders' deficit.

         Proposed Global Restructuring and New Financing. The final phase of
management's plan is to locate a new source of working capital. Management
forecasts that Directrix will require additional funding to complete the
buildout of the West Coast Facility and to provide for the deficiency in working
capital until Directrix generates operating cash flow. Directrix had initially
planned to put the West Coast facility into operation during the first calendar
quarter of 2002 but because of delays in finalizing the Playboy Transaction,
this date has been pushed back into the third calendar quarter of 2002. The
delay in the completion of the West Coast facility has heightened Directrix'
need for additional funding.

         As a preliminary step, Directrix secured an aggregate of $611,500 of
interim financing ("Interim Financing") in a private placement to existing
shareholders and investors of which $437,500 was placed during the three months
ended December 31, 2001 and the balance during the next two months. The terms of
the Interim Financing include a one year note secured by a perfected first lien
on Directrix' assets. (Under a letter agreement dated October 28, 2001, the
Credit Facility holders agreed to subordinate their security interest to the
Interim Financing holders' first lien.) The interim financing notes bear 20%
interest payable upfront in shares of Directrix common stock which Directrix is
recognizing as interest expense over the term of the notes. During the three
months ended December 31, 2001, Directrix issued 35,635 shares of Common Stock
as payment of interest on the notes and discounted the principal value of the
notes by the unamortized portion of the interest expense. During the two months
ended February 2002, Directrix issued 18,297 shares of Common Stock as payment
of interest on the notes.

         To date, management has been unable to secure financing beyond the
Interim Financing, and believes that it will not be able to secure additional
financing unless it can first restructure its capital structure. Directrix
proposed a comprehensive restructuring plan that would convert the interests of
the holders of the Interim Financing, Credit Facility, Debentures and Series A
and Series B Preferred into Common Stock. These steps were based on the
assumption that all of the terms of the Settlement Agreement would be in effect.
As part of this plan, Directrix would implement a revised business plan which
provided for, among other things, further reductions in its executives'
salaries.

         If Directrix was able to implement a restructuring plan along the lines
described above, Directrix could have secured preliminary commitments for $2.0
million of new financing. However, Directrix has not yet secured the consent of
Loral, which is one of the parties to the Settlement Agreement, and has been
forced to consider other options, including filing a petition under the
Bankruptcy Code. If Directrix is forced to file a bankruptcy petition, its
business will most likely be adversely affected. Moreover, there is no assurance
that Directrix will be able to file a reorganization plan that will enable it to
remain in business and it may be forced to cease operations and liquidate.

         Even if Directrix is able to implement a restructuring plan along the
lines described above and secure new financing, there is no assurance that
Directrix will be able to realize its long-term business plan and achieve
profitability. Moreover, there can be no assurance that the successful
implementation of the business plan will improve operating results and/or result
in Directrix achieving profitability. There also can be no assurance that
unforeseen circumstances could prevent Directrix from achieving its goal.



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<PAGE>

Commitments and Contingencies.

         Legal Proceedings - Logix.  Directrix was named as a defendant in an
action brought by Logix Development Corporation ("Logix") in the Los Angels
County Superior Court (Logix,  et. al. v. Emerald Media, Inc., et. al., Case No.
BC250732)  in May 2001.  Logix also  named as  defendants  in the  action  Spice
Entertainment Companies, Inc. and New Frontier Media, Inc. ("New Frontier"). The
suit arises out of EMI's sale of its customer list to a wholly owned  subsidiary
of New Frontier and alleges, among other things, that the sale was in derogation
of Logix' rights to the customer list. The initial  complaint  alleged breach of
contract, fraud and negligent  misrepresentation and sought damages in excess of
$10  million.  Directrix  is  obligated  to  defend  the suit on behalf of Spice
Entertainment Companies, now a subsidiary of Playboy Enterprises, Inc.

         On July 12, 2001, New Frontier filed a cross complaint against Logix,
EMI, Roger Faherty and Donald McDonald, Directrix' Chief Executive Officer and
President, respectively, and Daniel J. Barsky, counsel to EMI in the New
Frontier transaction. The cross complaint alleges, among other things, that EMI
breached its representations and warranties concerning its rights to the
customer list and that Messrs. Faherty, McDonald and Barsky had misrepresented
EMI's rights to the customer list. Directrix has undertaken the defense of the
cross complaint on behalf of Messrs. Faherty, McDonald and Barsky. Subsequently,
Mr. Barsky was dismissed from the action.

         On March 7, 2002 Logix filed a Motion for Leave to Amend Complaint
which proposed to add new parties to the action and additional causes of action.
Logix is now seeking damages of not less than $90 million plus exemplary
damages. Directrix believes the Logix suit and the New Frontier cross complaint
are without merit and is engaged in a vigorous defense of the action. A June
hearing is currently scheduled.

         Collection Actions. Directrix is a party to several collection actions.
The amount sought to be recovered aggregates approximately $217,000. The largest
amount sought was in a suit instituted by the Xerox Corporation in the Supreme
Court of the Sate of New York which seeks damages of approximately $82,000 plus
counsel fees and is attributable to alleged breaches of leases for office
equipment. The other suits seek damages of amounts less than $50,000. Directrix
intends to contest these suits and/or seek to settle these and other outstanding
payables. There are no assurances that Directrix will be able to negotiate
favorable terms on which to settle these amounts. Directrix has not filed or
paid its employment withholding taxes since September 30, 2001. The amount,
exclusive of any penalties which may be assessed, is recorded as an other
current liability on the accompanying balance sheet.

Explicit Rights Agreement.

         As part of the Merger and under an Explicit Rights Agreement, Directrix
was to receive a royalty free license of the explicit rights for distribution in
the domestic C-band market and via the Internet for adult movies licensed by
Playboy under Spice's license agreements which Playboy succeeded to after the
Merger where the adult licensors executed licensor consents. Approximately 30
adult licensors executed licensor consents. Directrix was unable to secure
theses rights because Playboy acquired these rights itself, refused to make
these rights available to Directrix and/or frustrated Directrix' efforts to
secure these rights. Directrix noticed Playboy of its breach of the Explicit
Rights Agreement shortly after the Merger and most recently in December 2001 and
to date Playboy has not cured the breach. Directrix estimates that its damages
attributable to the failure to receive the C-band Explicit Rights and the
Internet Explicit Rights are substantial. Directrix is attempting to negotiate a
resolution of this matter with Playboy.



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<PAGE>

                           PART II - OTHER INFORMATION


Item 1:         Legal Proceedings.

                See Part I, Item 2, Management's Discussion and Analysis,
                Commitments and Contingencies, Legal Proceedings for a
                discussion of Legal Proceedings.

Item 2:         Changes in Securities and Use of Proceeds.

                See the discussion under Part I, Item 2, Management's Discussion
                and Analysis, Restructuring Plan, New Financing, for a
                discussion of unregistered equity securities issued by
                Registrant during the three months ended December 31, 2001.

Item 6:         Exhibits and Reports on Form 8-K.

(a)             Exhibits.

                None.

(b)             Reports on Form 8-K.

                None.



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<PAGE>

                                    SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf of the
undersigned, thereunto duly authorized.

                                    DIRECTRIX, INC.


Dated:   March 25, 2002

                                    By: /s/ Donald J. McDonald, Jr.
                                        ----------------------------------------
                                        Donald J. McDonald, Jr.
                                        President, Director, Chief Financial
                                        Officer and Principal Accounting Officer



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