UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

                   ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED JANUARY 31, 2005
                          COMMISSION FILE NO. 333-52268

                    DIRECT RESPONSE FINANCIAL SERVICES, INC.

                 (Name of Small Business Issuer in Its Charter)


              Colorado                                   333-52268
  ---------------------------------         ------------------------------------
  (State or Other Jurisdiction of           (I.R.S. Employer Identification No.)
   Incorporation or Organization)

        2899 Agoura Road #115, Westlake Village, CA              91361
   ------------------------------------------------------    --------------
          (Address of Principal Executive Offices)             (Zip Code)

                                 (818) 735-3726
--------------------------------------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)


    SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE EXCHANGE ACT: NONE

    SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE EXCHANGE ACT: NONE

Check whether the Issuer: (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 such filing requirements for the past
90 days: Yes [X] No [ ]

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained herein, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]

Our revenues for our most recent fiscal year were $12,331.

The aggregate market value of the voting stock held by non-affiliates of Direct
Response was $1,542,010 as of April 28, 2005, based upon the closing sales price
of the Registrant's common stock as quoted on the over-the-counter bulletin
board of $0.03.

There were 77,240,335 shares of our common stock, no par value, outstanding as
of April 28, 2005.

                       DOCUMENTS INCORPORATED BY REFERENCE

None.

Transitional Small Business Disclosure Format (Check One): Yes [ ] No [X]

<PAGE>

                                   FORM 10-KSB
                   FOR THE FISCAL YEAR ENDED JANUARY 31, 2005


                                      INDEX

                                     PART I

                                                                          Page

Item 1.        Description of Business                                      4
Item 2.        Description of Property                                      7
Item 3.        Legal Proceedings                                            7

Item 4.        Submission of Matters to a Vote of Security Holders          7

                                     PART II

Item 5.        Market for the Registrant's Common Equity and
               Related Stockholder Matters                                  8

Item 6.        Management's Discussion and Analysis or Plan of Operation    9
Item 7.        Financial Statements                                       F-1
Item 8.        Changes in and Disagreements with Accountants on
               Accounting and Financial Disclosure                         16
Item 8A.       Controls and Procedures                                     16
Item 8B.       Other Information                                           16

                                    PART III

Item 9.        Directors, Executive Officers, Promoters and Control
                  Persons; Compliance with Section 16(A) of the
                  Exchange Act.                                            17
Item 10.       Executive Compensation                                      17
Item 11.       Security Ownership of Certain Beneficial Owners and
                  Management                                               18
Item 12.       Certain Relationships and Related Transactions              19
Item 13.       Exhibits                                                    19
Item 14.       Principal Accountant Fees and Services                      21


               SIGNATURES                                                  22




                                       2
<PAGE>

STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

In this annual report, references to "Direct Response," "the Company," "we,"
"us," and "our" refer to Direct Response Financial Services, Inc. and its
subsidiary.

Except for the historical information contained herein, some of the statements
in this Report contain forward-looking statements that involve risks and
uncertainties. These statements are found in the sections entitled "Business,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and "Risk Factors." They include statements concerning: our
business strategy; expectations of market and customer response; liquidity and
capital expenditures; future sources of revenues; expansion of our proposed
product line; and trends in industry activity generally. In some cases, you can
identify forward-looking statements by words such as "may," "will," "should,"
"expect," "plan," "could," "anticipate," "intend," "believe," "estimate,"
"predict," "potential," "goal," or "continue" or similar terminology. These
statements are only predictions and involve known and unknown risks,
uncertainties and other factors, including, but not limited to, the risks
outlined under "Risk Factors," that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by such forward-looking statements. For
example, assumptions that could cause actual results to vary materially from
future results include, but are not limited to: our ability to successfully
develop and market our products to customers; our ability to generate customer
demand for our products in our target markets; the development of our target
markets and market opportunities; and sales of shares by existing shareholders.
Although we believe that the expectations reflected in the forward looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Unless we are required to do so under US
federal securities laws or other applicable laws, we do not intend to update or
revise any forward-looking statements




                                       3
<PAGE>

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

BACKGROUND

We were incorporated in the State of Colorado on April 7, 2000 to develop
software and internet portals. On April 29, 2002, we acquired 100% of Direct
Response Financial Services, Inc., a Delaware corporation and changed our focus
to the development of financial services for the direct response industry.

In June of 2002, we changed our name to Direct Response Financial Services, Inc.

Direct Response Financial Services, Inc. is currently traded on the NASD Over
the Counter Bulletin Board under the symbol "DRFL." Direct Response Financial
Services, Inc. began trading on the Berlin Exchange under the ticker symbol
"DFS" on December 3, 2002. The trading number is 804239. Direct Response
Financial Services, Inc. is not traded on any other exchange at this time.

We currently have limited operations and are reliant on contributions from our
officers and shareholders. Liquidity demands have been met through cash advances
and financing activities. No formal agreements between any officer or
shareholder and the company currently exist to continue funding operations.

BUSINESS

We are a development stage company, however, over the last year the Company has
entered into key relationships with retailers, grocers, marketers and media
outlets that cater to the emerging multi-cultural under-banked and financially
underserved market. These partnerships create significant barriers to entry for
potential competitors. The Company's partnerships consist of exclusive
relationships with key partners such as Spanish Broadcasting System, the largest
Hispanic controlled radio broadcasting company; Emmis Communications
(NASDAQ:EMMS), a leading radio network; del Rey Marketing, the leading marketer
to Hispanic grocery stores in the U.S.; and other grass-roots and Internet
marketers who have expertise in reaching the Hispanic market. The Company has
recently been contacted by the leading Hispanic Internet portals seeking
co-marketing arrangements. The Company also has key partnerships with financial
transaction processors such as Optimum Pay USA, Inc., Mexico/U.S.-based card
marketers such as Poder de Compra, which has placed an initial order of 50,000
cards through Direct Card Services, and card loading networks that offer Direct
Response's cardholders over 10,000 ATM and bank locations. Moreover, through
exclusive relationships with Hispanic retail, merchant and grocery outlets,
Direct Response is building out its own proprietary card loading network, the
DirectLoad Network(TM). The Company anticipates launching an Internet offer of a
stored value debit card in the upcoming quarter at the Internet site
www.dcsmediacard.com. Presently, the Company is focused on delivery of stored
value debit cards to the unbanked and underbanked population in the United
States. The Company also continues to focus on its merchant banking business and
other derivative financial business activities.

Over the last two years, the Company has focused on creating its own proprietary
stored value debit card product combined with a retail loading network for its
debit cards. Due to Hispanics' inherent distrust of banks and the lack of a
convenient network for debit card loading, the Company was required to identify
and then deploy its own proprietary network of loading locations for the
Hispanic cardholders. Through its partnerships with del Rey Marketing and
providers of point of sale loading terminals, Direct Response is currently
building its proprietary DirectLoad Network(TM), designed to become the largest
card loading and transaction network in the country targeted to the Hispanic
population. User-friendly electronic terminals will be located at Hispanic
retail, merchant and grocery stores in heavily Hispanic-populated communities.
Cardholders will be able to use the DirectLoad Network(TM) to load funds on
cards and then use the cards for purchases at that store or elsewhere where
MasterCard or VISA is accepted. This offers a tremendous convenience to
cardholders who do not have bank accounts.

The Company employs current e-commerce and e-finance solutions to interface
between individual and business customers. We also provide solutions for payment
acceptance in any electronic environment. These technology solutions address
processing of electronic payments whether through credit, debit, pre-paid or ATM
means. We participate in the market for credit, debit, stored-value and smart
cards, electronic checks, cash, wireless and alternative Internet payment
methods.

The Company is positioning itself to become the leading provider of debit cards
to the Hispanic population in the U.S. The Company has developed a proprietary
database, the DirecTrac System(TM), which is designed to track the spending and
usage patterns of its debit cardholders. The database collects and aggregates
data while protecting the identity of individual cardholders. Collecting and
sorting the data is an automated, low-cost process that offers the Company the
opportunity to generate high-margin revenues. The data also has tremendous value
for consumer goods and products marketers. The fast-growing Hispanic market is
not only one that most Fortune 500 companies are currently targeting; it is also
a market in which there is a lack of standard consumer data. Because much of the
population is new to the U.S. and because the population has to date made
infrequent use of payment cards due to a cash-based lifestyle, tracking consumer
data for this market has been a challenge. Direct Response has the opportunity
to provide detailed consumer spending pattern data to other companies for a fee,
while protecting the identities of individual cardholders. Companies that
purchase such data from Direct Response may use the information to better target
and serve the needs of its Hispanic customers by making credit-related decisions
based upon debit card data.

We have invested in and licensed proprietary technology from various financial
services companies including Optimum Pay USA, Inc., a partially owned subsidiary
of Cybertek Holdings and SECOS. Cybertek Holdings is a publicly traded South


                                       4
<PAGE>

Korean company specializing in network security systems, fraud and transaction
processing. Optimum Pay and SECOS have each developed proprietary technology for
secure electronic payments that we have strategic and contractual relations.
Furthermore, through our subsidiary Direct Card Services, LLC, we have partnered
with Chase Merchant Services to provide merchant banking services. Furthermore,
through these strategic partnerships, we are positioned to capture the growing
market trends in e-finance and P2P payment transaction processing. We are also
working on deploying proprietary, wireless, payment technology that allows for
electronic point of sale payment solutions absent a landline (payment is
verified through our gateway network).

Through our existing marketing contracts, we will reach major distribution
channels for our financial services. These distribution channels include direct
response companies, pre-paid phone card distributors, network marketing
companies and financial institutions. Over the last year one of the major
advancements for the Company was its agreement reached with del Rey Marketing to
market debit cards and other payment transaction solutions to the Hispanic
market, primarily through national and regional Hispanic grocery store chains
and outlets. Through this partnership, the Company is building its DirectLoad
Network(TM), a proprietary network of card loading terminals through Hispanic
retail locations. Direct Response also works with del Rey Marketing to provide
research on consumer purchasing habits to Fortune 100 companies and Hispanic
grocery stores.

Del Rey Marketing is one of the fastest growing Hispanic marketing companies in
the United States and specializes in Hispanic grass-roots marketing programs to
the packaged goods and grocery retail industry. Del Rey Marketing is the largest
marketer to Hispanic grocery stores in the U.S. The company represents Fortune
100 consumer goods companies to a network of Hispanic grocery stores that are
located across the U.S., from New York and Miami to Los Angeles and Phoenix. One
of its retail grocery clients alone, Unified Western Grocers, has a network of
2,000 retail stores and generated sales of approximately $2.8 billion in 2003.

Direct Response's main product line is a series of branded and co-branded debit
cards targeted to the Hispanic population in the United States. These debit
cards are expected to generate ancillary revenues beyond the standard card
issuance and transaction fees attached to the cards. The Company is currently
developing a prepaid calling card also targeting the Hispanic population. Direct
Response continues to offer credit card merchant banking services to online and
traditional merchants.

Direct Response has recently entered into a contract with Poder de Compra,
Mexico, S.A. for an initial sale of debit cards to the Hispanic market. As these
cards come into circulation and are used daily by customers, the Company expects
to generate further revenues from: 1) initial fees generated from issuing
additional debit cards to new cardholders; 2) debit card transactions fees; 3)
sales of add-on services to debit cardholders; 4) advertising revenue from ads
placed in card statements; and 5) sales of aggregated market research data from
the Company's growing database.

Other products and services offered by the Company include:

o     Payment Gateway System, through Optimum Pay USA, Inc.

o     Merchant Banking Services, through our subsidiary Direct Card Services,
      LLC, Chase Merchant Services, LLC, and CardService International

o     Transmitter Business/Cash Cards, through Optimum Pay USA, Inc., a
      partially owned subsidiary of Cybertek Holdings and SECOS together with
      the partial ownership of the Company

o     Debit Cards (co-branded with VISA or MasterCard)

o     ATM Cards (co-branded with VISA or MasterCard)

o     Development of card loading stations and networks

PRODUCTS AND SERVICES

             PRE-PAID DEBIT CARDS AND INTERNET FINANCIAL TECHNOLOGY

The Company through its affiliation with MasterCard, Optimum Pay USA, Inc.,
BankFirst, and First Premier Bank provides stored value cash cards, person to
person financial services and innovative systems to move money, also known as
transmitter solutions. The first debit cards offered by the Company include the
DCS Personal Advantage Media Card, which will be offered through the Company's
Internet website located at www.dcsmediacard.com. In 2005 the Company also plans
to deploy various debit card programs customized for Hispanic grocery chains in
the Southern California area. In conjunction with the debit card offers the
Company also provides an Internet interactive web site. The Company owns and
operates an Internet web site at www.globalmoneyonline.com for Internet
financial transactions. Such transactions include crediting to debit cards,
movement of cash from card to card, account review, and movement of cash from an
existing financial account to the Global Money Online account. This innovative
system permits the Company's customers to avoid the need to visit a retail bank
location to move money. Further, the system allows the Company's customers
access 24/7 365 days per year.

                            MERCHANT BANKING SERVICES

We offer banking services (credit card transaction processing and related
services) to all levels and types of online, and offline merchants. Through our
proprietary banking software and our subsidiary, Direct Card Services, LLC, a


                                       5
<PAGE>

Master Agent of Chase Merchant Services and agent of CardService International,
we are able to offer competitive rates for merchant banking services in the
business and provide our clients with customer service. By lowering payment risk
and reducing credit card charge backs and losses, we help our clients obtain
lower card processing costs, which in turn allows them higher profit margins.
Direct Card Services, LLC, began offering card-processing services for merchants
on October 10, 2002. In addition, Direct Card Services, LLC has initiated a
sales campaign for signup of business merchants for card processing services
with limited success to date.

The Company has several independent contractor sales agents who offer the
Company's merchant banking services. These sales agents are located throughout
the United States.

                                PAYMENT GATEWAYS

Optimum Pay USA, Inc. allows us to offer payment gateways and provide merchants
with a detailed analysis of transactions in a useable format, thereby enabling
them to better manage their business and achieve higher profits. The following
is an example of a Gateway Processing Flow:

1.    Consumer initiates transaction with merchant via online, telephone orders,
      mail orders, wireless, brick and mortar using a credit or debit card.

2.    The merchant dials our gateway for approval of transaction.

3.    Our gateway approves or denies transaction. Upon approval, the funds are
      transferred to the processing bank via a master MID/TID batch to our BIN
      at the bank. Our fees are removed and transferred.

4.    Our processing gateway distributes the funds to the various merchant
      destination bank accounts via SWIFT or other available transfer
      procedures. Funds are transferred within 1-3 days.

5.    Holdback funds are maintained at the merchant bank for periods of 90-180
      days for fraud and charge back issues. Funds are rotated in and out
      dependent upon volume or merchant activity. Interest is paid on depository
      activity.

SOURCES OF REVENUES

The Company has several sources of revenue it is developing. The income occurs
primarily through merchant banking activities, the sale of pre-paid debit cards,
debit card transaction income, advertising income from card loading partners and
from transaction income related to its Internet web sites.

Debit Card Sales - The Company earns income on each debit card sale. The income
varies depending upon the card program and the marketing method used by the
Company.

Debit Card Transaction Income - The Company earns monthly income from each debit
card which has been issued and remains active. Transaction income includes
monthly statement fees, customer service fees, transaction fees, ATM fees,
loading fees, and other related fees.

Derivative Income - The Company also may earn monthly income from the sale of
add-on products or services to debit card holders or other customers of the
Company.

Merchant Banking Income - The Company earns monthly fees on merchant banking
service income for each of its merchant banking customers.

Internet Transaction Income - When the Company's customers utilize the Company's
Internet financial web site at globalmoneyonline.com the Company earns
transaction fees.

SALES AND MARKETING STRATEGIES

The Company is currently partnered with a Mexico/U.S.-based financial services
provider as well as several U.S.-based retail and media outlets for co-branded
promotions of its debit cards to target audiences. The Company is also actively
seeking, and is currently in talks with other media companies in Internet,
radio, and television for similar co-branded promotions. To marketing partners,
the benefits include the following: increased foot traffic into grocery retail
locations; greater monetization of traffic to websites; increased listening to
the radio station by its audience who may tune in for special offers and
promotions; greater brand awareness through co-branding of debit cards; closer
relationships with merchants, where increased traffic due to card loads can lead
to more advertising on the station; and, more effective use of air time to
generate new revenue streams from sharing transaction fees on cards. To
financial services providers currently catering to the Hispanic market, Direct
Response offers an effective way to enter the U.S. Hispanic market and the
ability to offer debit cards through a turn-key system.

Direct Response is currently finalizing partnership agreements with major
Hispanic retail grocers to launch a co-branded program selling debit cards. The
cards will be sold at the retail locations to customers who regularly shop at


                                       6
<PAGE>

the stores. The retailer will benefit from increased branding as well as added
financial transaction revenue each time the card is used. Direct Response gains
key and exclusive access to sales through such retail locations. The Company
plans to launch these card sales in the second quarter of 2005.

DIRECT SALES

The Direct Sales strategy is to pursue financial services companies,
predominately financial service companies and the direct response industry, by
providing new sources of revenue.

Direct sales efforts will also focus on recruiting and contracting with
Independent Sales Organizations and Independent Sales Agencies to build an
inexpensive, sales channel for its products and services.

COMPETITION

The markets for the financial products and services offered by us are intensely
competitive. We compete with a variety of companies in various segments of the
financial services industry, and our competitors vary in size and in the scope
and breadth of products and services they offer. Certain segments of the
financial services industry tend to be highly fragmented with numerous companies
competing for market share. Highly fragmented segments currently include online
banking, financial account processing, customer relationship management
solutions and electronic funds transfer and card solutions. Other segments of
the financial services industry are relatively new with limited competition,
including private label banking and wealth management solutions. We face a
number of competitors in the electronic bill presentment and payment market. We
also face competition from in-house technology departments of existing and
potential clients who may develop their own product offerings.

EMPLOYEES

At April 28, 2005, we employed 1 officer.

ITEM 2. DESCRIPTION OF PROPERTY

We lease an office at a rate of $2,000.00 per month on a month to month basis.

We believe that our facilities are adequate for our needs for the foreseeable
future.

ITEM 3. LEGAL PROCEEDINGS

We are not a party to any material legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.

None


                                       7
<PAGE>

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Our common stock is quoted on the Over-The-Counter Bulletin Board under the
symbol "DRFL." Our common stock has been quoted on the OTCBB since April 2002.

For the periods indicated, the following table sets forth the high and low bid
prices per share of common stock. These prices represent inter-dealer quotations
without retail markup, markdown, or commission and may not necessarily represent
actual transactions.

                                                     Low($)  High ($)
                                                     ------  --------
                 2003 Period Ending
                 January 31                            0.24    1.40
                 April 30                              0.26    1.02
                 July 31                               0.28    0.70
                 October 31                            0.85    1.62

                 2004 Period Ending
                 January 31                            0.50    1.52
                 April 30                              0.17    0.89
                 July 31                               0.04    0.23
                 October 31                            0.02    0.07

                 2005 Period Ending
                 January 31                            0.02    0.09


HOLDERS

As of April 28, 2005, we had approximately 58 holders of our common stock. The
number of record holders was determined from the records of our transfer agent
and does not include beneficial owners of common stock whose shares are held in
the names of various security brokers, dealers, and registered clearing
agencies. The transfer agent of our common stock is First American Stock
Transfer, Phoenix, Arizona.

DIVIDENDS

We have never declared or paid any cash dividends on our common stock. We do not
anticipate paying any cash dividends to stockholders in the foreseeable future.
In addition, any future determination to pay cash dividends will be at the
discretion of the Board of Directors and will be dependent upon our financial
condition, results of operations, capital requirements, and such other factors
as the Board of Directors deem relevant.

EQUITY COMPENSATION PLAN INFORMATION

<TABLE>
<CAPTION>
------------------------------------ ------------------------ ---------------------- ------------------------
           Plan category              Number of securities      Weighted average      Number of securities
                                        to be issued upon       exercise price of    remaining available for
                                           exercise of        outstanding options,       future issuance
                                      outstanding options,     warrants and rights
      As of January 31, 2005           warrants and rights
------------------------------------ ------------------------ ---------------------- ------------------------
                                               (a)                     (b)                     (c)
------------------------------------ ------------------------ ---------------------- ------------------------
<S>                                             <C>                     <C>                     <C>
Equity compensation plans approved              0                       0                       0
by security holders
------------------------------------ ------------------------ ---------------------- ------------------------
Equity compensation plans not                   0                       0                       0
approved by security holders
------------------------------------ ------------------------ ---------------------- ------------------------
Total                                           0                       0                       0
------------------------------------ ------------------------ ---------------------- ------------------------
</TABLE>


                  RECENT ISSUANCES OF UNREGISTERED SECURITIES.

For the fourth quarter of the fiscal year ended January 31, 2005, the following
issuances were made:


                                       8
<PAGE>

On December 1, 2004, we issued the following shares in lieu of compensation or
as directors' fees:

        T. Randolph Catanese - 500,000 shares
        Paradisus Investment Corp. - 500,000 shares
        Edward Kim - 375,000 shares
        Douglas R. Hume - 375,000 shares
        Ted Kozub - 250,000 shares
        Jill W. Love - 125,000 shares

Subsequent to January 31, 2005, we issued the following shares in lieu of
compensation or as directors' fees:

        Anecius Holding Company, Ltd. - 2,000,000 shares
        Chris del Rey - 375,000 shares
        Edward Kim - 125,000 shares
        Douglas R. Hume - 125,000 shares
        Peter Gerlach - 100,000 shares

In addition to the above issuances, on January 18, 2005, we issued a total of
900,000 shares to various investors in the Company's private placement
memorandum, and on February 7, 2005, we issued a total of 1,400,000 shares to
various investors in the Company's private placement memorandum. Further detail
related to the Company's private placement memorandum is located hereinbelow
under "Private Sale of Stock."

The issuance of the shares under the private placement memorandum was exempt
from registration requirements of the Securities Act of 1933 pursuant to Section
4(2) of such Securities Act and Regulation D promulgated thereunder based upon
the representations of each of the PPM investors that they were an "accredited
investor" (as defined under Rule 501 of Regulation D) and that they were
purchasing such securities without a present view toward a distribution of the
securities. In addition, there was no general advertisement conducted in
connection with the sale of the securities.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

INTRODUCTION

The following discussion of our financial condition and results of our
operations should be read in conjunction with the Financial Statements and Notes
thereto. Our fiscal year ends January 31. This document contains certain
forward-looking statements including, among others, anticipated trends in our
financial condition and results of operations and our business strategy. (See
"Factors Which May Affect Future Results"). These forward-looking statements are
based largely on our current expectations and are subject to a number of risks
and uncertainties. Actual results could differ materially from these
forward-looking statements. Important factors to consider in evaluating such
forward-looking statements include (i) changes in external factors or in our
internal budgeting process which might impact trends in our results of
operations; (ii) unanticipated working capital or other cash requirements; (iii)
changes in our business strategy or an inability to execute our strategy due to
unanticipated changes in the industries in which we operate; and (iv) various
competitive market factors that may prevent us from competing successfully in
the marketplace.

During the previous fiscal year to date, we have initiated the following actions
and strategies with regards to the on-going advancement of our business
opportunities:

Poder de Compra, Mexico, S.A., is a Mexico-based financial services provider
that has reached an agreement with Direct Response in order to reach the U.S.
Hispanic market. Poder de Compra is a well-established financial group that
focuses on financial services in Mexico, with a specific mission to grow its
services in managing remittances from Mexicans working abroad. The group is
affiliated with leading institutions including HSBC Bank and Insurance Company
in Mexico, Monterey Bank, Verizon, the U.S. Hispanic Chamber of Commerce and
others. Poder the Compra has recently purchased 50,000 debit cards from Direct
Card Services. This order is considered an initial purchase, which may be
followed by several additional, larger purchases. The initial payment for the
cards made to Direct Card Services, Direct Response's subsidiary, is $250,000.
Additional transaction revenue is expected from these 50,000 cards.

o Optimum Pay USA, Inc.- In addition to its pre-existing relationship as a 2%
owner of all outstanding equity in Optimum Pay USA, Inc. the Company, through
its subsidiary Direct Card Services, LLC, entered into several agreements with
OP for issuance and approval of debit card programs. These agreements include
three existing card programs - (1) the DCS Personal Advantage Media Card; (2)
the Super A Stored Value Card; and (3) the Power 92 Stored Value Media Card.
Under each of these agreements, the Company is committed to purchase a minimum
order of 5,000 cards/units.

All cards are networked through MasterCard. Further, DCS is approved as an
independent sales organization of MasterCard as part of the bank approval
process for the above card programs through Bank First and First Premier Bank.
In addition, the Company contracted with Optimum Pay for the delivery and
installation of its Internet financial site called www.globalmoneyonline.com.
Optimum Pay provides the interface with the issuing bank and the processor for
the Company's debit card programs. Optimum Pay also manages the data from all


                                       9
<PAGE>

card programs as well as provides some form of customer service for card
customers. Additionally, Optimum Pay operates and maintains the technology
infrastructure for www.globalmoneyonline.com.

o Agent Agreement with CardService International - In addition to its existing
relationship with Chase Merchant Services for the processing of referred
merchant credit and debit card transactions, the Company has continued to
operate under its Non-Exclusive, Non-Registered Agent Agreement with CardService
International, Inc. This agreement allows the Company access to an additional
card processor, providing another option for the Company when referring merchant
card processing business.

As it continues to grow, the Company will need additional capital. In the past,
capital needs were met through cash advances by third party investors and
through loans by interested shareholders. In order for the Company to sustain
its projected growth and to achieve its current business model the Company will
require significant capital either through equity investment or through loans.

CAPITAL RAISING ACTIVITIES

We have engaged in the following financing activities and require additional
capital to expand operations to a level where revenues sufficient to sustain
operations can be generated.

PRIVATE SALE OF CONVERTIBLE DEBENTURE

In January 2003, as amended on May 19, 2003, we signed a Securities Purchase
Agreement with La Jolla Cove Investors, Inc. for the sale of a $150,000 8%
convertible debenture and non-detachable warrant to purchase up 1,500,000 shares
of our common stock. The debenture bears interest at 8%, matures two years from
the date of issuance and is convertible into shares of our common stock. The
number of common shares into which this debenture may be converted is equal to
the dollar amount of the debenture being converted multiplied by eleven, minus
the product of the conversion price, multiplied by ten times the dollar amount
of the debenture being converted, divided by the conversion price. The
conversion price is equal to the lesser of: (i) $1.00 or (ii) 80% of the average
of the five lowest volume weighted average prices during the 20 calendar days
prior to the conversion date. The full principal amount of the convertible
debentures are due upon default under the terms of convertible debentures. See
the Selling Stockholder section for a Sample Debenture Conversion Calculation.

On or about February 19, 2004, the Company and La Jolla Cove Investors entered
into an Addendum to the debenture which provided that upon effectiveness of the
Company's SB-2 Registration Statement (which was declared effective as of
February 19, 2004), La Jolla would immediately effect a $2,500 conversion of the
debenture and $25,000 warrant exercise, along with providing a $150,000
pre-payment to the Company against future warrant conversions.

On March 23, 2004, the Company and La Jolla entered into another Addendum to the
debenture which provided the following:

o For a period of 60 days from the Addendum La Jolla would convert no more than
$2,200 of the debenture and related Warrants per calendar week, on a cumulative
basis

o Beginning from the 61st day from the Addendum the 10% monthly maximum
conversion amount shall be 20% if the volume weighted average price is above
$0.63

o The maturity date of the debenture is extended to January 9, 2006, and the
expiration date of the non-detachable warrant is extended to January 9, 2007

o If a conversion election is made by La Jolla on a date when the volume
weighted average price is below $0.63, the Company shall have the right to
prepay that portion of the debenture that La Jolla elected to convert at 150% of
such amount.

On June 24, 2004, the Company and La Jolla entered into another Addendum to the
debenture which provided that La Jolla would provide a $60,000 pre-payment to
the Company against future warrant conversions in exchange for the Company
delivering 2,000,000 shares of stock pursuant to the Company's February 19,
2004, SB-2 Registration Statement to be held by La Jolla in anticipation of
future debenture conversions and warrant exercise by La Jolla.

On or about November 9, 2004, the Company and La Jolla Cove Investors entered
into an Addendum to the debenture which provided that upon effectiveness of the
Company's SB-2 Registration Statement, La Jolla would immediately provide a
$150,000 pre-payment to the Company against future warrant conversions.
Additionally, La Jolla agreed that its sales of Company shares would be limited
to no more than 18% of the daily volume of the shares on any given date.
Further, under the Addendum the Company has the right to pre-purchase debenture
conversion shares directly from La Jolla. Pursuant to the Addendum, the Company
issued a certificate in the amount of 20,000,000 shares to La Jolla to be held
in trust by La Jolla's attorney pending future debenture conversions.

To date, La Jolla has converted $46,658 of the debenture, leaving a debenture
balance of $103,342. There are currently two sets of warrant pre-payment
balances with La Jolla: (1) the June 29, 2004, addendum warrant pre-payment
balance is currently at $30,000; and (2) the November 9, 2004, addendum warrant
pre-payment balance is currently at $120,000.


                                       10
<PAGE>

To date, La Jolla has been issued 10,346,572 shares and La Jolla currently holds
in trust 439,547 of the 2,000,000 shares delivered to La Jolla under the June
29, 2004, addendum.

PRIVATE SALE OF STOCK

In January of 2005, the Company completed its first Regulation D private
placement of common stock. The maximum funds to be raised was $250,000 of which
$200,000 was received by the Company. Pursuant to the private placement the
Company issued 2,300,000 restricted shares. Additionally, certain investors in
the private placement offering were granted warrants to purchase stock at a
later date. The warrants were issued and priced in two forms (a) a 10 cent
strike price or (b) a 3 cent purchase price with a 2 cent strike price. The
former could not be executed at any time up to its expiration at 24 months and
the latter could be executed after a 6-month hold up to its expiration at 24
months. If all type (a) warrants were to be exercised, the total number of
warrant shares issued would be 150,000. If all type (b) warrants were to be
exercised, the total number of warrant shares issued would be 6,768,000.

ONGOING REQUIREMENTS

We will have to secure additional capital to meet our ongoing requirements and
to meet our stated objectives throughout the 2005 fiscal year. We are
identifying potential investors in conjunction with our current finance
partners, and will seek to secure new investment banking partners on an ongoing
basis. Of course, sources of capital and the cost of capital are subject to
prevailing and general market conditions. Moreover, any terms and conditions
related to such investment or loan are contingent upon satisfactory terms and
conditions for the Company. Based on current market conditions and given our
success in raising private financing in the past, we expect that we will be able
to complete financings as required for growth and operations. We are continuing
to review all opportunities for both long-term equity programs as well as debt
financing. Any significant capital expenses or increases in operating costs will
be dependent upon our ability to raise additional capital, debt financing or
generate revenue from sales of our products or services.

                                  RISK FACTORS

In evaluating our business, prospective investors and shareholders should
carefully consider the risks factors, any of which could have a material adverse
impact on our business, operating results and financial condition and result in
a complete loss of your investment.

RISKS RELATED TO OUR BUSINESS:

WE HAVE HAD LOSSES SINCE OUR INCEPTION. WE EXPECT LOSSES TO CONTINUE IN THE
FUTURE AND THERE IS A RISK WE MAY NEVER BECOME PROFITABLE.

We have incurred losses and experienced negative operating cash flow since our
formation. For our fiscal year ended January 31, 2004, we had a net loss of
($2,384,693) and for our fiscal year ended January 31, 2005, we had a net loss
of ($1,509,433). We expect to continue to incur significant operating expenses.
Our operating expenses have been and are expected to continue to outpace
revenues and result in significant losses in the near term. We may never be able
to reduce these losses, which will require us to seek additional debt or equity
financing. If such financing is available, of which there can be no assurance,
you may experience significant additional dilution.

IF WE ARE UNABLE TO OBTAIN ADDITIONAL FUNDING OUR BUSINESS OPERATIONS WILL BE
HARMED.

We believe that our available short-term assets and investment income will be
sufficient to meet our operating expenses and capital expenditures through the
end of fiscal year 2006. We do not know if additional financing will be
available when needed, or if it is available, if it will be available on
acceptable terms. Insufficient funds may prevent us from implementing our
business strategy or may require us to delay, scale back or eliminate certain
contracts for the provision of our technology and products.

THE MARKET FOR OUR ELECTRONIC COMMERCE SERVICES IS EVOLVING AND MAY NOT CONTINUE
TO DEVELOP OR GROW RAPIDLY ENOUGH FOR US TO REMAIN CONSISTENTLY PROFITABLE.

If the number of electronic commerce transactions does not continue to grow or
if consumers or businesses do not continue to adopt our services, it could have
a material adverse effect on our business, financial condition and results of
operations. We believe future growth in the electronic commerce market will be
driven by the cost, ease-of-use and quality of products and services offered to
consumers and businesses. In order to consistently increase and maintain our
profitability, consumers and businesses must continue to adopt our services.

OUR FUTURE PROFITABILITY DEPENDS UPON OUR ABILITY TO IMPLEMENT OUR STRATEGY
SUCCESSFULLY TO INCREASE ADOPTION OF ELECTRONIC BILLING AND PAYMENT METHODS.

Our future profitability will depend, in part, on our ability to implement our
strategy successfully to increase adoption of electronic billing and payment
methods including the issuance of debit cards through our subsidiary, Direct
Card Services, LLC. Our strategy includes investment of time and money during
fiscal 2006 in programs designed to:

o     drive consumer awareness of electronic billing and payment;

o     encourage consumers to sign up for and use our electronic billing and
      payment services offered by our distribution partners;


                                       11
<PAGE>

o     encourage consumers to purchase and use our debit card products;

o     continually refine our infrastructure to handle seamless processing of
      transactions;

o     continue to develop state of the art, easy-to-use technology; and

o     increase the number of billers whose bills we can present and pay
      electronically.

If we do not successfully implement our strategy, revenue growth will be
minimal, and expenditures for these programs will not be justified.

Our investment in these programs will have a negative impact on our short-term
profitability. Additionally, our failure to implement these programs
successfully or to increase substantially adoption of electronic commerce
billing and payment methods by consumers who pay for the services could have a
material adverse effect on our business, financial condition and results of
operations.

SECURITY AND PRIVACY BREACHES IN OUR ELECTRONIC TRANSACTIONS MAY DAMAGE CUSTOMER
RELATIONS AND INHIBIT OUR GROWTH.

Any failures in our security and privacy measures could have a material adverse
effect on our business, financial condition and results of operations. We
electronically transfer large sums of money and store personal information about
consumers, including bank account and credit card information, social security
numbers, and merchant account numbers. If we are unable to protect, or consumers
perceive that we are unable to protect, the security and privacy of our
electronic transactions, our growth and the growth of the electronic commerce
market in general could be materially adversely affected. A security or privacy
breach may:

o     cause our customers to lose confidence in our services;

o     deter consumers from using our services;

o     harm our reputation;

o     expose us to liability;

o     increase our expenses from potential remediation costs; and

o     decrease market acceptance of electronic commerce transactions.

While we believe that we utilize proven applications designed for premium data
security and integrity to process electronic transactions, there can be no
assurance that our use of these applications will be sufficient to address
changing market conditions or the security and privacy concerns of existing and
potential subscribers.

WE RELY ON THIRD PARTIES TO DISTRIBUTE OUR ELECTRONIC COMMERCE PRODUCTS, WHICH
MAY NOT RESULT IN WIDESPREAD ADOPTION.

In electronic commerce, we rely on our contracts with financial services
organizations, businesses, billers, Internet portals and other third parties to
provide branding for our electronic commerce services and to market our services
to their customers. These contracts are an important source of the growth in
demand for our electronic commerce products. If any of these third parties
abandon, curtail or insufficiently increase their marketing efforts, it could
have a material adverse effect on our business, financial condition and results
of operations.

THE TRANSACTIONS WE PROCESS EXPOSE US TO CREDIT RISKS.

Any losses resulting from returned transactions, merchant fraud or erroneous
transmissions could result in liability to financial services organizations,
merchants or subscribers, which could have a material adverse effect on our
business, financial condition and results of operations. The electronic and
conventional paper-based transactions we process expose us to credit risks.
These include risks arising from returned transactions caused by:

o     insufficient funds;

o     unauthorized use;

o     stop payment orders;

o     payment disputes;

o     closed accounts;


                                       12
<PAGE>

o     theft;

o     frozen accounts; and

o     fraud.

We are also exposed to credit risk from merchant fraud and erroneous
transmissions.

WE MAY EXPERIENCE BREAKDOWNS IN OUR PAYMENT PROCESSING SYSTEM THAT COULD DAMAGE
CUSTOMER RELATIONS AND EXPOSE US TO LIABILITY.

A system outage or data loss could have a material adverse effect on our
business, financial condition and results of operations. In addition to the
damage to our reputation a system outage or data loss could entail, many of our
contractual agreements with financial institutions require the payment of
penalties if our systems do not meet certain operating standards. To
successfully operate our business, we must be able to protect our payment
processing and other systems from interruption by events that are beyond our
control. For example, our system may be subject to loss of service interruptions
caused by hostile third parties or other instances of deliberate system
sabotage. Other events that could cause system interruptions include:

o     fire;

o     natural disaster;

o     unauthorized entry;

o     power loss;

o     telecommunications failure; and

o     computer viruses.

Although we have taken steps to protect against data loss and system failures,
there is still risk that we may lose critical data or experience system
failures. Furthermore, our property and business interruption insurance may not
be adequate to compensate us for all losses or failures that may occur.

WE MAY EXPERIENCE SOFTWARE DEFECTS AND DEVELOPMENT DELAYS, DAMAGING CUSTOMER
RELATIONS, DECREASING OUR POTENTIAL PROFITABILITY AND EXPOSING US TO LIABILITY.

Our products are based on sophisticated software and computing systems that
often encounter development delays, and the underlying software may contain
undetected errors or defects. Defects in our software products and errors or
delays in our processing of electronic transactions could result in:

o     additional development costs;

o     diversion of technical and other resources from our other development
      efforts;

o     loss of credibility with current or potential customers;

o     harm to our reputation; or

o     exposure to liability claims.

In addition, we rely on technologies supplied to us by third parties that may
also contain undetected errors or defects that could have a material adverse
effect on our business, financial condition and results of operations. Although
we attempt to limit our potential liability for warranty claims through
disclaimers in our software documentation and limitation-of-liability provisions
in our license and customer agreements, we cannot assure you that these measures
will be successful in limiting our liability.

IF WE DO NOT RESPOND TO RAPID TECHNOLOGICAL CHANGE OR CHANGES IN INDUSTRY
STANDARDS, OUR SERVICES COULD BECOME OBSOLETE AND WE COULD LOSE OUR CUSTOMERS.

If competitors introduce new products and services embodying new technologies,
or if new industry standards and practices emerge, our existing product and
service offerings, proprietary technology and systems may become obsolete.
Further, if we fail to adopt or develop new technologies or to adapt our
products and services to emerging industry standards, we may lose current and
future customers, which could have a material adverse effect on our business,
financial condition and results of operations. The electronic commerce industry
is changing rapidly. To remain competitive, we must continue to enhance and
improve the functionality and features of our products, services and
technologies.


                                       13
<PAGE>

RISKS RELATING TO OUR COMMON STOCK:

OUR COMMON STOCK IS SUBJECT TO "PENNY STOCK" RULES.

The Securities and Exchange Commission has adopted Rule 15g-9 which establishes
the definition of a "penny stock," for the purposes relevant to us, as any
equity security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions. For
any transaction involving a penny stock, unless exempt, the rules require:

o     that a broker or dealer approve a person's account for transactions in
      penny stocks; and

o     the broker or dealer receive from the investor a written agreement to the
      transaction, setting forth the identity and quantity of the penny stock to
      be purchased.

In order to approve a person's account for transactions in penny stocks, the
broker or dealer must:

o     obtain financial information and investment experience objectives of the
      person; and

o     make a reasonable determination that the transactions in penny stocks are
      suitable for that person and the person has sufficient knowledge and
      experience in financial matters to be capable of evaluating the risks of
      transactions in penny stocks.

The broker or dealer must also deliver, prior to any transaction in a penny
stock, a disclosure schedule prepared by the Commission relating to the penny
stock market, which, in highlight form:

o     sets forth the basis on which the broker or dealer made the suitability
      determination; and

o     that the broker or dealer received a signed, written agreement from the
      investor prior to the transaction.

Disclosure also has to be made about the risks of investing in penny stocks in
both public offerings and in secondary trading and about the commissions payable
to both the broker-dealer and the registered representative, current quotations
for the securities and the rights and remedies available to an investor in cases
of fraud in penny stock transactions. Finally, monthly statements have to be
sent disclosing recent price information for the penny stock held in the account
and information on the limited market in penny stocks.



                                       14
<PAGE>

ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                          INDEX TO FINANCIAL STATEMENTS

                    DIRECT RESPONSE FINANCIAL SERVICES, INC.


                        CONSOLIDATED FINANCIAL STATEMENTS

                                                                           Page
                                                                           ----

Report of Independent Registered Public Accounting Firm                     F-2

Consolidated Financial Statements:

         Consolidated Balance Sheets                                        F-3

         Consolidated Statements of Operations                              F-5

         Consolidated Statement of Stockholders' Equity                     F-6

         Consolidated Statements of Cash Flows                              F-7

         Notes to Consolidated Financial Statements                         F-8



                                       15
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors
Direct Response Financial Services

         We have audited the accompanying  consolidated balance sheets of Direct
Response Financial  Services,  Inc. as of January 31, 2005 and January 31, 2004,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for the years ended January 31, 2004,  and the period from  inception
(April 24, 2002) through January 31, 2005.  These  financial  statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audit.

         We conducted our audit in  accordance  with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain  reasonable  assurance about whether the
financial  statements  are free of  material  misstatement.  The  Company is not
required  to have,  nor were we engaged  to  perform,  an audit of its  internal
control over financial reporting.  Our audit included  consideration of internal
control over financial  reporting as a basis for designing audit procedures that
are appropriate in the  circumstances,  but not for the purpose of expressing an
opinion on the  effectiveness  of the Company's  internal control over financial
reporting.  Accordingly,  we express  no such  opinion.  An audit also  includes
examining on a test basis,  evidence  supporting the amounts and  disclosures in
the  financial   statements,   assessing  the  accounting  principles  used  and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

         In our opinion,  the  financial  statements  referred to above  present
fairly, in all material respects,  the consolidated financial position of Direct
Response  Financial  Services,  Inc. as of January 31, 2005 and January 31, 2004
and the consolidated  results of its operations,  stockholders'  equity, and its
cash  flows  for the  years  ended  January  31,  2004 and for the  period  from
inception  (April  24,  2002)  through  January  1,  2005,  in  conformity  with
accounting principles generally accepted in the United States of America.

         The accompanying  financial statements have been prepared assuming that
the  Company  will  continue as a going  concern.  As  described  in Note 2, the
Company has sustained net operating losses and has insufficient  working capital
to complete its business plan, which raise substantial  doubts about its ability
to continue as a going  concern.  The  financial  statements  do not include any
adjustments that might result from the outcome of this uncertainty.

/s/ Miller and McCollom

MILLER AND MCCOLLOM
Certified Public Accountants
4350 Wadsworth Boulevard, Suite 300
Wheat Ridge, Colorado 80033
April 28, 2005

                                      F-2
<PAGE>

                    DIRECT RESPONSE FINANCIAL SERVICES, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS
<TABLE>
<CAPTION>
                                                                  January 31,  January 31,
                                                                     2005         2004
                                                                  ----------   ----------
<S>                                                               <C>          <C>
CURRENT ASSETS
    Cash                                                          $   49,993   $      250
    Accounts receivable                                                9,472           --
    Inventory                                                         58,000       58,000
    Prepaid expenses                                                  12,850       84,225
    Deposit                                                            2,500       25,000
                                                                  ----------   ----------
           Total current assets                                      132,815      167,475

PROPERTY AND EQUIPMENT
    Property and equipment, net of $893 and $447 depreciation          1,340        1,786

OTHER ASSETS
    Investments                                                      200,000      200,000
                                                                  ----------   ----------
           Total assets                                           $  334,155   $  369,261
                                                                  ==========   ==========

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES
    Accounts payable and accrued expenses                         $   47,738   $   32,281
    Accounts payable - related party                                 494,612      431,285
    Shareholder deposit                                              200,000           --
    Advances from stockholders, current portion                      222,532       33,067
                                                                  ----------   ----------
           Total current liabilities                                 964,882      496,633
                                                                  ----------   ----------

LONG-TERM LIABILITIES
    Advances from stockholders, less current portion                 191,384      387,466
    Advances from related party                                       26,435       20,825
    Debenture payable                                                121,500      150,000
                                                                  ----------   ----------
           Total liabilities                                       1,304,201    1,054,924

Commitments and contingencies                                             --           --
</TABLE>


        The accompanying notes are an integral part of these statements.

                                       F-3

<PAGE>

                    DIRECT RESPONSE FINANCIAL SERVICES, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                     CONSOLIDATED BALANCE SHEETS (CONTINUED)

<TABLE>
<CAPTION>
<S>                                                               <C>            <C>
STOCKHOLDERS' EQUITY (DEFICIT)
    Common stock - authorized 100,000,000 shares, no par
      value, 58,577,350 and 19,347,834 shares issued and
      outstanding at January 31, 2005 and 2004                      3,519,798      1,699,030
      Common stock warrants                                           140,106             --
      Subscribed stock                                               (735,824)            --


    (Deficit) accumulated during the development stage             (3,894,126)    (2,384,693)
                                                                  -----------    -----------
           Total stockholders' (deficit)                             (970,046)      (685,663)
                                                                  -----------    -----------

           Total liabilities and stockholders' equity (deficit)   $   334,155    $   369,261
                                                                  ===========    ===========
</TABLE>


        The accompanying notes are an integral part of these statements.

                                       F-4

<PAGE>

                    DIRECT RESPONSE FINANCIAL SERVICES, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                 April 24,
                                                                                   2002
                                                                                (inception)
                                               Year ending     Year ending        through
                                               January 31,     January 31,      January 31,
                                                  2005            2004             2005
                                               ------------    ------------    ------------
<S>                                            <C>             <C>             <C>
Revenues                                       $     12,331    $      1,859    $     14,409
Cost of sales                                         4,501             748           5,470
                                               ------------    ------------    ------------
    Gross Profit                                      7,830           1,111           8,939

Costs and Expenses:
    Consulting expense paid by issuing stock        691,550         942,564       2,470,705
    Consulting expense paid by cash                 116,948              --         116,948
    Professional fees                               268,911         170,498         545,697
    Advertising and marketing                        70,645          16,263         103,053
    General and administrative                      317,926         143,208         492,016
    Rent expense                                     24,000          24,000          64,856
                                               ------------    ------------    ------------
         Total                                    1,489,980       1,296,533       3,793,275

Earnings (loss) from operations                  (1,482,150)     (1,295,422)     (3,784,336)

Interest expense                                    (27,283)        (21,355)        (49,790)
Loss on investment                                       --         (60,000)        (60,000)
                                               ------------    ------------    ------------

Net (loss)                                     $ (1,509,433)   $ (1,376,777)   $ (3,894,126)
                                               ============    ============    ============

(Loss) per share                               $       (.05)   $       (.06)   $       (.14)
                                               ============    ============    ============

Weighted average shares outstanding              30,904,963      16,907,500      28,533,036
                                               ============    ============    ============
</TABLE>


        The accompanying notes are an integral part of these statements.

                                       F-5

<PAGE>

                    DIRECT RESPONSE FINANCIAL SERVICES, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                         (Deficit)
                                                                                        accumulated
                                                                                        during the
                                                             Common       Common Stock  development
                                               Shares         Stock         Warrants       stage          Total
                                            -----------    -----------   -----------    -----------    -----------
<S>                                          <C>           <C>           <C>            <C>            <C>
Balance April 24, 2002 (inception)           16,737,500    $     6,000   $        --    $        --    $     6,000

Shares issued for cash                           50,000         25,000            --             --         25,000
Shares issued for services                    1,270,000        724,500            --             --        724,500
Net loss for year ended January 31, 2003             --             --            --     (1,007,916)    (1,007,916)
                                            -----------    -----------   -----------    -----------    -----------

Balance January 31, 2003                     18,057,500        755,500            --     (1,007,916)      (252,416)
                                            -----------    -----------   -----------    -----------    -----------

Shares issued for services                    1,290,334        943,530            --             --        943,530
Net loss for year ended January 31, 2004             --             --            --     (1,376,777)    (1,376,777)
                                            -----------    -----------   -----------    -----------    -----------

Balance January 31, 2004                     19,347,834    $ 1,699,030   $        --     (2,384,693)   $  (685,663)

Shares issued for services                   10,302,500        691,550            --             --        691,550
Shares and warrants issued for cash in
  private placement                           2,300,000         59,894       140,106                       200,000
Shares issued for conversion of debenture     6,187,469        333,500            --                       333,500
Shares issued under stock subscription       20,439,547        735,824            --                       735,824
Net loss for year ended January 31, 2005             --             --            --     (1,509,433)    (1,509,433)
                                            -----------    -----------   -----------    -----------    -----------

Less subscribed stock                                                                                     (735,824)
                                            -----------    -----------   -----------    -----------    -----------

Balance January 31, 2005                     58,577,350    $ 3,519,798   $   140,106     (3,894,126)   $  (970,046)
                                            -----------    -----------   -----------    -----------    -----------
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       F-6

<PAGE>

                    DIRECT RESPONSE FINANCIAL SERVICES, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                          April 24,
                                                                                             2002
                                                                                         (inception)
                                                           Year ending    Year ending      through
                                                           January 31,    January 31,    January 31,
                                                              2005           2004           2005
                                                           -----------    -----------    -----------
<S>                                                        <C>            <C>            <C>
Cash flows from operating activities:
         Net (loss)                                        $(1,509,433)   $(1,376,777)   $(3,894,126)
         Non-cash items included in net (loss):
              Depreciation                                         446            447            893
              Expenses paid by issuing stock                   691,550        943,530      2,365,580
              Loss on investment                                    --         60,000         60,000
         Net change in operating assets and liabilities:
              Accounts receivable                               (9,472)            --         (9,472)
              Prepaid expenses                                  93,875        (59,225)        34,650
              Inventory                                             --        (58,000)       (58,000)
              Accounts payable and accrued liabilities          97,194        330,471        576,466
                                                           -----------    -----------    -----------
Net cash (used) by operating activities                       (635,840)      (159,554)      (924,009)

Cash flows from investing activities:
         Purchase of investments                                    --       (260,000)      (260,000)
         Purchase of property and equipment                         --             --         (2,233)
                                                           -----------    -----------    -----------
Net cash (used) by investing activities                             --       (260,000)      (262,233)

Cash flows from financing activities:
         Proceeds from advances - related parties                   --        415,412        425,652
         (Repayment) of advances - related parties             (19,417)            --        (19,417)
         Proceeds from common stock warrants                   140,106             --        140,106
         Proceeds from debenture                                    --             --        100,000
         Shareholder deposit                                   360,000             --        360,000
         Proceeds from issuance of common stock                204,894             --        229,894
                                                           -----------    -----------    -----------
Net cash provided by financing activities                      685,583        415,412      1,236,235
                                                           -----------    -----------    -----------

Net increase in cash                                            49,743         (4,142)         49,993

Cash at beginning of period                                        250          4,392             --
                                                           -----------    -----------    -----------
Cash at end of period                                      $    49,993    $       250    $    49,993
                                                           ===========    ===========    ===========

Supplemental disclosure of cash flow information:
  Cash paid during the period for:
         Interest                                          $     3,519    $     6,674    $    10,193
         Income taxes                                      $        --    $        --    $        --
</TABLE>


        The accompanying notes are an integral part of these statements.

                                       F-7

<PAGE>

                    DIRECT RESPONSE FINANCIAL SERVICES, INC.
                          (A DEVELOPMENT STAGE COMPANY)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant  accounting  policies of Direct  Response  Financial
Services,  Inc.  (Company) is presented to assist in understanding the Company's
financial statements.  The financial statements and notes are representations of
the Company's management who is responsible for their integrity and objectivity.
These accounting policies conform to generally accepted accounting principles in
the  United  States  of  America  and  have  been  consistently  applied  in the
preparation of the financial statements.  The financial statements are stated in
United States of America dollars.

Organization and Description of Business

The Company was incorporated in the State of Delaware on April 24, 2002.

The Company is in the development stage and has had no significant operations.

The Company's  primary  business  activity is providing  stored value debit card
programs and merchant accounts for credit and debit card processing.

On  April  29,  2002  the  Company   entered  into  a  Agreement   and  Plan  of
Reorganization with Relevant Links, Inc., a public company  (incorporated in the
State of Colorado on April 7, 2000) with no assets or  liabilities.  As a result
of the  reorganization,  the Company became a publicly reporting  company.  (See
note 4). Subsequent to the reorganization,  Relevant Links, Inc changed its name
to Direct Response Financial Services, Inc. (Colorado) (DRFS-CO).

On May 16, 2002, the Company  participated in forming Direct Card Services,  LLC
(DCS)  for  the  purpose  of  facilitating  the  Company's  bankcard  processing
business. Under the terms of the LLC agreement, the Company has a 50% interest.

Principles of Consolidation

The accompanying  consolidated financial statements include the Company and its'
wholly owned and controlled  subsidiary,  DRFS-CO, and its controlled subsidiary
DCS. All inter-company accounts have been eliminated in the consolidation.

The  Company  considers  its 50%  interest in DCS to be a  controlling  interest
because,  as sole managing member, it has management  control in addition to its
profit interest.  Because DCS has a deficit equity position at January 31, 2005,
no minority interest has been recorded.

Revenue Recognition

Revenues are recognized in accordance with SEC Staff  Accounting  Bulletin (SAB)
No. 101, "Revenue  Recognition in Financial  Statements." Under SAB 101, product
revenues (or service  revenues) are recognized  when  persuasive  evidence of an
arrangement exists,  delivery has occurred (or service has been performed),  the
sales price is fixed and determinable and collectibility is reasonably assured.

                                      F-8
<PAGE>

                    DIRECT RESPONSE FINANCIAL SERVICES, INC.
                          (A DEVELOPMENT STAGE COMPANY)

The Company  offers no warranties on equipment  sold beyond those offered by the
manufacturer.

Inventory

The company's inventory consists of prepaid stored value (debit) card blanks and
supplies and is valued at the lesser of cost or net  realizable  value using the
average costing method.

Use of Estimates

The  preparation  of the  Company's  financial  statements  in  conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions that affect the amounts  reported in these financial  statements
and accompanying notes. Actual results could differ from those estimates.

Earnings (Loss) Per Share

Earnings  (loss)  per share of common  stock is  computed  by  dividing  the net
earnings  (loss) by the weighted  average  number of common  shares  outstanding
during the period.  Fully diluted  earnings per share are not presented  because
they are anti-dilutive.

Estimated Fair Value of Financial Instruments

The carrying value of the Company's accounts  receivable,  accounts payable, and
other financial  instruments  reflected in the financial statement  approximates
fair value due to the short-term maturity of the instruments.  The fair value of
the Company's  advances  from  stockholders  and  debentures  payable  cannot be
estimated, because of the unique and proprietary nature of these instruments.

Comprehensive Income

The Company has adopted Statement of Financial  Accounting  Standards (SFAS) No.
130, "Reporting Comprehensive Income". SFAS 130 requires that the components and
total amounts of comprehensive  income be displayed in the financial  statements
beginning in 1998.  Comprehensive  income includes net income and all changes in
equity  during a period  that  arises from  non-owner  sources,  such as foreign
currency items and unrealized gains and losses on certain  investments in equity
securities. The company has no components of comprehensive income other than net
income (loss).

Income Taxes

The Company  records  deferred  taxes in accordance  with Statement of Financial
Accounting  Standards  (SFAS)  No.  109,  "Accounting  for  Income  Taxes."  The
statement  requires  recognition  of  deferred  tax assets and  liabilities  for
temporary  differences  between the tax bases of assets and  liabilities and the
amounts at which they are carried in the  financial  statements,  based upon the
enacted tax rates in effect for the year in which the  differences  are expected

                                      F-9
<PAGE>

                    DIRECT RESPONSE FINANCIAL SERVICES, INC.
                          (A DEVELOPMENT STAGE COMPANY)

to reverse.  A valuation  allowance  is  established  when  necessary  to reduce
deferred tax assets to the amount expected to be realized.

Valuation of Long-Lived Assets

The  Company   periodically   analyzes  its  long-lived   assets  for  potential
impairment,  assessing  the  appropriateness  of  lives  and  recoverability  of
unamortized balances through measurement of undiscounted operation cash flows on
a basis consistent with accounting  principles  generally accepted in the United
States of America.

Other

The Company's fiscal year end is January 31.

The Company  paid no  dividends  during the periods  presented.  Advertising  is
expensed as it is incurred. The company has no cash equivalents.

The Company consists of one reportable business segment.

All revenue reported is from external customers in the United States. All of the
Company's assets are located in the United States.

NOTE 2 - BASIS OF PRESENTATION - GOING CONCERN

The  accompanying  financial  statements  have been prepared in conformity  with
generally accepted accounting principles in the United States of America,  which
contemplates  continuation  of the  Company  as a going  concern.  However,  the
Company has sustained net operating losses and has insufficient  working capital
to complete  its business  plan.  This fact raises  substantial  doubt about the
Company's  ability to continue  as a going  concern.  Management  plans to raise
additional capital to enable the Company to complete its business plan.

NOTE 3 - DEVELOPMENT STAGE COMPANY

Based upon the Company's  business plan, it is a development  stage  enterprise.
Accordingly,  the Company  presents its financial  statements in conformity with
the  accounting  principles  generally  accepted in the United States of America
that  apply  in  establishing  operating  enterprises.  As a  development  stage
enterprise, the Company discloses the deficit accumulated during the development
stage and the cumulative  statements of operations and cash flows from inception
to the current balance sheet date.

NOTE 4 - PROPERTY AND EQUIPMENT

Components of property and equipment consist of:

<TABLE>
<CAPTION>
                                                                                 Depreciation
                                             Accumulated          Net              Rate and
                               Cost         Depreciation         Amount             Method
                          -------------   -----------------   --------------   -----------------
<S>                         <C>               <C>              <C>               <C>
January 31, 2004:
   Office Equipment         $    2,233        $     447        $    1,786        3 years SL
January 31, 2005:
   Office Equipment              2,233              893             1,340        3 years SL
</TABLE>


                                      F-10
<PAGE>

                    DIRECT RESPONSE FINANCIAL SERVICES, INC.
                          (A DEVELOPMENT STAGE COMPANY)


Depreciation is provided in amounts sufficient to recover asset costs over their
estimated useful lives.


NOTE 5 - INVESTMENTS

During  July 2003,  the  Company  invested  $200,000  in Optimum  Pay USA,  Inc.
("Optimum").  Optimum develops electronic payment systems. Optimum Pay USA, Inc.
is a privately held company with headquarters in Irvine,  California and offices
in Covington,  Kentucky.  The company issued an unsecured  promissory  note to a
shareholder  of the  company  for 2.5 shares of Series A  Convertible  Preferred
Stock of Optimum,  which represents  approximately two percent (2%) ownership of
Optimum Pay, Inc. The  promissory  note is due July 31, 2005, and bears interest
of three percent (3%). The investment is accounted for using the cost method and
valued at the lower of cost or fair market value.

NOTE 6 - ADVANCES FROM STOCKHOLDERS AND RELATED PARTIES

The Company has received  advances from  stockholders in the amount of $440,351.
The advances are evidenced by unsecured  promissory notes bearing interest rates
of 3% to 8%. The notes are due as follows:

Fiscal Year Ending:
         2006                                     222,532
         2007                                     217,819
                                             ------------
Total                                        $    440,351
                                             ============

Advances totaling  $413,916 are the subject of efforts by Company  management to
retire the Promissory Notes for less than their stated face value.  Negotiations
with the Promissory Note holders are in progress, but not completed.

NOTE 7 - CONVERTIBLE DEBENTURE, SHAREHOLDER DEPOSITS AND SUBSCRIBED STOCK

In January  2003,  the Company sold an 8%  convertible  debenture  for $150,000.
Interest on the  debenture  is payable  monthly.  No assets have been pledged as
security and the note cannot be prepaid.  The  agreement,  as amended on May 19,
2003,  February 19, 2004, March 23, 2004 and November 8, 2004, has the following
additional provisions:

The number of shares for which the  debenture is  convertible  into common stock
(in  denominations  of $1,000 or more in an integral  multiple of $500 in excess
thereof) is equal to the debenture  dollar amount being converted  multiplied by
eleven,  minus  the  product  of the  conversion  price,  as  determined  below,

                                      F-11
<PAGE>

                    DIRECT RESPONSE FINANCIAL SERVICES, INC.
                          (A DEVELOPMENT STAGE COMPANY)

multiplied  by ten  times  the  dollar  amount  of the  debenture  amount  being
converted,  with the entire foregoing result divided by the conversion price. To
the extent that, on any date,  the holding of common shares  results in a holder
being  deemed to be the  beneficial  owner of more than five percent (5%) of the
then outstanding shares of the Company's common stock, the holder shall not have
the right and the Company  shall not have the  obligation to convert any portion
of the debenture as shall cause such holder to be deemed the beneficial owner of
more than five percent (5%) of the then outstanding shares of common stock.

The  conversion  price is equal to the  lesser  of  $1.00,  or  eighty  per cent
(80%)(the discount  multiplier) of the average of the three lowest market prices
during the ninety (90) day period prior to the holder's election to convert.

In  addition  to the right to  convert  the  debenture,  the  holder  was given,
coinciding with the exercising of the debenture, a warrant until January 9, 2006
to purchase  shares of the Company's  common stock at an exercise price of $1.00
per  share  equal  to ten  times  the  dollar  amount  of the  debentures  being
converted.

During February and March 2004, the Company  amended the debenture  agreement to
extend the due date of the debenture to January 2006 and the expiration  date of
the conversion warrant to January 2007.  Additionally,  the amendments allow for
the debenture holder to add $150,000 of principal under certain conditions.

During June 2004, the Company  amended the agreement to provide for a prepayment
of $60,000 to be used for  converting  portions of the debenture and  exercising
warrants in exchange for the Company issuing 2,000,000 shares of common stock in
anticipation  of future  debenture  conversions  and  warrant  exercises.  As of
January 31, 2005,  439,547 of these shares have not been  utilized and are shown
on the financials statements as subscribed stock.

During November 2004, the Company further  amended the debenture  agreement.  In
accordance with the agreement,  the Company  delivered  20,000,000 shares of the
Company's  restricted  common  shares in the name of the  debenture  holder to a
trustee/escrow  agent which may be released to the debenture  holder pursuant to
valid debenture  conversions and warrant exercise notices. The shares issued and
held in escrow are recorded at the estimated  value of the  conversion and shown
on the financials  statements as subscribed stock. Such shares are held in trust
as  collateral  to  ensure  performance  under  the  debenture  agreement.   The
trustee/escrow agent has no right to vote the shares.

The  Company  has the option to  repurchase  any common  shares to be issued for
future  debenture  conversions and warrant  exercises  provided that the Company
gives notice and the debenture  holder converts  debenture  amounts and exercise
warrant  amounts at least equal to the number of shares the  Company  desires to
purchase.  The purchase  price for the common shares shall be 92% of the average
of the volume weighted  average price of the Company's common shares on the five
trading days prior to the date the debenture holder receives the notice from the
Company.

                                      F-12
<PAGE>

                    DIRECT RESPONSE FINANCIAL SERVICES, INC.
                          (A DEVELOPMENT STAGE COMPANY)

During the year ending January 31, 2005, the debenture holder converted  $28,500
of the principal of the debenture and received 7,902,469 shares of the Company's
common stock and simultaneously issued 285,000 warrant shares for $285,000.  The
debenture  holder also has  deposited  $200,000  with the company to be used for
future conversions.

NOTE 8 - STOCKHOLDERS' EQUITY

At inception, the Company issued 6,000,000 shares of stock for services,  valued
at $6,000, which was the estimated fair value of the services received.

During  December  2002,  the Company sold 50,000  shares of its common stock for
$25,000 cash, which was an average price per share of $.50.

During January 2003, the Company issued 1,270,000 shares of its common stock for
services, which was valued at estimated fair value of $724,500 (weighted average
$.57 per share) based on quoted market prices on the date of the transaction. Of
the shares issued,  1,240,000  shares were issued to related  parties and 30,000
shares were issued to non-related parties for consulting services.

In March of 2003, the Company  enacted a "2003 stock  incentive  plan." The plan
authorizes the board of directors,  or its designated committee,  to award up to
750,000  shares  or  options  for  shares,  generally  under  terms  and  prices
determined  by the board.  Awards may be granted  to  officers,  directors,  and
employees of and  consultants  and advisers to the Company or its  subsidiaries.
The plan contains  additional terms and  restrictions.  749,334 shares have been
issued pursuant to the plan through April 30, 2003.

During the fiscal year ended  January  2004,  the Company  issued an  additional
1,290,334 shares of its common stock to related parties for services,  which was
valued at  estimated  fair value of $943,530  (weighted  average $.99 per share)
based on quoted market prices on the date of the transaction.

During the fiscal year ended  January  2005,  the Company  issued an  additional
10,302,500  shares of its common stock to related  parties for  services,  which
were valued at  estimated  fair value of  $691,550  (weighted  average  $.08 per
share) based on quoted market prices on the date of the transaction.

The Company also issued stock and warrants with a private  placement  memorandum
in 2005.  The Company was  authorized to sell up to a maximum of 50 Units,  with
each Unit consisting of either:  (1) 200,000 Rule 144 restricted  common shares;
(2) 100,000 Rule 144 restricted  common shares plus a separate warrant entitling
the holder to purchase up to 50,000 shares of free trading stock  exercisable at
$0.10 per share for a period of two years from the date of  investment  pursuant
to the terms and conditions of the warrant;  or (3) a warrant for 167,000 shares
of free  trading  stock  exercisable  at  $0.02  per  share  with  each  warrant
convertible into 1.5 shares of stock  exercisable for a period of two years from
the  date of the  investment,  but not  prior  to six  months  from  the date of
investments  pursuant  to the terms  and  conditions  of the  warrant  (each,  a
"Unit").  The  selection  of Unit  Type  1,  Unit  Type 2 or  Unit  Type 3 (or a

                                      F-13
<PAGE>

                    DIRECT RESPONSE FINANCIAL SERVICES, INC.
                          (A DEVELOPMENT STAGE COMPANY)

combination  thereof  with the approval of the Company) was at the option of the
investor.  The Company issued 2,300,000 shares of common stock under the private
placement memorandum. Warrants issued were as follows:

              Exercise Price        Expires FYE            Number
              --------------        -----------         ------------
                   $.10                2007                 150,000
                   $.02                2007               6,768,000


During the year ending  January 31,  2005,  the company  issued  common stock by
debenture  conversions,  exercise of warrants, and subscribed stock as described
above in Note 7.

NOTE 9 - RELATED PARTY TRANSACTIONS

During the year ended January 31, 2005,  the Company  incurred legal fees with a
law firm, in which the  Company's  CEO is a partner,  in the amount of $186,617,
all of which is unpaid at year-end.

A director of the Company is the president of a significant  business related to
the Company  because it provides  third party  processing  and technology to the
Company as part of its stored value card programs.

NOTE 10 - INCOME TAXES

As of  January  31,  2005,  the  Company  had  approximately  $3,900,000  of net
operating  loss  carryover  that expires in 2023  through  2025. A change in the
ownership  of more than 50% of the  Company may result in the  inability  of the
Company to utilize the  carryover.  The Company had an  estimated  deferred  tax
asset of $359,000  related to the net  operating  loss  carryover,  including an
addition of $138,000 for the current year.  Carryforwards previously incurred by
the Company are not available due to  restrictions  when  ownership  changes.  A
valuation  allowance  has been provided for the total amount of the deferred tax
asset, including the current year addition, since the amounts, if any, of future
revenues necessary to be able to utilize the carryover, are uncertain.

The overall  effective tax rate differs from the Federal  statutory tax rate for
the year ended January 31, 2005 as follows:

                                                               % of Pre-tax
                                                               income (loss)
                                                             ----------------
          Tax provision based on Federal statutory rate              34.0%
          State tax, net of Federal benefit                           2.3%
          Surtax exemption                                          (27.1%)
                                                             ----------------
          Estimated tax rate                                          9.2%
          Valuation allowance                                        (9.2%)
                                                             ----------------
          Effective tax rate                                          0.0%
                                                             ================

                                      F-14
<PAGE>

                    DIRECT RESPONSE FINANCIAL SERVICES, INC.
                          (A DEVELOPMENT STAGE COMPANY)

NOTE 11 - CONCENTRATION OF RISK

Through its subsidiary Direct Card Services,  LLC, the Company is dependent on a
marketing  agreement with a major bank for its future revenue regarding bankcard
processing.  In addition,  through its subsidiary Direct Card Services, LLC, the
Company is also dependent upon two other banks for its stored value (debit) card
business.

NOTE 12 - COMMITMENTS AND CONTINGENCIES

The Company rents its office space on a month-to-month basis.

In addition to its  pre-existing  relationship  as a 2% owner of all outstanding
equity in Optimum Pay USA, Inc. the Company,  through its subsidiary Direct Card
Services, LLC, entered into several agreements with OP for issuance and approval
of debit  card  programs.  These  agreements  included  five  stored  value card
programs - (1) the DCS Personal  Advantage  Media Card; (2) the La Raza Personal
Advantage  Media  Card;  (3) the La Vida Buena Card (4) Power 92 and (5) Super A
Foods.  Under each of these  agreements,  the Company is committed to purchase a
minimum  order of 5,000  cards/units.  To date,  the Company has paid a total of
$183,350  against these minimum orders,  leaving balances due under each account
as  follows:  DCS  Personal  Advantage  Media Card - $34,000;  La Raza  Personal
Advantage Media Card - $26,875; Power 92 - $14,535 and Super A Foods - $45,050.

NOTE 13 - SUBSEQUENT EVENTS

Subsequent to year-end,  the Company  issued  11,378,985  shares of common stock
under the  conversion  provisions of the  debenture  payable and the exercise of
related warrants.

On March 14, 2005, the Company issued  4,575,000  shares of  unrestricted  stock
under the Company's S-8 Registration statement for services.

On March 17, 2005,  the Company  authorized  and approved  issuance of 2,725,000
shares of Rule 144 restricted common stock for consulting services.

The  Company  entered  into a  consulting  agreement  dated  March 8, 2005.  The
consulting company will provide services with regard to acquisition,  financing,
and company goals and structure.  The  consultant  will receive a monthly fee in
the amount of $5,000  and a  percentage  (finders  fee) of  investment  proceeds
identified by the consultant.

NOTE 14 - RECENT ACCOUNTING PRONOUNCEMENTS

In January  2003,  the FASB  issued  Interpretation  No. 46,  "Consolidation  of
Variable  Interest  Entities."  It  requires  existing  unconsolidated  variable
interest  entities (VIE's) to be consolidated by their primary  beneficiaries if
the entities do not effectively  disperse risks among the parties  involved.  It
applies  immediately  to VIE's  created  after  January 31, 2003 and to VIE's in
which an enterprise holds a variable  interest that was acquired before February
1, 2003, the  Interpretation  applies for periods beginning after June 15, 2003.

                                      F-15
<PAGE>

                    DIRECT RESPONSE FINANCIAL SERVICES, INC.
                          (A DEVELOPMENT STAGE COMPANY)

In  December  2003,  the  FASB  reissued  Interpretation  No.  46  with  certain
modifications  and   clarifications  for  certain  VIE's.  The  Company  has  no
unconsolidated  VIE's and therefore its financial  statements  are in compliance
with the requirements of Interpretation No. 46.

In April 2003,  the FASB  issued SFAS No. 149  "Amendment  of  Statement  133 on
Derivative  Instruments and Hedging Activities",  which amends and clarifies the
accounting  guidance on certain derivative  instruments and hedging  activities.
SFAS 149 is generally  effective  for contracts  entered into or modified  after
June 30, 2003 and hedging  relationships  designated  after June 30,  2003.  The
adoption of this  statement  did not impact the  Company's  financial  position,
results of operations, or cash flows.

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments  with  Characteristics  of both  Liabilities  and Equity."  SFAS 150
establishes  standards for how an issuer of equity  (including the equity shares
of any entity  whose  financial  statements  are  included  in the  consolidated
financial  statements)  classifies  and  measures on its balance  sheet  certain
financial  instruments with characteristics of both liabilities and equity. SFAS
150 is effective for financial  instruments  entered into or modified  after May
31, 2003 and for existing financial instruments after July 1, 2003. The adoption
of this statement did not impact the Company's  financial  position,  results of
operations, or cash flows.

During 2004,  the FASB issued SFAS No. 151,  "Inventory  costs - an amendment of
ARB No. 43, Chapter 4", SFAS No. 152,  "Accounting for Real Estate  Time-Sharing
Transactions  - an amendment of FASB  Statements  No. 66 and 67",  SFAS No. 153,
"Exchanges of Nonmonetary Assets - an amendment of APB Opinion No. 29", and SFAS
No. 123 (revised 2004),  "Share-based  Payment".  These statements are effective
for periods after these  financial  statements.  We do not believe the impact of
adoption of these  statements  will be  significant  to our  overall  results of
operations or financial position.


                                      F-16
<PAGE>

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

ITEM 8A. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, we conducted an evaluation,
under the supervision and with the participation of our chief executive officer
and chief financial officer of our disclosure controls and procedures (as
defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon
this evaluation, our chief executive officer and chief financial officer
concluded that our disclosure controls and procedures are effective to ensure
that information required to be disclosed by us in the reports that we file or
submit under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the Commission's rules and forms. There was
no change in our internal controls or in other factors that could affect these
controls during our last fiscal quarter that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.

ITEM 8B. OTHER INFORMATION

None.



                                       16
<PAGE>

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.

DIRECTORS AND EXECUTIVE OFFICERS

NAME                      AGE   POSITION
----                      ---   --------
T. Randolph Catanese(1)   47    Chief Executive Officer, Acting CFO and Director
Douglas Hume              33    Director
Edward Kim                36    Director

(1) On March 1, 2005, Ted Kozub resigned as our Chief Executive Officer, Chief
Financial Officer and Director. There was no disagreement or dispute between Mr.
Kozub and our company which led to his resignation. On March 1, 2005, our Board
of Directors appointed T. Randolph Catanese as our Chief Executive Officer,
Acting Chief Financial Officer and Director. There are no understandings or
arrangements between Mr. Catanese and any other person pursuant to which Mr.
Catanese was selected as a Director. Mr. Catanese presently does not serve on
any committee of our Board of Directors. Mr. Catanese may be appointed to serve
as a member of a committee although there are no current plans to appoint him to
a committee as of the date hereof. Mr. Catanese does not have any family
relationship with any director, executive officer or person nominated or chosen
by us to become a director or executive officer.

T. RANDOLPH CATANESE, CHIEF EXECUTIVE OFFICER, ACTING CHIEF FINANCIAL OFFICER
AND DIRECTOR SINCE MARCH 2005. From 1999 to the present, Mr. Catanese has been
practicing as an attorney in the State of California and is an active member of
the California Bar Association. In this capacity, Mr. Catanese has represented
clients in general business and commercial matters. In May of 2002 he founded
Direct Card Services, LLC, a wholly owned subsidiary of Direct Response
Financial Services, Inc. Mr. Catanese has acted as Managing Member of Direct
Card Services, LLC since its inception. Mr. Catanese graduated from the
University of Arizona with a Bachelor of Arts degree in 1980. Additionally, Mr.
Catanese attended Pepperdine University School of Law where he received his
Juris Doctorate in 1983.

DOUGLAS R. HUME, ESQ. Mr. Hume has served as general counsel to our company over
the past fiscal year. He is a member of the California Bar Association. He will
continue to act as general counsel to our company.

EDWARD KIM, DIRECTOR. Edward Kim is currently the President of Optimum Pay USA,
Inc. Optimum Pay is a significant business partner to us as it provides third
party processing and technology to us as part of its stored value card programs.
Mr. Kim is also the co-managing member of Direct Card Services, LLC, a
subsidiary of our company.

Directors serve until the next annual meeting and until their successors are
elected and qualified. Officers are appointed to serve for one year until the
meeting of the board of directors following the annual meeting of stockholders
and until their successors have been elected and qualified.

CODE OF ETHICS

We have adopted a Code of Business Conduct and Ethics that applies to all of our
directors, officers and employees, including our principal executive officer,
principal financial officer and principal accounting officer. The Code of
Business Conduct and Ethics will be posted on our website at http://www.DRFS.net

ITEM 10. EXECUTIVE COMPENSATION

The following tables set forth certain information regarding our President and
each of our most highly-compensated executive officers whose total annual salary
and bonus for the fiscal year ending January 31, 2005, 2004 and 2003:

                           SUMMARY COMPENSATION TABLE
                               ANNUAL COMPENSATION

<TABLE>
<CAPTION>
                                                           Other
                                                           Annual      Restricted    Options       LTIP
   Name & Principal                Salary       Bonus      Compen-       Stock         SARs(#)     Payouts   All Other Comp-
       Position           Year       ($)         ($)     sation ($)    Awards ($)                    ($)     ensation($)(1)
------------------------ ------- ------------ ---------- ------------ ------------- ----------- ------------ --------------
<S>                       <C>         <C>         <C>         <C>        <C>             <C>          <C>           <C>
T. Randolph Catanese,     2005        0           0           0          75,000          0            0             0
CEO, President, Acting    2004        0           0           0             0            0            0             0
CFO and Director
(Effective as of March    2003        0           0           0            0             0            0             0
1, 2005)
------------------------ ------- ------------ ---------- ------------ ------------- ----------- ------------ --------------
Ted Kozub, CFO, CEO       2005      14,000        0           0            0             0            0           12,500
and Director              2004       9,000        0           0           27,500         0            0            2,500
(Effective as of April    2003        0           0           0          250,000         0            0             0
6, 2003)
------------------------ ------- ------------ ---------- ------------ ------------- ----------- ------------ --------------
Gregory C. Rotelli,       2005   0                0           0            0             0            0             0
President and Director    2004   0                0           0            0             0            0             0
(Effective as of April    2003   0                0           0          250,000         0            0             0
6, 2003)
------------------------ ------- ------------ ---------- ------------ ------------- ----------- ------------ --------------
</TABLE>


                                       17
<PAGE>

(1) - Includes unrestricted stock awards issued pursuant to S-8 registration.

No options were granted or exercised during our fiscal year ended January 31,
2005.

Directors and Committee Members did not receive compensation from us during the
fiscal year ending January 31, 2005.

During the fiscal year ending January 31, 2005, the Board of Directors served as
the Compensation Committee with regard to executive compensation, in the absence
of a formal committee.

Other than base salaries, there were no additional compensation plans or
policies in place for any executive officer as of January 31, 2005. Restricted
stock compensation to officers was issued in lieu of salary and approved by the
Board of Directors. Unless noted, all stock compensation was issued in the form
of restricted shares and, for accounting purposes, were valued at the prevailing
closing market price on the day of issuance.

There are no annuity, pension or retirement benefits proposed to be paid to
Officers, Directors, or employees of Direct Response Financial Services, Inc. in
the event of retirement at normal retirement date pursuant to any existing plan
provided by Direct Response Financial Services, Inc.

EMPLOYMENT AGREEMENTS

Ted Kozub's agreement was effective on April 4, 2003 and continues in force to
date. Mr. Kozub shall receive compensation consisting of: $1,000.00 per month,
250,000 shares of Rule 144 restricted common stock of Company, all of which
shall vest and be granted by the Company at the end of the twelve (12) month
term of this Agreement and two (2) weeks paid vacation.

On March 1, 2005, Ted Kozub resigned as our Chief Executive Officer, Chief
Financial Officer and Director. As part of the resignation, Mr. Kozub's Key
Executive Employment Agreement dated April 4, 2003, was terminated. On March 1,
2005, our Board of Directors appointed T. Randolph Catanese as our Chief
Executive Officer, Acting Chief Financial Officer and Director. We have not
finalized the terms of Mr. Catanese's employment agreement as of the date
hereof.

No employment agreements exist or are currently contemplated.

There was no compensation paid to any directors of Direct Response Financial
Services, Inc. as director's fees.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The following table sets forth certain information regarding beneficial
ownership of our common stock as of April 28, 2004, by

o     each person who is known by us to beneficially own more than 5% of our
      common stock;

o     each of our officers and directors;

o     all of our officers and directors as a group.

Except as otherwise noted, each person's address is c/o Direct Response
Financial Services, Inc., 2899 Agoura Road, #115, Westlake Village, CA 91361.

                   NAME AND ADDRESS             NUMBER OF         PERCENTAGE OF
TITLE OF CLASS     OF BENEFICIAL OWNER          SHARES            CLASS
--------------     -------------------          -----------       -------------

Common Stock       T. Randolph Catanese         3,592,800                 4.65%

Common Stock       Douglas R. Hume              1,147,199                 1.49%

Common Stock       Edward Kim                   1,100,000                 1.42%

Common Stock       Officers and directors
                    as a group of 3             5,839,999                 7.56%



                                       18
<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

We received an advance from a stockholder in the amount of $20,825 evidenced by
a promissory note. The note is unsecured, bears 6% interest, and is due April
16, 2006.

We have incurred legal fees with a law firm, in which a partner is also the
Chief Executive Officer of the Company and manager of one of our subsidiaries,
in the amount of $186,617, all of which is unpaid.

ITEM 13. EXHIBITS

(a) Index to Exhibits

Exhibit No.   Description
-----------   -----------

              ARTICLES OF INCORPORATION AND BYLAWS

     3.1      Articles of Incorporation (Incorporated by reference to our
              registration statement on Form SB-1 filed with the SEC on
              December 18, 2000, File No. 333-52268).

     3.2      Bylaws (Incorporated by reference to our registration
              statement on Form SB-1 filed with the SEC on December 18,
              2000, File No. 333-52268).

              INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS

     4.1      Common Stock Purchase Warrant with La Jolla Cove Investors,
              Inc.(Incorporated by reference to our Form 10KSB filed with the
              SEC on May 27, 2003, File No. 333-52268).

     4.2      Convertible Debenture with La Jolla Cove Investors,
              Inc.(Incorporated by reference to our Form 10KSB filed with
              the SEC on May 27, 2003, File No. 333-52268).

     4.3      Letter Agreement with La Jolla Cove Investors(Incorporated by
              reference to our Form 10KSB filed with the SEC on May 27,
              2003, File No. 333-52268).

     4.4      Purchase Agreement with La Jolla Cove Investors,
              Inc.(Incorporated by reference to our Form 10KSB filed with
              the SEC on May 27, 2003, File No. 333-52268).

     4.5      Registration Rights Agreement with La Jolla Cove
              Investors(Incorporated by reference to our Form 10KSB filed
              with the SEC on May 27, 2003, File No. 333-52268).

     4.6      Promissory Note with RPMJ, Inc.(Incorporated by reference to
              our Form 10KSB filed with the SEC on May 27, 2003, File No.
              333-52268).


                                       19
<PAGE>

     4.7      Addendum to Convertible Debenture and Warrant to Purchase
              Common Stock(Incorporated by reference to our Form 10KSB filed
              with the SEC on May 27, 2003, File No. 333-52268).

                               MATERIAL CONTRACTS

10.1     Amendment to the Limited Liability Company Agreement of Direct Card
         Services, LLC

10.2     Option to Purchase Agreement (LLC) with T. Randolph
         Catanese(Incorporated by reference to our Form 10KSB filed with the SEC
         on May 27, 2003, File No. 333-52268).

10.3     Management Consulting Agreement with Anecius Holding
         Company(Incorporated by reference to our Form 10KSB filed with the SEC
         on May 27, 2003, File No. 333-52268).

10.4     Ted Kozub Employment Agreement(Incorporated by reference to our Form
         10KSB filed with the SEC on May 27, 2003, File No. 333-52268).

10.5     WNCR Consulting Agreement dated January 20, 2004 (Incorporated by
         reference to our Form 10KSB filed with the SEC on April 30, 2004, File
         No. 333-52268).

10.6     MDU with ROI Media Solutions (Incorporated by reference to our Form
         10KSB filed with the SEC on April 30, 2004, File No. 333-52268).

10.7     KLAX FM Radio Marketing Agreement dated February 12, 2004 (Incorporated
         by reference to our Form 10KSB filed with the SEC on April 30, 2004,
         File No. 333-52268).

10.8     KKFR Radio Marketing Agreement (Incorporated by reference to our Form
         10KSB filed with the SEC on April 30, 2004, File No. 333-52268).

10.9     Agent Agreement (Incorporated by reference to our Form 10KSB filed with
         the SEC on April 30, 2004, File No. 333-52268).

10.10    La Jolla Addendum (Incorporated by reference to our Form 10KSB filed
         with the SEC on April 30, 2004, File No. 333-52268).

10.11    La Jolla Addendum to convertible debenture (Incorporated by reference
         to our Form 10KSB filed with the SEC on April 30, 2004, File No.
         333-52268).

10.12    Approved Sales Program Agreement (Incorporated by reference to our Form
         10KSB filed with the SEC on April 30, 2004, File No. 333-52268).

10.13    Approved Sales Program Agreement dated January 5, 2004 (Incorporated by
         reference to our Form 10KSB filed with the SEC on April 30, 2004, File
         No. 333-52268).

10.14    Floyd Cochran Consulting Agreement dated January 20, 2004 (Incorporated
         by reference to our Form 10KSB filed with the SEC on April 30, 2004,
         File No. 333-52268).

10.15    Addendum to Convertible Debenture and Warrant between the Company and
         La Jolla dated November 8, 2004 (filed herewith)

10.16    Strategic Alliance Agreement between Direct Card Services, LLC and Info
         Touch USA, Inc. dated December 7, 2004 (filed herewith).


                                       20
<PAGE>

10.17    Agreement for Custom Pre-Paid Stored Value Debit Card between the
         Company and Super A Foods, Inc. dated February 21, 2005 (filed
         herewith).

10.18    Letter of Understanding between Direct Card Services, LLC and ROI Media
         Solutions, LLC dated February 24, 2005(filed herewith).

10.19    Joint Marketing Agreement between the Company, Direct Card Services,
         LLC and del Rey Financial, Inc. dated February 23, 2005(filed
         herewith).

10.20    Letter Agreement between Direct Card Services, LLC, Optimum Pay USA,
         Inc. and Poder de Compra, Mexico, SA dated March 24, 2005(filed
         herewith).

10.21    Consulting Services Agreement between the Company and GMCRNet.com, Inc.
         dated March 11, 2005(filed herewith).

31.1     Certification by Chief Executive Officer and Acting Chief Financial
         Officer pursuant to Sarbanes Oxley Section 302.

32.1     Certification by Chief Executive Officer and Acting Chief Financial
         Officer pursuant to 18 U.S.C. Section 1350


ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT FEES

Miller and McCollom billed us $13,750 for services rendered for the audit of our
annual consolidated financial statements for the year ended January 31, 2005
included in this Form 10KSB.

ALL OTHER FEES

The aggregate fees billed by Miller and McCollom for services rendered to the
Company, other than services covered in "Audit Fees" for the fiscal year ended
January 31, 2005 were $0. Miller and McCollom did not perform any services which
directly or indirectly related to the operation of, or supervision of the
operation of, our information systems or management of our local area network.


                                       21
<PAGE>

                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

DIRECT RESPONSE FINANCIAL SERVICES, INC.

BY: /s/ T. Randolph Catanese
--------------------------------------
T. Randolph Catanese, CEO, Acting CFO

May 2, 2005

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.


            NAME                       TITLE                             DATE
            ----                       -----                             ----

/s/ T. Randolph Catanese           CEO, CFO and Director             May 2, 2005
---------------------------
T. Randolph Catanese


/s/ Douglas Hume                   Director                          May 2, 2005
---------------------------
Douglas Hume


/s/ Edward Kim                     Director                          May 2, 2005
---------------------------
Edward Kim



                                       22