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

                                   FORM 10-KSB

[X]  Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of
     1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006

[ ]  Transition Report Under Section 13 or 15(d) of the Securities Exchange
     Act of 1934

                        COMMISSION FILE NUMBER 000-27551

                          DIGITALFX INTERNATIONAL, INC.
                 (Name of Small Business Issuer in Its Charter)

                  FLORIDA                              65-0358792
      (State or Other Jurisdiction                 (I.R.S.  Employer
    of Incorporation or Organization)             Identification  No.)

                         3035 EAST PATRICK LANE, SUITE 9
                             LAS VEGAS, NEVADA 89120
              (Address of Principal Executive Offices and Zip Code)

                                 (702) 938-9300
                           (Issuer's telephone Number)

         Securities registered under Section 12(b) of the Exchange Act:

                                      None

         Securities registered under Section 12(g) of the Exchange Act:

                          Common Stock, $.001 par value
                                (Title of Class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 in response to Item 405 of
Regulation S-B contained in this form, 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.                                              [X]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act.)                           Yes   [ ]   No   [X]

The issuer's revenues for the fiscal year ended December 31, 2006 were
$22,800,000.

At March 13, 2007, the aggregate market value of the voting stock held by
non-affiliates of the issuer was $15,604,358.

At March 13, 2007, the issuer had 23,613,638 shares of Common Stock, $0.001 par
value, issued and outstanding.

Transitional Small Business Disclosure Format (check one): Yes   [ ]   No   [X]


<PAGE>
<TABLE>
<CAPTION>
                          DIGITALFX INTERNATIONAL, INC.

                         2006 FORM 10-KSB ANNUAL REPORT


                                TABLE OF CONTENTS
                                -----------------


<S>       <C>                                                                                <C>
PART I    . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   3

ITEM 1.   Description of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   3

ITEM 2.   Description of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14

ITEM 3.   Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15

ITEM 4.   Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . .  16

PART II   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17

ITEM 5.   Market for Common Equity and Related Stockholder Matters. . . . . . . . . . . . .  17

ITEM 6.   Management's Discussion and Analysis or Plan of Operation . . . . . . . . . . . .  19

ITEM 7.   Financial Statements DigitalFX International, Inc. (formerly Qorus.com, Inc.)
          and Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  37

ITEM 8.   Changes in and Disagreements with Accountants on Accounting and
          Financial Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  63

ITEM 8A.  Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  63

ITEM 8B.  Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  63

PART III  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  64

ITEM 9.   Directors, Executive Officers, Promoters, Control Persons and
          Corporate Governance; Compliance with Section 16(a) of the Exchange Act . . . . .  64

ITEM 10.  Executive Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  67

ITEM 11.  Security Ownership of Certain Beneficial Owners and Management and Related
          Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  69

ITEM 12.  Certain Relationships and Related Transactions, and Director Independence . . . .  72

ITEM 13.  Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  75

ITEM 14.  Principal Accountant Fees and Services. . . . . . . . . . . . . . . . . . . . . .  76
</TABLE>


                                        2
<PAGE>
                                     PART I

            CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
            ---------------------------------------------------------

     This  2006  Annual  Report  on Form 10-KSB, including the sections entitled
"Risk  Factors," "Management's Discussion and Analysis or Plan of Operation" and
"Business,"  contains  "forward-looking  statements"  that  include  information
relating  to  future  events,  future  financial  performance,  strategies,
expectations, competitive environment, regulation and availability of resources.
These  forward-looking  statements  include,  without  limitation,  statements
regarding:  proposed new services; our statements concerning litigation or other
matters; statements concerning projections, predictions, expectations, estimates
or  forecasts  for  our  business,  financial  and  operating results and future
economic performance; statements of management's goals and objectives; and other
similar expressions concerning matters that are not historical facts. Words such
as  "may,"  "will,"  "should,"  "could,"  "would,"  "predicts,"  "potential,"
"continue,"  "expects,"  "anticipates," "future," "intends," "plans," "believes"
and "estimates," and similar expressions, as well as statements in future tense,
identify  forward-looking  statements.

     Forward-looking  statements  should  not  be  read as a guarantee of future
performance  or results, and will not necessarily be accurate indications of the
times  at,  or  by  which,  that  performance or those results will be achieved.
Forward-looking  statements  are based on information available at the time they
are  made  and/or management's good faith belief as of that time with respect to
future  events,  and  are  subject  to  risks and uncertainties that could cause
actual  performance  or  results to differ materially from those expressed in or
suggested by the forward-looking statements.  Important factors that could cause
these  differences  include,  but  are  not  limited  to:

          -    our failure to implement our business plan within the time period
               we  originally  planned  to  accomplish;  and

          -    other  factors  discussed  under  the  headings  "Risk  Factors,"
               "Management's  Discussion  and Analysis or Plan of Operation" and
               "Business."

     Forward-looking  statements  speak  only as of the date they are made.  You
should  not  put  undue reliance on any forward-looking statements. We assume no
obligation  to  update  forward-looking  statements  to  reflect actual results,
changes  in  assumptions  or  changes in other factors affecting forward-looking
information,  except to the extent required by applicable securities laws. If we
do  update  one or more forward-looking statements, no inference should be drawn
that  we  will  make  additional  updates  with  respect  to  those  or  other
forward-looking  statements.

ITEM 1.   DESCRIPTION OF BUSINESS

OVERVIEW

     DigitalFX  International,  Inc.  is  a  digital  communications  and social
networking  company  that,  through  a  multi-tiered affiliate program, offers a
suite  of  proprietary digital communication tools, including video email, video
instant  messaging,  live  webcasting,  podcasting,  blogging  and digital vault
storage.  Our  social  networking  website,  www.helloWorld.com, operated by our
                                             ------------------
wholly-owned  subsidiary,  DigitalFX  Networks,  LLC, a Nevada limited liability
company,  targets  users  from ages 18 to 65.  The site features a full suite of
digital  communication  tools.  Customers  pay a monthly subscription fee to use
the  tools and to participate in the social network.  Additionally, our website,
www.vmdirect.com,  operated  by  our  wholly-owned  subsidiary  VMdirect, L.L.C.
----------------
("VMdirect"),  offers  affiliates  the tools necessary to effectively market and
distribute  our  digital  communication  tools.


                                        3
<PAGE>
     Our  tools help our customers create, manage and store their digital assets
with the objective of making their digital lives richer and simpler.

     Our  multi-tiered  affiliate  program  drives  the  growth of our business.
Rather  than  using  traditional  advertising and marketing methods, we chose to
create  a  multi-tiered  affiliate program to develop new customers.  Affiliates
earn  retail  commissions  on  a  monthly residual basis by acquiring new retail
customers for us.  Affiliates also earn commissions from the sales activities of
other  affiliates who they personally enroll.  These rewards are extended for up
to eight generations of affiliates, meaning that an affiliate earns a commission
on  the  sales of the affiliates they have personally enrolled as well as on the
sales  of  second-,  third-, and fourth-generation affiliates, potentially eight
levels  deep.  Our  affiliate  compensation  plan is structured on a 3x8 matrix,
meaning  affiliates  can  each  enroll  three  affiliates underneath themselves,
before they begin to build their next organizational level.  The layers of three
continue  down  a  total  of  eight  levels.

HISTORY  OF  THE  COMPANY

     We  were  incorporated  on  January 23, 1991 under the laws of the state of
Florida.  Prior to November 2001, we provided intelligent message communications
services  to  enterprises  in  the  travel and hospitality sectors.  In November
2001,  we  sold  substantially  all  of our assets to Avery Communications, Inc.
("Avery")  after which we continued without material business assets, operations
or  revenues.

     On June 22, 2004, we consummated the transactions contemplated by a certain
Securities  Purchase  Agreement  dated  June 10, 2004, by and among the Company,
Keating  Reverse  Merger  Fund,  LLC,  Thurston Interests, LLC and certain other
shareholders of the Company. The transactions resulted in a change of control of
the  Company. Prior to this transaction Thurston Interests, LLC was our majority
shareholder.  Thurston  Group,  Inc.,  one  of Thurston Interests, LLC's related
entities,  provided  consulting  services  to  us  in  connection with potential
financing,  merger  and/or  acquisition  transactions.  Thurston  Communications
Corporation,  another  of Thurston Interests, LLC's related entities, engaged in
several  bridge  financings  of Aelix, Inc., a former subsidiary of the Company.
Thurston  Interests, LLC and its related entities are hereinafter referred to as
"Thurston."

     Prior to entering into the Purchase Agreement, our debt owed to Thurston in
the  principal  amount  of  $4,686,799,  together with accrued interest totaling
$1,840,921,  was  satisfied  by our issuance of a convertible promissory note in
the  principal  amount  of  $1,228,870  (the  "First  Note")  and  a convertible
promissory  note  in  the  principal  amount  of  $60,000 (the "Second Note") to
Thurston.  Both  notes  were  convertible  into our common stock at a conversion
price  of  $2.50  per  share.  Thurston,  our  majority shareholder prior to the
closing  of  the  transactions  contemplated  under the Purchase Agreement, also
paid,  on  our behalf, an outstanding promissory note in the amount of $200,000,
plus  interest  of  $10,667,  and  assumed  certain accounts payable and accrued
expenses  totaling  $166,437.

     We  also  settled with an unrelated party a debt in the amount of $100,000,
together  with  accrued  interest,  by the issuance of a $27,500 note, which was
convertible,  at  the election of the holder, into shares of our common stock at
$2.50  per  share.

     Pursuant to the Purchase Agreement, (i) Thurston and the other shareholders
sold  177,122  previously  issued  shares of our common stock to KRM Fund, for a
purchase  price of approximately $1.9196 per share; (ii) Thurston sold the First
Note to KRM Fund; (iii) KRM Fund converted the First Note into 491,548 shares of
our  common  stock, at a conversion price of $2.50 per share; and (iv) we issued
KRM  Fund  20,000  shares  of  our  common  stock  for a total purchase price of
$50,000,  or  $2.50 per share.  Additionally, Thurston converted the Second Note
into  24,000  shares  of  our  common  stock, at a conversion price of $2.50 per
share.


                                        4
<PAGE>
     Immediately  following  the  closing  of  the  Purchase Agreement, KRM Fund
purchased  from an unrelated party a convertible promissory note issued by us in
the principal amount of $27,500, which was convertible into shares of our common
stock at a conversion price of $2.50 per share.  KRM Fund in turn converted this
note  into  11,000  shares  of  our  common  stock.

     Effective  as  of the closing of the Purchase Agreement, Patrick J. Haynes,
III resigned as our Chief Executive Officer and a director, Robert T. Isham, Jr.
resigned  as  a  director,  Thomas  C. Ratchford resigned as our Chief Financial
Officer,  and  Kevin  R.  Keating was appointed as our sole director, President,
Treasurer and Secretary.  Concurrently, our principal executive office was moved
to 936A Beachland Boulevard, Suite 13, Vero Beach, FL 32963.

     We  have no ongoing relationship with Thurston.  We are aware that Thurston
continues  to  own  shares  of  our  common  stock.

     On  October  31,  2004, we entered into a Letter of Intent to acquire Taxus
(Cayman)  Inc.,  a  company  incorporated  under  the laws of the Cayman Islands
("Taxus").  Taxus  owns and operates its business through a Chinese wholly-owned
foreign enterprise, which has exclusive management and licensing agreements with
Beijing Taxus Co. Ltd., a private Chinese enterprise ("Beijing Taxus").  Beijing
Taxus  was established in 2000 and is currently headquartered in Beijing, China.
Beijing  Taxus  is a bio-tech company specializing in the research, breeding and
extraction  of Taxus plants, also known as yew trees.  Effective April 13, 2005,
we  terminated this Letter of Intent due to the failure of Taxus to deliver U.S.
GAAP  financial  statements  and  the  appropriate  Chinese regulatory approvals
within  60  days  of  the  date  of  the  Letter  of  Intent.

     On  April  25,  2005, we entered into a Letter of Intent to acquire Private
Brands,  Inc.,  a California corporation ("Private Brands") from Tarrant Apparel
Group,  a  California corporation ("Tarrant").  Private Brands is a wholly-owned
subsidiary  of  Tarrant.  Private  Brands  is  a  Los  Angeles, California based
apparel  company  focused  on acquiring or exclusively licensing rights to brand
names.  Effective  June  16, 2005, the parties mutually agreed to terminate this
Letter  of  Intent.

     Effective August 11, 2005, we entered into an Exchange Agreement with Elwin
Group  Limited,  an  International  Business Company incorporated in the British
Virgin  Islands  ("Elwin"),  each  of  the  equity  owners  of Elwin (the "Elwin
Members"),  and  KRM Fund.  Elwin through its affiliates and controlled entities
is  a  producer  of  primary  aluminum ingots.  Effective September 21, 2005, we
terminated  the  Exchange  Agreement  with  Elwin  due  to  the  failure  of the
transactions  contemplated  thereunder to have been consummated by September 15,
2005.

     On  December 15, 2005, we entered into an agreement and plan of merger with
EcoTechnology,  Inc.,  a Delaware corporation ("EcoTech") and Qorus Acquisition,
Inc.,  a  Delaware  corporation  and our wholly-owned subsidiary ("Merger Sub").
EcoTech  is  in  the  business  of  designing,  building,  owning  and operating
industrial plants that deploy a state-of-the-art, proprietary thermal drying and
gasification process to reduce human waste (commonly referred to in the industry
as  "sludge"  or  "biosolids")  into  dry bio-ash that is beneficially reused in
mulch,  fertilizer,  and  building  products.  Effective  February  8,  2006, we
terminated  this  Merger  Agreement  due  to  the  failure  of  the transactions
contemplated  thereunder  to  have  been  consummated  by  January  31,  2006.

     Effective  February  23,  2006,  we entered into an Exchange Agreement with
Shiming (Cayman) Co., Ltd., ("Shiming"), an exempted company incorporated in the
Cayman Islands with limited liability, each of the equity owners of Shiming (the
"Shiming  Shareholders"),  and  KRM  Fund.  Shiming  through  its affiliates and
controlled  entities  were  engaged  in  the  research  and development, product
design,  marketing  and  product  support  of mainly high speed broadband server
hardware  and  multimedia  software.


                                        5
<PAGE>
Effective March 15, 2006, we terminated this Exchange Agreement with Shiming due
to  Shiming's  failure  to  provide  audited  financial  statements  prepared in
accordance  with  U.S.  GAAP.

     Keating  Securities  introduced  us to each of Taxus (Cayman) Inc., Private
Brands,  Inc.,  Elwin  Group  Limited, Eco Technology, Inc. and Shiming (Cayman)
Co.,  Ltd.  To  our  knowledge,  Keating  Securities,  LLC  did  not receive any
consideration  in  connection with these introductions and to our knowledge, did
not,  and  currently  does  not, have any relationship with each of the proposed
reverse  merger  candidates.

     On  May  23,  2006,  we  entered  into an Exchange Agreement with VMdirect,
L.L.C.,  a  Nevada  limited liability company, the members of VMdirect holding a
majority  of  its  membership  interests,  and  KRM  Fund.  The  closing  of the
transactions  contemplated  by the Exchange Agreement occurred on June 15, 2006.
At  the  closing,  we  acquired  all  of the outstanding membership interests of
VMdirect  from the VMdirect Members, and the VMdirect Members contributed all of
their Interests to us.  In exchange, we issued to the VMdirect Members 1,014,589
shares  of  our  Series A Convertible Preferred Stock, par value $0.01 per share
(the  "Preferred  Shares"),  which, as a result of the approval by a substantial
majority  of  our  outstanding shareholders entitled to vote and the approval by
our  board  of  directors  on  June  22,  2006, of amendments to our articles of
incorporation  that  (i) changed our name to DigitalFX International, Inc., (ii)
increased  our  authorized  number of shares of common stock to 100,000,000, and
(iii)  adopted  a 1-for-50 reverse stock split, on August 1, 2006 converted into
approximately  21,150,959  shares  of our common stock.  We also assumed options
currently  exercisable  to  purchase  962,499  shares  of  our  common stock and
warrants currently exercisable to purchase 1,552,495 shares of our common stock.
Based  on  the closing price of our common stock as reported by the NASDAQ Stock
Market  on  June  15, 2006, the 21,150,959 shares of our common stock underlying
the  Preferred Shares issued pursuant to the Exchange Agreement had an aggregate
value  of  $158,632,192.

     The  following  parties constituted the VMdirect Members: Craig Ellins, Amy
Black,  The  Richard  Kall  Family  Trust,  Lizanne  Kall,  David Weiner, Family
Products,  LLC,  Bruce Raben, the Bruce I. Raben Living Trust, Joe Bianco, Jorel
Management  Corp.,  Mathias  Venture  Partners,  LLC,  Peter  Newman,  Woodman
Management  Corporation,  SAM  Venture  Partners,  Lorne  Walker,  Kurt Adelman,
Douglas  and  Terry  McNamara,  Beverly  C.  Wolfe,  Strategic Turnaround Equity
Partners,  L.P.  (Cayman),  MER  Investments,  Inc.  and  John  Pretto.

     At  the closing, VMdirect became our wholly-owned subsidiary.  The exchange
transaction  was  accounted  for  as  a  reverse  merger (recapitalization) with
VMdirect  deemed  to  be  the accounting acquirer, and us deemed to be the legal
acquirer.

     As a result of the closing of the transactions contemplated by the Exchange
Agreement,  the  VMdirect Members, together with holders of options and warrants
to  purchase VMdirect membership interests, held approximately 23,665,953 shares
of  our  common stock on a fully-diluted and as converted to common stock basis,
representing  approximately 96.2% of our outstanding shares of common stock on a
fully-diluted  and  as  converted  to  common  stock basis, and our shareholders
existing  immediately  prior to the closing held approximately 923,961 shares of
our  common  stock  on a fully-diluted basis, representing approximately 3.8% of
our  outstanding  shares  of  common  stock  on  a  fully-diluted  basis.

     Following  the  closing  of  the  transactions contemplated by the Exchange
Agreement,  Craig  Ellins,  VMdirect's  Chief  Executive  Officer and one of its
former  members  and  managers, became our Chairman, Chief Executive Officer and
President, and Lorne Walker, VMdirect's Chief Financial Officer became our Chief
Financial  Officer  and  Secretary.


                                        6
<PAGE>
     At the closing of our acquisition of VMdirect, pursuant to the terms of the
Exchange  Agreement, we entered into a financial advisory agreement with Keating
Securities,  LLC, a registered broker-dealer, under which Keating Securities was
compensated  by  us  for advisory services rendered to us in connection with our
acquisition  of  VMdirect.  The transaction advisory fee of $500,000 was paid at
the  closing  of the acquisition. Kevin R. Keating, one of our directors, is the
father of the principal member of Keating Investments, LLC. Keating Investments,
LLC  is  the  managing  member  of  Keating  Reverse  Merger  Fund, LLC. Keating
Investments,  LLC  is  also  the  managing  member  and  90%  owner  of  Keating
Securities,  LLC,  a  registered broker-dealer. Keating Investments, LLC is also
the  managing  member and 100% owner of Keating After Market Support, LLC. Kevin
R.  Keating  is  not  affiliated  with  and  has  no  equity interest in Keating
Investments,  LLC,  Keating Reverse Merger Fund, LLC, Keating Securities, LLC or
Keating  After  Market Support, LLC and disclaims any beneficial interest in the
shares of our common stock owned by Keating Reverse Merger Fund, LLC. Similarly,
Keating  Investments, LLC, Keating Reverse Merger Fund, LLC, Keating Securities,
LLC  and  Keating  After Market Support, LLC disclaim any beneficial interest in
the  shares  of  our  common  stock  currently  owned  by  Kevin  R.  Keating.

     On  December 22, 2006, we entered into a Securities Purchase Agreement (the
"Securities  Purchase  Agreement")  with  Kingdon  Associates,  Kingdon  Family
Partnership,  L.P.  and  M.  Kingdon Offshore Ltd. (the "Investors") pursuant to
which we agreed to sell to the Investors an aggregate of 1,000,000 shares of our
common stock (the "Shares") at a per share price of $4.75 (the "Purchase Price")
for  gross  proceeds  of  $4.75  million.  The  transactions contemplated by the
Securities  Purchase  Agreement  closed  on  December  27, 2006 (the "Closing").
Immediately  following  the  Closing,  we  had 23,280,563 shares of common stock
issued  and  outstanding.

     In  connection with the Closing, on December 27, 2006, we also entered into
a  Registration  Rights Agreement (the "Registration Rights Agreement") with the
Investors,  pursuant  to  which,  among  other things, we agreed to register the
resale  of  the  Shares  by the Investors and to keep the registration statement
effective  until  the  earlier of the date on which all Shares have been sold by
the  Investors  and the date that all of the Shares may be sold by the Investors
pursuant  to  Rule  144 promulgated under the Securities Act of 1933, as amended
(the  "Effectiveness  Period").  The Registration Rights Agreement provides that
if  (i)  we  do not file a registration statement on or before January 31, 2007,
(ii) a registration statement is not declared effective on or prior to March 27,
2007,  which  date  may  be  extended  to  May  1,  2007  in  the event that the
registration  statement  is  reviewed  by  the SEC, or (iii) after its effective
date,  such  registration  statement ceases to remain continuously effective and
available  to  the  holders of the Shares at any time prior to the expiration of
the  Effectiveness  Period  for an aggregate of more than 30 consecutive trading
days  or  for  more  than an aggregate of 60 trading days in any 12-month period
(which  need  not be consecutive), then we must pay each holder of Shares on the
date  of such event, and for each month thereafter that such event continues, an
amount  in  cash  as  partial  liquidated  damages  equal to 1% of the aggregate
Purchase  Price  paid  by  such  Investor  pursuant  to  the Securities Purchase
Agreement  for  any Shares then held by such Investor, up to a maximum of 18% of
the  aggregate  Purchase  Price  paid  by  such Investor in any 12-month period,
unless,  as  a  result  of  the liquidated damages provision of the Registration
Rights  Agreement, generally accepted accounting principles of the United States
require  the  Shares  to  be  treated  as derivative securities, or as any other
financial  component  other than stockholders equity, in which case, the maximum
amount  payable  under  the  liquidated  damages  provisions of the Registration
Rights  Agreement  will  not  exceed 18% of the aggregate Purchase Price paid by
such  Investor.

     Also  in  connection  with the Closing, each of Craig Ellins, our Chairman,
Chief Executive Officer and President, Lorne Walker, our Chief Financial Officer
and  Secretary,  Amy  Black,  the  President of VMdirect, VM Investors, LLC, our
majority shareholder, and Richard Kall, one of the managers of VM Investors, LLC
entered  into  a  Lock-Up  Letter  Agreement  (the  "Lock-Up  Letter Agreement")
pursuant  to  which  such parties agreed not to offer, sell, pledge or otherwise
dispose  of  any  shares  of  common  stock


                                        7
<PAGE>
owned  or  subsequently  acquired  by  such parties for a period ending 180 days
after  the  Closing,  without  the  prior  written  consent  of  Kingdon Capital
Management,  LLC.  Kingdon  Capital Management, LLC is the investment advisor of
each  of  Kingdon  Associates,  Kingdon  Family Partnership, L.P. and M. Kingdon
Offshore  Ltd.

     Roth  Capital Partners, LLC and Craig-Hallum Capital Group LLC acted as the
placement  agents  ("Placement  Agents")  in  connection  with  the transactions
consummated  under the Securities Purchase Agreement.  For their services as the
Placement  Agents,  we paid the Placement Agents an aggregate commission in cash
equal  to  7% of the gross proceeds from the sale of the Shares or $332,500.  We
also  paid  Roth Capital Partners, LLC an advisory fee of $16,625.  In addition,
we  reimbursed the Placement Agents for their out-of-pocket expenses incurred in
connection  with  the  transactions  contemplated  by  the  Securities  Purchase
Agreement,  including  the  actual  and reasonable fees and disbursements of the
Placement  Agents'  legal  counsel,  in  the  aggregate  amount of approximately
$50,086.

RECENT  DEVELOPMENTS

     During fiscal 2006 we took the following significant actions to support our
business:

          -    Commenced sales to affiliates and retail customers in Australia
               and New Zealand in January.

          -    Launched the 5.0 studio initially in October adding podcasting,
               blogging, and digital media sharing to the existing product. The
               5.0 studio represented a radical advancement from our 4.0
               product. The 5.0 studio was fully functional in February 2007.

          -    Developed a Learning Media System - an interactive web-based,
               video learning environment.

          -    Began implementation of a customer relationship management system
               (RightNow) and a business intelligence system (Cognos).

     Sales in Australia and New Zealand in 2006 accounted for 10% of our growth.

     The  Learning  Media  System  (LMS)  is  fully  customizable  and  has  a
comprehensive  back-end  administration system. The LMS can support thousands of
users  with  accountability  and  certification. We intend to add the LMS to our
product  offering  to  small  businesses  in  2007.

     The  Customer  Relationship  Management  Software (CRMS) is a comprehensive
system  that  tracks  all  customer  contacts with our support staff through one
easy-to-use  interface.  Each  support activity is stored by customer for future
reference  and  archiving.  The  CRMS  includes  a  knowledge base that is fully
indexed  and  searchable.  It  assists customers to get answers to questions and
contains  a search capability that utilizes keywords to locate specific articles
and  information  from  the  database.  The  system is scalable and adaptable to
allow  future  growth for new products and services, international expansion and
multi-language  capability.

     Data  and reporting from the Cognos system will assist senior management in
critical  business  decisions  and daily tracking of key performance indicators.


                                        8
<PAGE>
BUSINESS OF DIGITALFX INTERNATIONAL, INC.

General  Overview

     We  are a digital communications and social networking company.  We develop
and  market  proprietary  web-based  social  networking  software  applications,
including  video  email,  video instant messaging, podcasting, blogging and live
webcasting.  We  bundle  our  proprietary  applications  with  other open source
applications  and  sell  them  as  an integrated suite through an Internet-based
subscription  model.  Our  Web  2.0  communication tools enable users to create,
transcode,  send,  manage  and  store  all forms of digital media content (i.e.,
photos,  videos and music).  These innovative social networking applications are
scalable,  customizable  and  highly  extendible,  and  provide  individuals and
enterprises  with  highly  effective,  multi-sensory  communication  tools.

     Currently,  the primary source of subscribers for these applications is our
social  networking  website,  www.helloworld.com.  We are aggressively expanding
our  subscription base by offering our suite of communications tools to affinity
groups,  other  social  networks  and  later  in 2007, to small and medium sized
businesses  and  corporate  enterprises.  By  providing individuals and business
subscribers  with our rich and expanding suite of collaborative applications, we
are  facilitating  the  rapidly  accelerating  trends in streaming media, social
networking, podcasting and self-generated content.  With our marketing strategy,
which is based on a commission structure encouraging the expansion of the number
of  our  marketing affiliates, and the ease of use of our products - designed to
simplify  the  creation  and management of digital media - we intend to simplify
the  digital  lives  of  millions  of  subscribers.

     We currently market our products on the Internet and maintain affiliates in
the  United  States,  Canada,  the  United  Kingdom,  Mexico,  Australia and New
Zealand.

Growth  Strategy

     The primary business strategy and the principal source of our recent growth
involves  our  multi-tiered  affiliate  program.  In  the multi-tiered affiliate
program,  affiliates  purchase  business  packages  that  range  in  price  from
approximately  $70 to $1,996.  These packages provide them with the products and
tools  they  need  to  get  started  with their VMdirect business.  The business
packages  include web cameras, an affiliate training CD, HELLOWorld 30-day trial
accounts  and  access  to  an  online  administration and training center, which
includes  a  real-time  commission engine, promotional tools, contact management
systems,  a  video  email  auto-responder and other marketing tools.  With these
tools,  affiliates  use  their  personal  sales efforts to share the benefits of
HELLOWorld  with  others.  Viral  marketing  dynamics occur as customers use the
digital  communications  tools  and  share the opportunity to resell HELLOWorld.
Early  adopting  consumers  who  are  pleased with the product often communicate
their  positive  experiences to friends and colleagues.  Word can quickly spread
to  a  new group of users, who in turn promote the product's benefits to others,
who  then  do  the  same  with the people they know.  This type of word-of-mouth
advertising has come to be described as "viral" marketing because it can rapidly
spread  from  one  person  to  another.  Retail subscriptions start at $9.95 per
month,  depending  on the level of features desired by the customer.  Affiliates
earn  commissions  by enrolling customers and other affiliates, participating in
an  enrollment  matrix  that  pays  commissions  up to eight levels deep.  As of
December  31,  2006,  we  had  approximately  14,000  active  affiliates.

     The  market  for  our  services  is relatively new and rapidly evolving and
growing.  Social  networking  and  streaming  media  are areas of high interest,
dominating  both  the  consumer  and financial press.  According to the Aberdeen
Group,  the streaming media industry is expected to grow from $2 billion in 2004
to  an  estimated $12 billion by 2008.  We expect that the annual rate of growth
of  adoption


                                        9
<PAGE>
of  streaming  media  tools  in  2007  will  exceed  2006  as  more users become
comfortable with this technology, the Internet and personal computer usage.

     Social  networking  sites  are  also  among  the  fastest  growing  Web
destinations.  In May 2006, the top 10 social networking sites combined for over
1/3  of  total  unique  Internet  visits.  Other trends in our favor include the
dispersion  of  families  and  friends  around the country and globe who want to
visually  communicate  on  a  regular  basis and the desire of many companies to
reduce  resources  spent on employee air and automobile travel. We differentiate
ourselves  from  other social networking sites by allowing our members to retain
copyright  and  ownership  of  all  the  content  that  they  have  created.

     We  intend  to  continue  to  grow  our  business through continued product
enhancements  with  additional  features and functionality; the extension of the
DigitalFX  Studio  to small businesses and enterprise customers; and by offering
ancillary  products  and  services  through  the  affiliate program. In 2007, we
intend  to  initiate  a  traveling leadership seminar called the One Vision Tour
that  will  deliver  substantial  training  to  affiliates  and  potential  new
customers.  The  seminar  will  encompass  marketing  techniques  to  facilitate
expansion  of  existing  businesses  and  leadership  skills  to  manage growing
organizations.

     During  2007,  we  also  plan  to  pursue  strategic, accretive acquisition
opportunities  to  accelerate  growth.  We  will  evaluate  prospects  that  are
synergistic  and  look  to  invest  in  businesses  or  technologies  that offer
complementary  products  or  services  that  enhance  our  business  model.

     We  intend to achieve further international expansion and to begin sales of
our  existing  services  to  small businesses in the first half of the year.  We
intend  to  continue  our  affiliate  marketing  approach.  To  facilitate  our
international  expansion,  we have engaged an experienced multi-tiered marketing
consultant  who has lived and worked extensively in Europe and Asia. His initial
objectives  in 2007 are to accelerate growth in the United Kingdom and establish
the  infrastructure  and  translations  necessary  to  enroll subscribers in two
European  countries  by  the  end of the year.  We anticipate realizing revenues
from  these  new  markets  in  2007.

     In  early  2007,  we  initiated  an  investor  relations  program  with the
objective  of  increasing  our  exposure to both institutional investors and the
retail  brokerage  community.  We also launched a public relations and marketing
program  aimed  at  specific  media  outlets  utilizing  personal interviews and
featured  articles  in  national  financial,  technical  and media publications.

Products

   DigitalFX  Studio

     Video  Mail  is  a web-based email client with streaming media options that
allow  users to create or reply with embedded video messages.  The videos can be
delivered  in multiple media formats (e.g., Windows, Flash, Quicktime), ensuring
higher  delivery  rates  than  ever  before.  Each  email  account comes with: a
private  video  vault  for  storing  and  managing videos, the ability to upload
custom graphics and videos, and the option to cut-and-paste video on demand onto
external  websites.

     Video  IM  is  a  video-enabled instant messenger tool that allows users to
send  real-time  streaming video to anyone that has agreed to join their contact
list.

     Live  Webcasting  is  an  easy-to-use webcasting tool that allows a user to
broadcast live over the Internet to a number of simultaneous viewers.


                                       10
<PAGE>
     Podcasting  enables  video  recordings  to be available for downloading and
subscriptions  by  others  in  single  or episodic delivery via RSS (real simple
syndication).

     Blogging allows the creation of an online video diary.

     To  support our customers and affiliates, we have developed a complete line
of  video  tutorials  and  maintain  a  technical support desk that is available
twenty-four  hours  a  day.  Additionally,  our  marketing  staff  and  account
executives  assist  affiliates  in  becoming  more  effective  in  the  areas of
marketing  and  sales.

   Web-based  Social  Networks

     HELLOWorld.com  is  a  web  portal  utilizing  a  commercial-free,
subscription-based  application  service  provider model through which customers
access  our  wide  spectrum  of streaming video content as well as an integrated
suite  of consumer-oriented streaming media applications, including video email,
video  chat  and live web-casting.  Through the portal, users are able to access
their  personal  digital  media  vaults  as well as other user-generated content
(music, videos, photos submitted by other members) and can utilize the community
tools  to  search  for  other  members.

Customers

     No  individual  customer  accounted  for  a material portion of our revenue
during  the  past  two  years. At December 31, 2006, we had approximately 26,000
active customers as compared to approximately 7,000 at December 31, 2005.

     We  aim  to  provide  customers with industry leading product and technical
support  services  through our highly trained customer support personnel located
in  Las  Vegas, Nevada and outsourced vendors.  Our support services include bug
fixes,  telephone  support  and  upgrades or enhancements of particular software
product  releases  when  and if they become generally available.  In addition to
our  customer  support  personnel being available 24 hours a day, 7 days a week,
365  days a year, we provide a comprehensive evolving knowledge base and conduct
quality  audits  of  our  products  and services.  We also support our affiliate
network  in  all  aspects  of  the  VMdirect  business  opportunity.

     All  affiliates  and  customers  have  access to the VMdirect or helloWorld
customer  support  website that provides the latest product information, general
service  updates  and  up-to-date knowledge base articles.  The customer support
websites  also  provide electronic forms for opening technical support incidents
and feedback for suggesting product, service and company enhancements.

Competition

     We  compete against well-capitalized streaming media and Internet companies
as  well as many smaller companies.  The market for our products and services is
highly competitive.  The streaming media sector is evolving and growing rapidly,
and  companies  are  continually  introducing  new  products  and  services.

     We  believe  the  streaming  media solutions we offer are comparable and in
many  cases  superior to those offered by our competitors because in addition to
having  superior  picture  quality,  our primary product (helloWorld.com) is the
only  product  that allows a user to upload any format of video and transcode it
into  a  range  of  commonly  used video formats to ensure that the video can be
properly  viewed.  In  addition  to  our  products  and  services,  we  have  a
knowledgeable  and  attentive customer support team as well as dedicated account
managers  who  focus  on  the  needs  of  our  customer  and  affiliate  base.


                                       11
<PAGE>
     Competitive  parameters  include  the  range  of our product offerings, the
performance  and  quality  of  our products and services, the reliability of our
infrastructure,  our expertise and experience in streaming media technology, our
scalability  and capacity, ease of use, the price of our services, and the level
of  customer  support.

     Although we do not currently compete against any one entity with respect to
all  of the features of our services, we do compete with numerous companies with
respect  to  specific  elements.  These elements encompass five primary markets:
streaming  media,  social  networking,  on-demand  collaboration,  digital media
management  and self-generated media publishing. In the realm of streaming media
services  aimed  at the consumer and small business marketplace, our competitors
consist of numerous companies including Easystream, Playstream, Co-Video Systems
and  SightSpeed.  In the domain of streaming media services targeted to mid-size
and  large  enterprises,  our  competitors  will include Akamai, VitalStream and
Savvis, along with a number of smaller private companies. With respect to social
networking,  our  HELLOWorld  site  and its features compete with broader social
networking and Internet sites that include MySpace.com and LiveJournal.com. With
respect  to on-demand collaboration, we compete with WebEx and Radvision. In the
realm  of  digital  media management, we compete with thePlatform and Virage. In
the  realm of self-generated media publishing, we compete with such companies as
YouTube  and  Flickr.

     In  some  cases,  competitors  may  have  longer  operating histories, more
customers,  greater  financial  strength,  more  name  recognition,  and  larger
technical  staffs.  These  competitors  may  be  able  to attract customers more
easily  because  of  their financial resources and awareness in the market.  Our
larger  competitors  can  also  devote  substantially more resources to business
development  and  may  adopt  more  aggressive  pricing  policies.

Trademarks, Domain Names and other Intellectual Property

     Our  registered  intellectual  property  is  primarily  in  the  form  of
trademarks.  We  have  registered  the  VMdirect(R)  and Video Says It Better(R)
trademarks  with  the  United  States Patent and Trademark Office and have filed
applications  for  the registration of the trademarks helloWorld(TM), Connecting
People,  Changing Lives(TM), and Digital Life Made Simple(TM). We have not tried
to  register  copyrights or patents on any of our software programs, methods, or
other  ideas,  but we believe that some of our computer code may have common law
copyright  protection.

     We  also  own  the  www.vmdirect.com,  www.firststream.com  and
                         ----------------   -------------------
www.helloworld.com  domain  names,  and  own or hold exclusive and non-exclusive
------------------
licenses  to several proprietary software applications relating to video e-mail,
video  instant  messaging, live webcasting, digital vault storage technology and
podcasting,  including  a  perpetual  non-exclusive  license  we  obtained  from
RazorStream,  LLC,  a  company  majority  owned  by our majority shareholder, VM
Investors,  LLC,  which  is in turn owned by, among others, Craig Ellins and Amy
Black,  our  Chief  Executive  Officer  and President, and VMdirect's President,
respectively.

     We  have  a  policy  of  entering  into  confidentiality and non-disclosure
agreements  with  our employees and some of our vendors and customers as we deem
necessary.  We  also  have  a  policy  of  not  allowing customers to access our
software's  source  code.  These agreements and policies are intended to protect
our  intellectual  property,  but  we cannot assure that these agreements or the
other  steps  we  have  taken  to  protect  our  intellectual  property  will be
sufficient  to  prevent  theft, unauthorized use or adverse infringement claims.
We  cannot  prevent  piracy of our software, methods and features, and we cannot
determine  the  extent  to  which  our  software, methods and features are being
pirated.  Further,  the  laws  of  some  foreign  countries  do  not protect our
proprietary rights as well as the laws of the United States.


                                       12
<PAGE>
     We will continue to expand the VMdirect, HELLOWorld and First Stream brands
and  our  proprietary  trademarks,  domains  and  software.

Product  Development

     We conduct continuing product development to support and expand our product
offerings  internally,  as well as through the use of third party services.  All
engineering  and  design  for  the applications are created internally.  We also
contract  with  best-of-breed  contractors  for  discrete project work.  Through
December  31,  2006, six independent contractors were used on separate projects.
We  spent $1,278,000 on product development in 2006 primarily on our new digital
media platform that features added functionality, including podcasting, enhanced
email  and  IM  messaging  and  blogging.  Our  spending  in  2007 will focus on
additional  product enhancements to our 5.0 studio and on the adaptation of this
product  to  small  businesses and enterprises.  We anticipate that spending for
these initiatives will be higher in the first half of the year.

     In  the  years  ended  December  31,  2004  and 2005, we spent $481,000 and
$289,000,  respectively,  on  product  development.  The larger amount in fiscal
2004 was due to spending for the 4.0 product that was released in March 2005.

Seasonality

     We  experience  seasonality  in  our business in specific months during the
year.  December  and  July  have  historically  experienced  lower  growth,  as
affiliates are focused on family holidays and vacations. We expect this trend to
continue.

EMPLOYEES

     As  of  March  13,  2007, we had 55 full-time employees and eight part-time
employees, all located in Las Vegas, Nevada.  Since inception, we have never had
a  work  stoppage,  and  our employees are not represented by a labor union.  We
consider  our  relationships  with  our  employees  to  be  positive.

GOVERNMENT  REGULATION

     Our  marketing  program  is  subject  to  a  number  of  federal  and state
regulations  administered  by  the  Federal  Trade  Commission and various state
agencies  in  the  United States, directed at preventing fraudulent or deceptive
shams  by  ensuring that product sales are made to consumers of the products and
that  compensation,  recognition,  and  advancement  within  the  marketing
organization  are  based  on  the sale of products rather than investment in the
organization  or other non-sales-related criteria. These regulatory requirements
do  not  include  "bright  line" rules and are inherently fact-based. Thus, even
though  we  believe  that our marketing program complies with applicable federal
and  state  laws  or regulations, a governmental agency or court could determine
that  we  have  failed  to meet these requirements in a particular case. Such an
adverse  determination  could  require us to make modifications to our marketing
system,  increasing  our  operating  expenses. The negative publicity associated
with  such  an  adverse  determination  could also reduce affiliate and end user
demand for our products, which would consequently reduce our sales and revenues.

     Our  ability  to  capitalize  on growth in new international markets and to
maintain  the  current level of operations in our existing international markets
is  exposed  to  risks  associated  with  international  operations,  including:


                                       13
<PAGE>
          -    the possibility that a foreign government might ban or severely
               restrict our business method of selling through our affiliates,
               or that local civil unrest, political instability or changes in
               diplomatic or trade relationships might disrupt our operations in
               an international market;

          -    the possibility that a government authority might impose legal,
               tax or other financial burdens on affiliates, as direct sellers,
               or on our company due, for example, to the structure of our
               operations in various markets; and

          -    the possibility that a government authority might challenge the
               status of our affiliates as independent contractors or impose
               employment or social taxes on our affiliates.

     We  conduct  all  of  our  international  operations  in Australia, Canada,
Mexico,  New  Zealand  and the United Kingdom.  We have not been affected in the
past  by  any  of  the potential political, legal or regulatory risks identified
above.  While  we  do  not  consider  these  risks to be material in the foreign
countries in which we currently operate, they may become material risks in other
countries  where  we  may  expand  our  business.

     Legislative  or  regulatory changes in one or more of our present or future
markets  could lead to the determination that our marketing system do not comply
with  applicable laws and regulations and could result in the prohibition of our
marketing  system.  Failure to comply with applicable laws and regulations could
result  in  the  imposition of legal fines and/or penalties which would increase
our  operating  costs.  We  may  also  be  required to comply with directives or
orders  from  various  courts or applicable regulatory bodies to comply with new
legislation  or  regulation, which would detract management's attention from the
operation  of  our  business.  Further  we could be prohibited from distributing
products through our marketing system or may be required to modify our marketing
system.

ITEM 2.   DESCRIPTION OF PROPERTY

     Our  principal  executive  offices  are  located at 3035 East Patrick Lane,
Suite  9,  Las Vegas, Nevada 89120.  Our telephone number is (702) 938-9300.  It
is  from  this  facility that we conduct all of our executive and administrative
functions  and  ship  merchandise  to  affiliates  and  consumers.  We  utilize
approximately  11,000  square  feet  and  pay  $17,600 per month pursuant to the
governing  lease  agreement.  Due  to  our  current  growth  and  expected staff
additions,  we foresee the need to lease additional space within the next twelve
months.  We  are  presently  previewing  locations that are close to our present
offices  and are working with design consultants for approximately 35,000-55,000
square  feet  of  space  to be used as offices, warehouse, theater and recording
studios.

     VMdirect  was  party  to a Sublease dated August 8, 2005 with Public Market
Ventures,  Inc.  ("PMV"),  pursuant to which we leased our administrative office
space.  VMdirect  was  also  party to a Lease Agreement dated September 15, 2005
with  Patrick  Airport  Business  Center,  LLC ("PABC" and together with PMV the
"landlord"),  pursuant  to  which  we  leased warehousing space for our computer
servers.  We  were  not permitted to make any alterations or improvements to, or
assign  or  sublease, the premises without the landlord's prior written consent.
We  were  also  required  to  execute,  acknowledge and deliver to the landlord,
within  15  days  of  the  landlord's  request, instruments or assurances as the
landlord  may  deem  necessary  or  appropriate  to  evidence  or  confirm  the
subordination  or  superiority  of these leases to any security instrument.  The
initial terms of these leases expired on January 31, 2007.  On February 7, 2007,
we  signed  a  new lease with PABC for the existing 11,000 square feet for a one
year period from February 1, 2007 through January 31, 2008. This lease has terms
substantially  similar  to  the lease referenced above dated September 15, 2005.


                                       14
<PAGE>
ITEM 3.   LEGAL PROCEEDINGS

     Except  as  described  below,  we are not involved in any legal proceedings
that  require  disclosure  in  this  report.

     From  time  to  time,  we  may be involved in litigation relating to claims
arising  out  of  our operations in the normal course of business.  Except as is
described  below,  we  are  not  currently  party  to any legal proceedings, the
adverse  outcome  of  which,  in  management's  opinion,  individually or in the
aggregate,  would have a material adverse effect on our results of operations or
financial  position.

     On  August 4, 2005, VMdirect filed a lawsuit in the District Court of Clark
County,  Nevada,  against  a  former  employee  alleging  a number of complaints
including fraud, breach of oral contract, intentional interference and negligent
interference,  and  seeking  compensatory  and punitive damages in amounts to be
proved  at  trial,  rescission  of the oral contract relating to the defendant's
equity  interest  in  VMdirect,  injunctive relief, punitive damages, attorneys'
fees,  disgorgement  of  ill gotten profits, revenues and gain, and restitution.
VMdirect  hired  the defendant in May 2001 as a project manager in reliance upon
the  defendant's representations regarding his skill in handling the job duties.
In  May  2002,  VMdirect agreed to provide the defendant with a small portion of
the  equity  interest  in  VMdirect,  which  was  expressly conditioned upon the
defendant working full time and in good faith for no less than 3 years after May
2002.  VMdirect  terminated defendant's employment on August 10, 2004 due to his
continuous  lack  of diligence and unsatisfactory job performance as well as his
creation  of  a  hostile  and  adversarial  work  environment.

     On August 5, 2005, VMdirect was served with a lawsuit filed in the District
Court of Clark County, Nevada, which counterclaim was amended on March 27, 2006,
by  this  same  former  employee  for  alleged breach of employment contract and
wrongful  termination, and seeking general damages in excess of $10,000, special
damages  for  lost wages and converted monies in the amount of $270,000, special
damages  for  the  equity  interest  in  VMdirect in an amount to be determined,
punitive  or  treble  damages  as  allowed  by  law,  attorneys'  fees  and  the
dissolution  of  VMdirect.  This  former  employee alleges that the grant of the
equity  interest in VMdirect had no conditions, and that VMdirect has engaged in
a  campaign  to  defame  said  former  employee.

     A  petition  to consolidate these cases was filed on September 20, 2005 and
is  currently  pending  before  the  courts.  On  May 5, 2006, our legal counsel
representing us in this matter filed a motion to dismiss the defendant's amended
counterclaim,  which  motion  was  denied  on  June 21, 2006.  Our legal counsel
representing  us  in this matter subsequently filed an answer to the defendant's
amended  counterclaim  on  July 18, 2006, denying all liability.  Our management
believes  there  exists no basis for the former employee's claims and intends to
pursue  VMdirect's  claims, and defend the former employee's claims, vigorously.
In the event our management's assessment of the case is incorrect, or the former
employee  actually  obtains  a  favorable  judgment  for the claimed damages, we
believe  that  the  economic  impact  on us would be insignificant and would not
materially  affect  our  operations.

     On  February  7,  2007,  VMdirect  and  DigitalFX Solutions jointly filed a
lawsuit  in  the Superior Court of the State of California for the County of Los
Angeles  against  a former affiliate of VMdirect alleging a number of complaints
including  unfair business practice, misappropriation of trade secrets, slander,
intentional interference with contractual relationship, intentional interference
with  prospective  economic  advantage  and  breach  of  contract,  and  seeking
compensatory  and  punitive damages in amounts to be proved at trial, injunctive
relief  and  attorneys'  fees  and  costs.  The defendant became an affiliate of
VMdirect  in  May  2006  and  agreed  to adhere to VMdirect's Code of Ethics for
affiliates.  Upon  signing up as an affiliate, defendant represented that he was
capable  of  bringing a substantial number of new affiliates to VMdirect, and in
reliance  on  this  representation,  VMdirect  agreed  to  provide  certain


                                       15
<PAGE>
privileges  to  defendant  including posting of training materials on VMdirect's
website.  VMdirect  also  agreed  to  work  with  defendant  to develop training
materials.  Although  VMdirect  paid  for  all  of  the  costs of developing the
materials  and  its  personnel  actively participated in the development of such
materials,  defendant  demanded  aggregate compensation of $300,000 for creating
the  training  and  motivational  materials  after  they  were  completed. After
VMdirect  did  not  pay this fee to defendant, defendant requested that VMdirect
stop  using  the  materials,  began  disparaging  VMdirect and its officers, and
engaged  in cross-recruiting affiliates from other VMdirect networks, a practice
prohibited  by  VMdirect's  Code  of  Ethics  for  its affiliates. VMdirect then
terminated  defendant's  distribution  network  and  believes  that  defendant
continues  to  use VMdirect's proprietary trade secrets to recruit affiliates to
join  other  network  marketing  companies  that  compete  with  VMdirect.

     On  March  6,  2007,  we, along with VMdirect and DigitalFX Solutions, were
served  with  a  cross  complaint  for  damages  filed  in the Superior Court of
California  for  the  County  of  Los Angeles, by this same former affiliate for
alleged  breach  of  contract,  fraud-intentional  misrepresentation,
fraud-intentional  concealment/omission,  fraud-false  promises,  negligent
misrepresentation  and  infringement of the rights of publicity and privacy, and
seeking  general,  exemplary and punitive damages in amounts to be determined at
trial and an order enjoining our use of his name, image, photograph and likeness
for  any purpose without his written consent. This former affiliate alleges that
the  officers of VMdirect agreed to grant him 60,000 shares of our common stock,
agreed  to  pay  him  a  percentage of FirstStream's sales in connection with is
creation  of  certain  training  materials,  agreed  to pay for the costs of all
training  materials  created by him and agreed that all training materials which
contained  his  likeness  would  remain  his  intellectual property. This former
affiliate  also  alleges  that  it  was  expressly  agreed  that  a copy of such
materials would be made available to him for posting as promotional materials on
his  own website and that his consent for VMdirect to use his image and likeness
on  its  websites  would  be  revocable  at  any  time.

     On  March  6,  2007,  legal  counsel  for the same former affiliate filed a
Notice of Removal of Action with the United States District Court of the Central
District  of  California  seeking  to remove the case from the Superior Court of
California  to  the  United Stated District Court.  Our legal counsel intends to
file  a  motion  to  remand  the  case back to the Superior Court of California.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No  matters  were  submitted  to  a vote of our shareholders in the quarter
ended  December  31,  2006.


                                       16
<PAGE>
                                     PART II

ITEM 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

COMMON  STOCK

     Our  common  stock  is  quoted  on  the OTC Bulletin Board under the symbol
"DFXN."  The following table sets forth, for the periods indicated, the high and
low bid information for our common stock, as determined from sporadic quotations
on  the  OTC  Bulletin  Board.  The  information  has been adjusted to reflect a
1-for-50  reverse stock split of our common stock which took effect on August 1,
2006, after the periods presented. The following quotations reflect inter-dealer
prices,  without  retail  mark-up, mark-down or commission and may not represent
actual  transactions.

<TABLE>
<CAPTION>
                                       HIGH    LOW
                                      ------  -----
<S>                                   <C>     <C>
YEAR ENDED DECEMBER 31, 2005
    First Quarter . . . . . . . . .   $ 2.00  $1.50
    Second Quarter. . . . . . . . .   $72.50  $1.00
    Third Quarter . . . . . . . . .   $ 8.00  $4.00
    Fourth Quarter. . . . . . . . .   $25.00  $4.50

YEAR ENDED DECEMBER 31, 2006
    First Quarter . . . . . . . . .   $20.00  $1.50
    Second Quarter. . . . . . . . .   $16.50  $5.00
    Third Quarter . . . . . . . . .   $15.50  $2.00
    Fourth Quarter. . . . . . . . .   $10.50  $4.00
</TABLE>

     On  March 13, 2007, the closing sales price of our common stock as reported
on the OTC Bulletin Board was $2.75 per share.  As of March 13, 2007, there were
approximately  156 record holders of our common stock.  The number of holders of
record  is  based on the actual number of holders registered on the books of our
transfer  agent  and  does  not  reflect  holders  of shares in "street name" or
persons,  partnerships,  associations, corporations or other entities identified
in  security  position  listings  maintained  by  depository  trust  companies.

DIVIDEND  RIGHTS

     Subject  to  preferences  that  may  apply  to  shares  of  preferred stock
outstanding  at  the time, the holders of outstanding shares of our common stock
are  entitled  to  receive dividends out of funds legally available at the times
and  in  the  amounts  that our board of directors may determine.  We have never
paid  dividends  on  our  common  stock  and  have  no  current  plan to pay any
dividends.  We  intend to retain our future earnings to re-invest in our ongoing
business.

RECENT  SALES  OF  UNREGISTERED  SECURITIES

     On  December  15,  2006,  Europa International, Inc. exercised a warrant to
purchase  165,247  shares of our common stock through the payment of $43,252.08.

     On  January  19,  2007,  Gary  Freeman purchased 9,500 shares of our common
stock  through the net issue exercise of a portion of a warrant in the amount of
approximately 9,988 shares of our common stock.  The additional shares for which
Mr. Freeman exercised his warrant had an aggregate value of approximately $2,318
based on the closing sale price of our common stock on January 19, 2007 of $4.75
per  share.


                                       17
<PAGE>
     On  February  20,  2007,  Gary Freeman purchased 9,500 shares of our common
stock  through the net issue exercise of a portion of a warrant in the amount of
approximately  10,276  shares  of  our  common stock.  The additional shares for
which  Mr. Freeman exercised his warrant had an aggregate value of approximately
$2,716  based on the closing sale price of our common stock on February 20, 2007
of  $3.50  per  share.

     On February 22, 2007, Paul Guez purchased 69,049 shares of our common stock
through  the  net  issue exercise of a warrant in the amount of 75,085 shares of
our  common  stock.  The  additional  shares  for  which  Mr. Guez exercised his
warrant  had an aggregate value of approximately $19,315.20 based on the closing
sale  price  of  our  common  stock  on  February  22,  2007 of $3.20 per share.

     On  February  22,  2007,  Woodman  Management Corporation purchased 223,577
shares  of  our  common stock through the net issue exercise of a warrant in the
amount  of  243,121 shares of our common stock.  The additional shares for which
Woodman  Management  Corporation exercised its warrant had an aggregate value of
approximately  $62,540.80 based on the closing sale price of our common stock on
February  22,  2007  of  $3.20  per  share.

     On  February  22,  2007,  our board of directors authorized the issuance of
10,000  shares of our common stock to Christopher Bolsover pursuant to our entry
into  a  Professional  Services  Agreement with Bolsover Endeavours.  The shares
issued  to  Christopher Bolsover had an aggregate value of approximately $32,000
based  on  the  closing  sale  price of our common stock on February 22, 2007 of
$3.20  per  share.

     In  connection  with the above stock sales, we did not pay any underwriting
discounts or commissions.  None of the sales of securities described or referred
to  above  was  registered  under  the  Securities  Act of 1933, as amended (the
"Securities  Act").  Each  of the purchasers is an accredited investor with whom
we  or one of our affiliates had a prior business relationship.  As a result, no
general  solicitation  or advertising was used in connection with the sales.  In
making  the  sales without registration under the Securities Act, we relied upon
the exemption from registration contained in Section 4(2) of the Securities Act.


                                       18
<PAGE>
ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

     This  discussion summarizes the significant factors affecting our operating
results,  financial  condition and liquidity and cash flows for the fiscal years
ended  December  31,  2006  and 2005.  All financial information that follows is
that  of our company, our company's wholly-owned subsidiary VMdirect, L.L.C. and
VMdirect,  L.L.C.'s wholly-owned U.K. subsidiary, and our company's wholly-owned
Nevada  subsidiaries.  The  discussion  and analysis that follows should be read
together  with  our Consolidated Financial Statements included elsewhere in this
Annual  Report  on  Form 10-KSB.  Except for historical information, the matters
discussed  in  this  Management's Discussion and Analysis of Financial Condition
and  Results of Operations are forward looking statements that involve risks and
uncertainties  and  are based upon judgments concerning various factors that are
beyond  our  control.

OVERVIEW

     We  are  a  digital  communications  and  social  networking  company that,
directly  and  through  a  multi-tiered  affiliate  program,  offers  a suite of
proprietary  digital  communication  tools, including video email, video instant
messaging,  live  webcasting,  podcasting,  blogging, and digital vault storage.
Our  social networking website, www.helloWorld.com, operated by our wholly-owned
                                ------------------
subsidiary, DigitalFX Networks, LLC, a Nevada limited liability company, targets
users  from  ages  18  to  65.  The  site  features  a  full  suite  of  digital
communication  tools,  and  affiliates  and  retail  customers  pay  a  monthly
subscription  fee  to  use  the  tools  and  participate  in the social network.
Additionally,  our  website,  www.vmdirect.com,  operated  by  our  wholly-owned
                              ----------------
subsidiary VMdirect, offers affiliates the tools necessary to effectively market
and  distribute  our  digital  communication  tools.

     Our  multi-tiered  affiliate  program  drives  the  growth of our business.
Rather  than  using  traditional  advertising and marketing methods, we chose to
create  a  multi-tiered  affiliate  program to develop new customers. Affiliates
earn  retail  commissions  on  a  monthly residual basis by acquiring new retail
customers  for  us.  Affiliates  earn  additional  commissions  from  the  sales
activities  of affiliates who they personally enroll. These rewards are extended
for  up  to  eight  generations of affiliates, meaning that an affiliate earns a
commission  on the sales of the affiliates they have personally enrolled as well
as  on  the  sales  of  second-,  third-,  and  fourth-generation  affiliates,
potentially  eight levels deep. Our affiliate compensation plan is structured on
a  3x8  matrix,  meaning  affiliates can each enroll three affiliates underneath
themselves,  before  they  begin  to  build their next organizational level. The
layers  of  three  continue  down  a  total  of  eight  levels.

     The  market  for  our  services  is relatively new and rapidly evolving and
growing.  Social  networking  and  streaming  media  are areas of high interest,
dominating  both  the  consumer  and financial press.  According to the Aberdeen
Group,  the streaming media industry is expected to grow from $2 billion in 2004
to  an  estimated $12 billion by 2008.  We expect that the annual rate of growth
of  adoption  of  streaming  media  tools in 2007 will exceed 2006 as more users
become  comfortable  with  this  technology,  the Internet and personal computer
usage.

     Social  networking  sites  are  also  among  the  fastest  growing  Web
destinations.  In May 2006, the top 10 social networking sites combined for over
1/3  of  total  unique  Internet  visits.  Other trends in our favor include the
dispersion  of  families  and  friends  around the country and globe who want to
visually  communicate  on  a  regular  basis and the desire of many companies to
reduce  resources  spent on employee air and automobile travel. We differentiate
ourselves  from  other social networking sites by allowing our members to retain
copyright  and  ownership  of  all  the  content  that  they  have  created.

     We  intend  to  continue  to  grow  our  business through continued product
enhancements  with  additional  features and functionality; the extension of the
DigitalFX  Studio  to  small  businesses  and


                                       19
<PAGE>
enterprise  customers;  and  by offering ancillary products and services through
the  affiliate  program.  In  2007, we intend to initiate a traveling leadership
seminar  called  the  One  Vision Tour that will deliver substantial training to
affiliates  and  potential  new customers.  The seminar will encompass marketing
techniques  to facilitate expansion of existing businesses and leadership skills
to  manage  growing  organizations.

     During  2007,  we  also  plan  to  pursue  strategic, accretive acquisition
opportunities  to  accelerate  growth.  We  will  evaluate  prospects  that  are
synergistic  and  look  to  invest  in  businesses  or  technologies  that offer
complementary  products  or  services  that  enhance  our  business  model.

     We  have  also engaged an experienced multi-tiered marketing consultant who
has  lived  and  worked  extensively  in  Europe  and  Asia  to  facilitate  our
international  expansion.  His  initial  objectives  in  2007  are to accelerate
growth  in  the United Kingdom and establish the infrastructure and translations
necessary  to  enroll  subscribers  in  two European countries by the end of the
year.  We  anticipate  realizing  revenues  from  these  new  markets  in  2007.

GENERAL

     Net  sales  are comprised of gross sales less credits, returns, chargebacks
and  allowances.

     Cost  of revenues consists primarily of technology fees, portal content and
support  costs, cameras and training materials in business packages, fulfillment
expenses,  inbound  and  outbound  freight  costs, direct expenses for sales and
training  conferences,  purchased  merchandise,  and  reserve  for  inventory
obsolescence.

     Commission  expenses  include  all  monies  earned  by  affiliates  in  our
multi-tiered  program.  When  a  sale  is made from us to a customer through the
efforts  of  our  affiliate  network,  the  sale  is recorded as revenue and the
affiliates  earn  commissions  as  a  percentage of this sale.  We have no other
internal  sales  expenses.

     Other  operating  expenses  consist  of  product  development,  marketing,
technical  and  customer  support,  general  and administrative and equity-based
compensation.

     The  exchange  transaction  was  accounted  for  as  a  reverse  merger
(recapitalization)  with  VMdirect  deemed to be the accounting acquirer, and us
deemed to be the legal acquirer.  Immediately prior to the exchange transaction,
we  had  no  material  operations, assets, or liabilities.  Accordingly, for all
meaningful  purposes, the following discussion, which represents a discussion of
the  operations  of  our  wholly-owned  subsidiary,  VMdirect,  for  the periods
presented,  represents a discussion of our operations for the periods presented.


                                       20
<PAGE>
RESULTS  OF  OPERATIONS

YEAR ENDED DECEMBER 31, 2006 COMPARED WITH YEAR ENDED DECEMBER 31, 2005

     The  following  table  presents  revenue  by  category  for the years ended
December  31,  2006  and  2005.

<TABLE>
<CAPTION>
REVENUE:                               2006         2005
                                    -----------------------
<S>                                 <C>          <C>
Affiliate business packages         $ 7,745,400  $1,959,700
Upgrades to business packages         1,551,300     477,400
Subscription fees for access plans
and administrative tools             11,848,400   2,311,000
Merchandise and Shipping fees           920,700     179,400
Other revenue                           734,200     140,500
                                    -----------------------
Total Revenue                       $22,800,000  $5,068,000
                                    =======================
</TABLE>

     Revenues  increased  $17,732,000  in  2006  or  350%  to  $22,800,000  from
$5,068,000  in  2005.  This increase related to significant growth in the number
of  affiliates  and retail customers across all products and services offered by
us and included geographic expansion into Australia and New Zealand in the first
quarter  of  2006.

     Affiliate  business  package revenues increased $5,785,700 to $7,745,400 in
2006  from  $1,959,700  in 2005.  In 2006, we experienced a 300% increase in the
number  of  new  affiliates that enrolled versus 2005.  Of the new enrollees, we
had  a  20% favorable price swing due to affiliates joining at a higher level in
2006  than  in 2005.  Revenue related to affiliate upgrades increased $1,052,000
from  $477,000  to  $1,551,000.  During  2006,  approximately  1,500  affiliates
elected  to  upgrade  to  a  higher  level  once enrolled, versus 500 affiliates
upgrading  in  2005.

     Subscription  revenue  from  affiliates  and  retail  customers  increased
$9,537,000  to  $11,848,000 in 2006 from $2,311,000 in 2005. We started the year
with approximately 4,000 active affiliates and ended the year with approximately
14,000, an increase of 245%. Additionally, we started the year with 3,000 active
retail  customers  and  ended the year with approximately 12,000, an increase of
290%. We offer retail access plans at $9.95, $29.95 and $39.95 per month. During
2006,  more  of these customers enrolled in plans at a higher monthly price than
in  2005.  This  change,  coupled  with  the growth in both retail customers and
affiliates,  and  new  affiliates  electing  a  higher  level, accounted for the
increase  in  subscription  revenue.

     In  January  2006,  we  initiated  sales in Australia and New Zealand which
contributed  $1,862,000, accounting for 8% of sales and 11% of our sales growth.
At  December  31,  2006  we  had  over  1,600  customers in these two countries.

     Merchandise  sales  consisting of web cameras and branded apparel increased
$250,000  to  $322,000  in  2006  from  $72,000  in 2005.  Shipping and handling
revenues increased $491,000 to $599,000 in 2006 from $108,000 in 2005 due to the
volume  of  business  packages  and  merchandise  sold.

     Other  revenue  is  comprised  primarily  of  registration  fees  for sales
conferences  and  events.  During  2006,  two  conferences  were held in May and
September,  versus  only  one  event  in  2005.  Additionally,  attendance  was
significantly  higher  at  both  of  the  2006  conferences.


                                       21
<PAGE>
     Gross  Profit  increased $14,536,000 to $18,356,000 in 2006 from $3,820,000
in  2005.  As a percentage of sales, gross profit increased from 75% of sales to
81% from 2005 to 2006.  This improvement was due to the leveraging of fixed cost
elements  (3%)  and to reductions in the purchase price of items in the business
packages  due  to  quantity discounts (5%).  This was offset by expenses for the
sales  conferences  (-2%).

     Commission  expenses  increased  $8,118,000  to  $10,459,000  in  2006 from
$2,341,000  in  2005.  As  a  percent  of  sales on an annual basis, commissions
remained  constant  in  2005 and 2006 at 46%.  However, the quarterly pattern in
2006  reflects a steady reduction in this percentage: Q1: 50%; Q2: 47%; Q3: 45%;
and  Q4:  44%.

     We expect commissions in 2007 to continue to decrease as a percent of sales
based on changes to discretionary elements in the current program and structural
differences  in  the  commission program for small business and enterprise sales
which  commence  in  2007.

     The  following table represents a breakdown of other operating expenses for
the  years  ended  December  31,  2006  and  2005.  These  comparisons  are  not
necessarily  indicative  of  future  spending.

<TABLE>
<CAPTION>
                                   2006        2005
                                ----------------------
<S>                             <C>         <C>
Marketing                       $  838,000  $  376,000
Technical and customer support   1,139,000     591,000
Product development              1,278,000     292,000
General and Administrative       3,172,000   1,265,000
Equity-based compensation          305,000     122,000
                                ----------------------
Total Other Operating Expenses  $6,732,000  $2,646,000
                                ======================
</TABLE>

     Compared  to  2005, other operating costs have decreased as a percentage of
revenue due primarily to fixed costs elements, estimated at 45% of total, and to
negotiated  fee  reductions  in  merchant  processing  charges.

     Marketing  expenses increased $462,000 to $838,000 in 2006 from $376,000 in
2005.  These  expenses  include  employee  costs,  costs  for  video production,
promotional  programs  and graphic and web design.  The increase in 2006 related
to  additional  staffing,  affiliate  incentive  and  recognition  programs, and
outside  design  services.

     Technical and customer support expenses increased $548,000 to $1,239,000 in
2006 from $591,000 in 2005.  These expenses include employee costs, outsourcing,
programming,  and  software  amortization and maintenance.  The increase in 2006
was  primarily  for  additional  staffing  and  outsourced services which relate
directly  to  the  growth  in  our  customer  base.

     Product  development  costs  increased  $987,000 to $1,278,000 in 2006 from
$292,000  in 2005.  Product development outsourced to third parties consisted of
discrete  project  work.  Through December 31, 2006, six independent contractors
were used on separate projects.  Product development costs increased in 2006 due
to  the  development  of  our  5.0  digital  media  platform that features added
functionality,  including  podcasting,  enhanced  email  and  IM  messaging  and
blogging,  and  to  the  design  and  creation of our Learning Media System.  We
estimate  that  our  product development costs for 2007 will be similar to those
incurred  in  2006  as  we  continue  to  add  features and functionality to the
DigitalFX  Studio  and  as  we  prepare  for  extension of our products to small
businesses  and  enterprise companies.  We expect spending for these initiatives
to  be  higher  in  the  first  half  of  the  year.


                                       22
<PAGE>
     General  and  Administrative expenses increased $1,907,000 to $3,172,000 in
2006  from  $1,265,000  in  2005.  These  expenses  include  employee  costs  in
operations,  finance,  human  resources  and  corporate, and merchant processing
fees,  facilities costs, professional services, depreciation and risk management
premiums.  The  increase in 2006 was primarily related to credit card processing
fees which fluctuate directly with sales ($629,000), employee costs for staffing
additions  ($614,000)  and  costs  associated  with  being  a  public  company
($450,000).

     Equity-based  compensation  increased  $183,000  to  $305,000  in 2006 from
$122,000  in  2005.  Our  equity-based  compensation  expense  represents  the
amortization  of  deferred  equity-based compensation over the vesting period of
stock  options  granted  to  employees  and  of common stock warrants granted to
non-employees.  The  expense was due to new option grants during 2006 and to the
effects  of the fluctuation in our stock price on the recognition of expenses on
warrants  granted  to  non-employees.

     We  expect that our other operating expenses will continue to decrease as a
percentage  of  net  sales  if  we  are  able  to increase our net sales through
international  expansion  and  customer  growth.  We  expect  this  reduction in
operating  expenses as a percent of sales will be partially offset by additional
legal,  administrative  and translation costs to establish operations in foreign
countries,  the full-year costs of operating as a public company, and additional
expenses  in  2007  to  further  comply with regulations imposed by the Sarbanes
Oxley  Act  of  2002.

     Operating  Income  (Loss)  increased  $2,332,000  from an operating loss of
$1,167,000  in 2005 to operating income of $1,165,000 in 2006.  This improvement
was  due  to  our  revenue growth and leverage in the cost of revenues and other
operating  expenses.

     Other Expenses increased $516,000 to $572,000 in 2006 from $56,000 in 2005.
The  increase  was  due to fees associated with the exchange transaction in June
($635,000  net  of  interest  income  of  $52,000).  Other expenses in 2005 were
comprised  primarily  of  expenses to start up operations in the United Kingdom,
Australia  and  New Zealand.  Interest Income is comprised of interest earned on
our  cash  and  short term investments.  Interest income increased due to higher
cash  balances  and  to  higher  interest  yields.

LIQUIDITY  AND  CAPITAL  RESOURCES

     Our  cash  requirements are principally for working capital.  Historically,
we  funded  our  working  capital needs through the sale of equity interests and
through  additional  capital  contributions  by  our  former  members.  We  have
generated  net  positive  cash  flow from operations since the fourth quarter of
2005.

     For the year ended December 31, 2006, cash provided by operating activities
was  $1,386,000  and  consisted of net income of $480,000, increased by non-cash
items  of  $264,000 and by $642,000 due to changes in other operating assets and
liabilities.  The  latter consisted of increases in accounts payable and accrued
expenses  of  $1,555,000, a decrease in inventory of $19,000 offset by increases
in  accounts  receivable of $22,000 and prepaids, merchant reserves and deposits
of  $908,000.

     For the year ended December 31, 2005, cash used in operating activities was
$431,000  and consisted of a net loss of $1,223,000, increased by non-cash items
of  $200,000  and decreased by $592,000 due to changes in other operating assets
and  liabilities.  The  latter  consisted  of  increases in accounts payable and
accrued  expenses of $761,000 partially offset by increases in current assets of
$162,000  and  other  assets  of  $7,000.


                                       23
<PAGE>
     Investing  Activities  during  the year ended December 31, 2006 of $547,000
and  2005  of  $279,000  were  the result of capital expenditures, primarily for
computer  and  video  equipment  and  software  licenses.

     Financing  Activities  during  the  years  ended December 31, 2006 and 2005
consisted  of  proceeds from the sale of equity interests, capital contributions
by  former  members  and  the  payoff  of  a note payable.  Net cash provided by
financing  activities  increased  $3,708,000  to  $4,667,000  from  $959,000.

     On  December 22, 2006, we entered into a Securities Purchase Agreement with
Kingdon  Associates,  Kingdon  Family  Partnership, L.P. and M. Kingdon Offshore
Ltd.  (the  "Investors") pursuant to which we agreed to sell to the Investors an
aggregate  of 1,000,000 shares of our common stock at a per share price of $4.75
for  gross  proceeds  of  $4.75  million.  The  transactions contemplated by the
Securities  Purchase Agreement closed on December 27, 2006, with net proceeds to
us  of  approximately  $4.36 million, after payment of commissions and expenses,
which  we  presently  intend  to  use  for  general  working  capital  purposes.

     We  expect  that  with our present cash flows from operating activities, we
will  have  adequate  working  capital  to  continue  to grow our operations and
develop  our  products,  international markets and business plan as anticipated.
While  there  is currently no definitive plan of debt or equity financing, there
is  no  assurance  that  external  financing  will be available if needed in the
future,  or  if available, that it would be available on terms acceptable to us.

     Our  business  benefits  from  low  capital  expenditure requirements.  Our
capital  expenditures  for  2007  will  primarily  be  for the completion of our
business  software  implementations  in  the  first quarter of the year, and for
additional  computer  equipment  and  for  leasehold improvements, furniture and
fixtures  related  to the relocation in Las Vegas of our corporate offices later
in  the  year.

CREDIT  FACILITIES

     In  Fiscal 2005, we set up a business credit line with Wells Fargo Bank for
$65,000  at  an  annual  percentage  rate  of 12.75%.  Our MasterCard account is
linked  to this line of credit which we utilize on a monthly basis.  The balance
is  paid  off  in  full  on  a  monthly  basis  when  due.

DEBT

     On  August 22, 2002, we issued a promissory note in the principal amount of
$50,000  to  an  individual  in  order  to fund working capital needs.  The note
accrued  interest  at  a rate of 5%.  The note and accrued interest were paid in
full  in  April  2006.

BACKLOG

     Backlog is only relevant to our affiliate business packages and merchandise
sales,  as all subscription services are delivered upon enrollment or at monthly
renewal.  We  do  not  believe  that backlog is a meaningful indicator of future
business  prospects  due  to  the  short  period of time from affiliate business
package  and  merchandise  order to product shipment.  Most products are shipped
one  to  two  days  from the date ordered; therefore, backlog information is not
material  to  an  understanding  of  our  business.


                                       24
<PAGE>
GEOGRAPHIC  INFORMATION

     Sales in the United States and Canada for the years ended December 31, 2006
and  2005 accounted for 89% and 88% of our revenue, respectively.  International
sales in the United Kingdom, Mexico, Australia and New Zealand accounted for the
remaining  11%  in the year ended December 31, 2006.  International sales in the
United  Kingdom  represented  the  remaining 12% for the year ended December 31,
2005.

CRITICAL  ACCOUNTING  POLICIES

     We  prepare  our  Consolidated  Financial  Statements  in  conformity  with
accounting  principles generally accepted in the United States, which require us
to make estimates and assumptions that affect the reported amounts of assets and
liabilities  and  revenue  and  expenses  during the year.  Actual results could
differ  from  those  estimates.  We  consider  the following policies to be most
critical  in  understanding  the  judgments  that  are involved in preparing our
financial  statements  and  the  uncertainties  that could impact our results of
operations,  financial  condition  and  cash  flows.

Revenue  Recognition

     We  generate revenue through (i) sales of starter packages and selling aids
to affiliates which include cameras, sales literature, and training videos, (ii)
sales  of  monthly  subscriptions to retail customers and affiliates with a wide
spectrum  of streaming video content as well as an integrated suite of streaming
media  applications,  including  video  email, video chat, and live web-casting,
(iii)  sales  of  branded apparel and  merchandise, and (iv) hosting conferences
and  events.

     Starter  Packages:  We recognize revenue from the sales of starter packages
and  selling  aids,  including shipping revenue, in accordance with SAB No. 104,
"Revenue  Recognition," when persuasive evidence of an order arrangement exists,
delivery  has  occurred,  the  sales  price  is  fixed  or  determinable  and
collectibility  is  reasonably assured. Generally, these criteria are met at the
time  the  product  is shipped to our customers when title and risk of loss have
transferred.  Sales  of  the  above  products entail no post-customer support or
delivery  of any other items. As such, there are no elements of these sales that
would  require  separate accounting as a multiple deliverable in accordance with
SOP  97-2,  "Software  Revenue Recognition." Costs incurred for the shipping and
handling of our products are recorded as cost of sales as incurred.

     Allowances for subsequent customer returns of starter packages are provided
when  revenues  are  recorded.  Affiliate  starter  packages returned within the
first  30  days  of  purchase  are  refunded  at  90 percent of the sales price.
Returned  products that were damaged during shipment to the customer is replaced
immediately  at our expense.  On a monthly basis, we calculate a sales allowance
which  is  an estimate of refunds for package returns that are within the 30 day
time  frame that have not yet been returned or processed.  The estimate is based
on  an  analysis  of  the historical rate of package returns using data from the
four  months  preceding the date of measurement.  We have found that this method
approximates actual returns for the next 30 days.  Increases or decreases to the
sales  allowance  are  charged  to  revenue.

     Monthly  Subscriptions: We sell subscriptions for our internet-based studio
suite  of  products  through  a  unique  multi-tiered  affiliate  program  using
non-related  independent  distributors,  known  as  affiliates.  We  also market
subscriptions  directly to retail customers who purchase them for their personal
use.  Our  services  are provided immediately upon enrollment and continue until
cancelled.  We  recognize  revenue  when the subscription is initiated, and then
monthly  based  on  an  automatic  renewal.  The  recurring  subscription can be
cancelled  at  any time in writing.  If cancelled within the first 30 days after


                                       25
<PAGE>
enrollment,  90%  of  the  fee is refunded, pro-rated for the number of days not
used  during the month.  If a subscription is cancelled after the first month of
service,  a  full refund is issued for the month if the cancellation is received
in  writing  within  48  hours of the renewal billing.  No refund is issued if a
subscription  is  cancelled more than 48 hours after the renewal billing for the
month.  We  record  an  allowance  for  subscription  cancellations  based on an
analysis  of  historical  data  for  the  four  months  preceding  the  date  of
measurement.  We apply a cancellation percentage to subscription revenue that is
subject  to  cancellation  within the first 30 days of enrollment or 48 hours of
renewal.  The  accuracy  of  these  estimates is dependent on the rate of future
cancellations being consistent with the historical rate.  Increases or decreases
to  the  sales  allowance  are  charged  to  revenue.

     Branded Apparel and Merchandise: We also sell select products to affiliates
to  assist them in building their businesses and in selling subscriptions to the
portal.  These  products include cameras, branded apparel and other merchandise.
Revenue for these sales, including shipping revenue, are recognized when all the
criteria  of  SAB  No.  104  described  above  are  met, which is generally upon
shipment.

     Conferences  and Events: We also earn fees for certain events we hosts such
as  sales and training conferences and seminars.  Revenue is recognized when the
event  is  held.  Amounts collected prior to the event are reflected as deferred
revenue,  and  recognized  when  the  event  is  held.

Allowance for Doubtful Accounts

     Our receivables consist entirely of receivables from credit card companies,
arising  from  the  sale  of  product  and services to our customers.  We do not
record  an  allowance  for doubtful accounts, as monies processed by credit card
processors  are  collected  100%  within  three  to  five  days.

Inventories

     Inventories  are  valued  at the lower of cost or market.  They are written
down,  as  required,  to  provide  for estimated obsolete or unsalable inventory
based on assumptions about future demand for our products and market conditions.
If  future  demand  and  market  conditions are less favorable than management's
assumptions,  additional  inventory  write-downs  could  be  required. Likewise,
favorable  future  demand  and  market conditions could positively impact future
operating  results  if  written-off  inventory  is  sold.

Stock-Based  Compensation

     We  account  for  stock  option  and warrant grants issued to non-employees
using  the  guidance of SFAS No. 123R, "Accounting for Stock-Based Compensation"
and  EITF No. 96-18: "Accounting for Equity Instruments that are Issued to Other
Than  Employees  for  Acquiring,  or  in  Conjunction  with  Selling,  Goods  or
Services,"  whereby  the  fair  value  of  such  option  and  warrant  grants is
determined  using  the  Black-Scholes option pricing model at the earlier of the
date  at  which  the  non-employee's  performance  is completed or a performance
commitment  is  reached.

     Statement  of  Financial  Accounting  Standards  No.  123,  "Accounting for
Stock-Based  Compensation"  ("SFAS No. 123"), established a fair value method of
accounting  for  stock-based compensation plans and for transactions in which an
entity  acquires  goods  or  services  from non-employees in exchange for equity
instruments.  SFAS  No.  123  was  amended  by Statement of Financial Accounting
Standards  No.  148,  "Accounting  for Stock-Based Compensation - Transition and
Disclosure,"  which  required  companies  to  disclose  in  interim  financial
statements  the  pro forma effect on net income (loss) and net income (loss) per
common  share  of  the  estimated  fair  market  value  of  stock


                                       26
<PAGE>
options  or  warrants  issued  to  employees.  Through  December  31,  2005,  we
accounted  for  stock-based  compensation  utilizing  the intrinsic value method
prescribed  in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued  to  Employees"  ("APB No. 25"), with pro forma disclosures of net income
(loss)  as if the fair value method had been applied.  Accordingly, compensation
cost  for  stock  options was measured as the excess, if any, of the fair market
price  of our stock at the date of grant over the amount an employee must pay to
acquire  the  stock.

     As the exercise price of stock options and warrants issued to employees was
not less than the fair market value of the Company's common stock on the date of
grant,  and  in  accordance  with  accounting  for  such  options  utilizing the
intrinsic  value  method,  there was no related compensation expense for options
issued to employees recorded in our 2005 consolidated financial statements.  The
fair  value  of  stock  options  and  warrants issued to officers, directors and
employees  on  the  date  of  grant  was  estimated  using  the  Black-Scholes
option-pricing  model,  and the effect on our results of operations was required
to  be  disclosed  as  if such stock options and warrants had been accounted for
pursuant  to  SFAS  No.  123.

     In  December 2004, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 123 (revised 2004), "Share Based Payment" ("SFAS No. 123R"), a revision
to  SFAS  No.  123,  "Accounting  for  Stock-Based Compensation."  SFAS No. 123R
superseded  APB  No.  25  and  amended  SFAS  No. 95, "Statement of Cash Flows."
Effective  January  1,  2006, SFAS No. 123R requires that we measure the cost of
employee services received in exchange for equity awards based on the grant date
fair value of the awards, with the cost to be recognized as compensation expense
in  the  Company's  financial  statements over the vesting period of the awards.

     Accordingly,  we  recognize compensation cost for equity-based compensation
for  all  new  or  modified grants issued after December 31, 2005.  In addition,
commencing  January 1, 2006, we recognize the unvested portion of the grant date
fair value of awards issued prior to adoption of SFAS No. 123R based on the fair
values  previously calculated for disclosure purposes over the remaining vesting
period  of  the  outstanding  stock  options  and  warrants.

     We  adopted  SFAS  No.  123R  effective  January 1, 2006, and are using the
modified  prospective  method in which compensation cost is recognized beginning
with  the  effective date (a) based on the requirements of SFAS No. 123R for all
share-based  payments  granted  after  the  effective  date and (b) based on the
requirements  of  SFAS No. 123R for all awards granted to employees prior to the
effective  date of SFAS No. 123R that remain unvested on the effective date (see
Note  6,  Stock  Options  and  Warrants).

RECENT  ACCOUNTING  PRONOUNCEMENTS

     In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements,"
which  provides  enhanced  guidance  for  using fair value to measure assets and
liabilities.  SFAS  No.  157  provides  a  common  definition  of fair value and
establishes  a  framework  to  make  the  measurement of fair value in generally
accepted  accounting  principles  more  consistent and comparable.  SFAS No. 157
also  requires  expanded  disclosures to provide information about the extent to
which  fair  value  is  used  to measure assets and liabilities, the methods and
assumptions used to measure fair value, and the effect of fair value measures on
earnings.  SFAS  No.  157 is effective for financial statements issued in fiscal
years  beginning  after  November  15, 2007 and for interim periods within those
fiscal years.  We are currently in the process of evaluating the effect, if any,
the  adoption  of SFAS No. 157 will have on our results of operations, financial
position,  or  cash  flows.

     In June 2006, the FASB issued FIN 48, "Accounting for Uncertainty in Income
Taxes--an  interpretation  of FASB Statement No. 109," which seeks to reduce the
diversity  in  practice  associated


                                       27
<PAGE>
with  the accounting and reporting for uncertainty in income tax positions. This
Interpretation  prescribes  a  comprehensive  model  for the financial statement
recognition, measurement, presentation and disclosure of uncertain tax positions
taken  or  expected  to  be  taken  in  an  income tax return. FIN 48 presents a
two-step  process  for evaluating a tax position. The first step is to determine
whether  it  is  more-likely-than-not that a tax position will be sustained upon
examination,  based  on the technical merits of the position. The second step is
to  measure  the  benefit  to  be  recorded  from  tax  positions  that meet the
more-likely-than-not recognition threshold, by determining the largest amount of
tax  benefit  that  is  greater  than  50  percent likely of being realized upon
ultimate  settlement,  and  recognizing that amount in the financial statements.
FIN  48  is effective for fiscal years beginning after December 15, 2006. We are
currently  in  the process of evaluating the effect, if any, the adoption of FIN
48  will  have  on its results of operations, financial position, or cash flows.

     In  September  2006,  the  Securities  and Exchange Commission issued Staff
Accounting  Bulletin  ("SAB")  No.  108,  "Considering the Effects of Prior Year
Misstatements  when  Quantifying  Misstatements  in  Current  Year  Financial
Statements."  SAB  No.  108  was  issued  in order to eliminate the diversity in
practice  surrounding  how  public  companies  quantify  financial  statement
misstatements.  SAB No. 108 requires that registrants quantify errors using both
a  balance  sheet  (iron  curtain)  approach  and an income statement (rollover)
approach  then  evaluate  whether  either approach results in a misstated amount
that,  when all relevant quantitative and qualitative factors are considered, is
material.  SAB  No.  108 is effective for fiscal years ending after November 15,
2006.  We adopted the bulletin during 2006. The adoption did not have a material
effect  on  results  of  operations,  financial  position,  or  cash  flows.

QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

     We  currently  have  limited financial market risks from changes in foreign
currency  exchange  rates or changes in interest rates and do not use derivative
financial  instruments.  For  the  year  ended  December  31,  2006, 3% of total
revenue is denominated in British pounds, 7% in Australian dollars and 1% in New
Zealand  dollars.  In  the  future,  we  expect  to  enter  into transactions in
additional  currencies.  An  adverse  change in exchange rates would result in a
decline in income before taxes, assuming that each exchange rate would change in
the  same  direction  relative  to  the  U.S. dollar.  In addition to the direct
effects  of  changes in exchange rates, such changes typically affect the volume
of sales or foreign currency sales price as competitors' products become more or
less  attractive.

OFF-BALANCE  SHEET  ARRANGEMENTS

     We  have  no  off-balance  sheet  arrangements or financing activities with
special  purpose  entities.


                                       28
<PAGE>
RISK  FACTORS

     INVESTING  IN  OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.  YOU SHOULD
CAREFULLY  CONSIDER  THE  FOLLOWING  RISK  FACTORS  AND  ALL  OTHER  INFORMATION
CONTAINED  IN  THIS PROSPECTUS BEFORE PURCHASING SHARES OF OUR COMMON STOCK.  IF
ANY  OF  THE  FOLLOWING  RISKS  OCCUR,  OUR BUSINESS, FINANCIAL CONDITION AND/OR
RESULTS OF OPERATIONS COULD BE MATERIALLY AND ADVERSELY AFFECTED.  IN THAT CASE,
THE  TRADING  PRICE  OF OUR COMMON STOCK COULD DECLINE, AND YOU MAY LOSE SOME OR
ALL  OF  YOUR  INVESTMENT.

                          RISKS RELATED TO OUR BUSINESS

OUR  OPERATING  RESULTS MAY FLUCTUATE SIGNIFICANTLY BASED ON CUSTOMER ACCEPTANCE
OF  OUR  PRODUCTS.

     Management  expects  that  we will experience substantial variations in our
net  sales  and  operating  results  from  quarter  to  quarter  due to customer
acceptance  of  our  products.  We  rely  on sales by our affiliates to generate
significant  revenues for us.  If customers don't accept our products, our sales
and  revenues  would  decline, resulting in a reduction in our operating income.

     Customer  interest for our products could also be impacted by the timing of
our  introduction  of  new  products.  If our competitors introduce new products
around  the same time that we issue new products, and if such competing products
are  superior  to  our  own,  customers' desire for our products could decrease,
resulting  in  a  decrease  in  our  sales  and revenues.  To the extent that we
introduce  new  products and customers decide not to migrate to our new products
from  our  older  products, our revenues could be negatively impacted due to the
loss  of  revenue from those customers.  In the event that our newer products do
not  sell as well as our older products, we could also experience a reduction in
our  revenues  and  operating  income.

     As  a result of fluctuations in our revenue and operating expenses that may
occur,  management  believes that period-to-period comparisons of our results of
operations are not a good indication of our future performance.

WHILE  WE  RECENTLY ACHIEVED AN OPERATING PROFIT, WE HAVE A HISTORY OF OPERATING
LOSSES  AND  THERE  CAN  BE  NO  ASSURANCE  THAT  WE  CAN  MAINTAIN  OR INCREASE
PROFITABILITY.

     While we achieved an operating profit for the year ended December 31, 2006,
we  have  a  history  of  operating  losses.  Given the competitive and evolving
nature  of  the  industry  in which we operate, we may not be able to sustain or
increase  profitability  and  our  failure  to  do so would adversely affect our
business,  including  our  ability  to  raise  additional  funds.

WE MAY NOT BE ABLE TO EFFECTIVELY MANAGE OUR GROWTH.

     Our  strategy envisions growing our business.  To date, our growth has been
derived  primarily  from the expansive growth of our multi-tiered affiliate base
and we intend to continue to employ this growth strategy.  To manage anticipated
growth,  we  plan  to  expand  our technology to handle increasing volume on our
websites  and  to  expand  our  administrative  and  marketing  organizations to
accommodate  larger  numbers of our affiliates.  We must also effectively manage
our  relationships  with  the increasing number of retail customers/users of our
products.  We  will  need  to  hire,  train, supervise and manage new employees.
These  processes  are  time  consuming  and  expensive, will increase management
responsibilities  and  will  divert  management  attention.  Any  growth  in  or
expansion  of  our  business  is


                                       29
<PAGE>
likely  to  continue  to  place  a  strain  on our management and administrative
resources,  infrastructure  and  systems.  We  cannot assure you that we will be
able  to:

          -    sufficiently and timely improve our technology to handle
               increasing volume on our websites;

          -    expand our administrative and marketing systems effectively,
               efficiently or in a timely manner to accommodate increasing
               numbers of our affiliates; or

          -    allocate our human resources optimally.

     Our  inability  or  failure  to manage our growth and expansion effectively
could  result  in  strained  affiliate  and  customer  relationships  based  on
dissatisfaction with our service to these groups, our failure to meet demand for
our  products  and/or  increased  expenses  to us to resolve these issues, and a
consequent  significant  decrease in the number of our affiliates and end users.
Any significant decrease in our affiliate base or the number of retail customers
would  result  in  a  decrease  in  revenues.

NINETY-FOUR  PERCENT  OF  OUR REVENUES FOR THE YEAR ENDED DECEMBER 31, 2006 HAVE
BEEN  DERIVED  FROM  SALES  OF  OUR  PRODUCTS  AND  SERVICES  TO  OUR MULTI-TIER
AFFILIATES, AND OUR FUTURE SUCCESS DEPENDS ON OUR ABILITY TO CONTINUE THE GROWTH
OF  OUR  AFFILIATE  BASE,  AS  WELL  AS  TO  EXPAND OUR RETAIL SUBSCRIPTIONS AND
INITIATE  ADVERTISING  REVENUE.

     To date, our growth has been derived primarily from the expansive growth of
our  multi-tiered affiliate base.  Rather than using traditional advertising and
sales  methods,  we  chose to create a multi-tiered affiliate program to develop
new  customers.  Affiliates  earn retail commissions on a monthly residual basis
by  acquiring new customers for us.  Affiliates earn additional commissions from
the  sales  activities  of affiliates who they personally enroll.  These rewards
are  extended  for  up  to  eight  generations  of  affiliates,  meaning that an
affiliate earns a commission on the sales of the affiliates they have personally
enrolled  as  well  as  on  the  sales of second-, third-, and fourth-generation
affiliates,  potentially  eight levels deep.  Our affiliate compensation plan is
structured  on a 3x8 matrix, meaning affiliates can each enroll three affiliates
underneath  themselves  before  they  begin  to  build their next organizational
level. The layers of three continue down a total of eight levels.

     Our success and the planned growth and expansion of our business depends on
us  achieving  greater  and broader acceptance of our products and expanding our
customer  base.  There  can be no assurance that customers will subscribe to our
product  offerings or that we will continue to expand our customer base.  Though
we  plan  to  continue  to  provide  tools  to  our affiliates to enable them to
generate  sales,  we  cannot  guarantee  that the time and resources we spend on
these  efforts  will  generate  a  commensurate increase in users of our product
offerings.  If  we  are  unable  to  effectively  market  or  expand our product
offerings, and if our affiliate enrollment does not continue to grow, we will be
unable to grow and expand our business or implement our business strategy.  This
could materially impair our ability to increase sales and revenue and materially
and  adversely  affect  our margins, which could harm our business and cause our
stock  price  to  decline.

     Our future success depends largely upon our ability to attract and retain a
large  active  base  of affiliates who purchase and sell our products. We cannot
give  any  assurances  that  the productivity of our affiliates will continue at
their  current  levels  or  increase  in the future.  Several factors affect our
ability  to  attract  and  retain a significant number of affiliates, including:

          -    on-going motivation of our affiliates;

          -    general economic conditions;


                                       30
<PAGE>
          -    significant changes in the amount of commissions paid;

          -    public perception and acceptance of direct selling;

          -    public perception and acceptance of us and our products;

          -    the limited number of people interested in pursuing direct
               selling as a business;

          -    our ability to provide proprietary quality-driven products that
               the market demands; and

          -    competition in recruiting and retaining active affiliates.

OUR  ABILITY  TO CONDUCT BUSINESS, PARTICULARLY IN INTERNATIONAL MARKETS, MAY BE
AFFECTED  BY  POLITICAL,  ECONOMIC,  LEGAL  AND  REGULATORY  RISKS,  WHICH COULD
ADVERSELY  AFFECT  THE  EXPANSION  OF  OUR  BUSINESS  IN  THOSE  MARKETS.

     Our  ability  to  capitalize  on growth in new international markets and to
maintain  the  current level of operations in our existing international markets
is exposed to risks associated with international operations, including:

          -    the possibility that a foreign government might ban or severely
               restrict our business method of selling through our affiliates,
               or that local civil unrest, political instability or changes in
               diplomatic or trade relationships might disrupt our operations in
               an international market;

          -    the possibility that a government authority might impose legal,
               tax or other financial burdens on affiliates, as direct sellers,
               or on our company due, for example, to the structure of our
               operations in various markets;

          -    the possibility that a government authority might challenge the
               status of our affiliates as independent contractors or impose
               employment or social taxes on our affiliates;

          -    our ability to staff and manage international operations;

          -    handling the various accounting, tax and legal complexities
               arising from our international operations; and

          -    understanding cultural differences affecting non-U.S. customers.

     We  currently  conduct activities in Australia, Canada, Mexico, New Zealand
and  the  United  Kingdom.  We  have not been affected in the past by any of the
potential  political,  legal  or regulatory risks identified above.  While we do
not  consider  these  risks  to be material in the foreign countries in which we
currently  operate,  they may be material in other countries where we may expand
our  business.

     We  are  also  subject  to  the  risk that due to legislative or regulatory
changes  in  one  or more of our present or future markets, our marketing system
could  be  found  not  to  comply with applicable laws and regulations or may be
prohibited.  Failure to comply with applicable laws and regulations could result
in  the  imposition  of  legal  fines  and/or penalties which would increase our
operating  costs.  We  may  also be required to comply with directives or orders
from  various  courts  or  applicable  regulatory  bodies  to  conform  to  the
requirements  of new legislation or regulation, which would detract management's
attention  from  the  operation of our business.  Further we could be prohibited
from  distributing  products  through our marketing system or may be required to
modify  our  marketing  system.

     Our  services  are  priced  in  local currency.  As a result, our financial
results  could  be  affected  by  factors  such  as  changes in foreign currency
exchange  rates  or  weak  economic  conditions  in  foreign markets.  We do not
currently engage in hedging activities or other actions to decrease fluctuations
in


                                       31
<PAGE>
operating results due to changes in foreign currency exchange rates, although we
may do so when the amount of revenue obtained from sources outside of the United
States  becomes  significant.

WE  ALSO  FACE  LEGAL  AND  REGULATORY RISKS IN THE UNITED STATES, THE AFFECT OF
WHICH  COULD  REDUCE  OUR  SALES  AND  REVENUES.

     Our  marketing  program  is  subject  to  a  number  of  federal  and state
regulations  administered  by  the  Federal  Trade  Commission and various state
agencies  in  the  United States, directed at preventing fraudulent or deceptive
schemes by ensuring that product sales are made to consumers of the products and
that  compensation,  recognition,  and  advancement  within  the  marketing
organization  are  based  on  the sale of products rather than investment in the
organization  or other non-sales-related criteria. These regulatory requirements
do  not  include  "bright  line" rules and are inherently fact-based. Thus, even
though  we  believe  that our marketing program complies with applicable federal
and  state  laws  or regulations, we are subject to the risk that a governmental
agency  or  court could determine that we have failed to meet these requirements
in  a  particular  case.  Such an adverse determination could require us to make
modifications  to  our  marketing system, increasing our operating expenses. The
negative  publicity  associated  with  such  an adverse determination could also
reduce  affiliate and end user demand for our products, which would consequently
reduce  our  sales  and  revenues.

IF  WE  INCUR  SUBSTANTIAL LIABILITY FROM LITIGATION, COMPLAINTS, OR ENFORCEMENT
ACTIONS  RESULTING  FROM MISCONDUCT BY OUR MULTI-LEVEL AFFILIATES, OUR FINANCIAL
CONDITION  COULD  SUFFER.

     Although  we  use  various  means  to address misconduct by our multi-level
affiliates,  including maintaining policies and procedures to govern the conduct
of  our  affiliates  and  conducting training seminars, it is still difficult to
detect  and correct all instances of misconduct.  Violations of our policies and
procedures  by  our  affiliates  could  lead  to  litigation, formal or informal
complaints,  enforcement  actions,  and  inquiries by various federal, state, or
foreign  regulatory  authorities  against us and/or our affiliates.  Litigation,
complaints,  and  enforcement  actions  involving  us  and  our affiliates could
consume  considerable  amounts of financial and other corporate resources, which
could  have  a  negative  impact on our sales, revenue, profitability and growth
prospects.

     We  have  not  been,  and  are  not  currently,  subject  to  any  material
litigation,  complaint  or  enforcement action regarding affiliate misconduct by
any  federal,  state  or  foreign  regulatory  authority.

WE  MAY  BE  UNABLE  TO  COMPETE  SUCCESSFULLY  AGAINST  EXISTING  AND  FUTURE
COMPETITORS, WHICH COULD DECREASE OUR REVENUE AND MARGINS AND HARM OUR BUSINESS.

     The  social  networking  and  digital  communications industries are highly
competitive.  Our  future  growth and financial success depend on our ability to
further  penetrate  and expand our user base, as well as our ability to grow our
revenue  models.  Our  competitors  possess  greater resources than we do and in
many  cases are owned by companies with broader business lines.  For example, we
encounter  competition  in  the  social networking space from www.myspace.com, a
company  acquired  by  News  Corporation,  and  we offer video instant messaging
services  similar  to those offered at www.skype.com, a subsidiary of eBay, Inc.
There  can  be  no assurance that we will be able to maintain our growth rate or
increase  our  market  share  in  our  industry  at  the  expense  of  existing
competitors.

WE  MAY NOT BE ABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS WHICH
WOULD  AFFECT  OUR  ABILITY  TO  COMPETE  IN  OUR  INDUSTRY.

     Our intellectual property relates to the initiation, receipt and management
of digital communications.  We rely in part on trade secret, unfair competition,
trade  dress  and  trademark  law  to


                                       32
<PAGE>
protect  our  rights  to certain aspects of our intellectual property, including
our  software technologies, domain names and recognized trademarks, all of which
we  believe  are  important  to  the success of our products and our competitive
position.  There can be no assurance that any of our trademark applications will
result  in the issuance of a registered trademark, or that any trademark granted
will  be  effective  in  thwarting  competition or be held valid if subsequently
challenged.  In addition, there can be no assurance that the actions taken by us
to  protect  our proprietary rights will be adequate to prevent imitation of our
products, that our proprietary information will not become known to competitors,
that  we  can  meaningfully  protect  our  rights  to  unpatented  proprietary
information  or  that  others  will  not  independently  develop  substantially
equivalent  or better products that do not infringe on our intellectual property
rights.

     We could be required to devote substantial resources to enforce and protect
our  intellectual property, which could divert our resources from the conduct of
our  business  and  result  in  increased  expenses.  In  addition,  an  adverse
determination  in  litigation  could  subject  us  to  the loss of our rights to
particular  intellectual  property,  could require us to grant licenses to third
parties,  could prevent us from selling or using certain aspects of our products
or  could  subject  us  to  substantial liability, any of which could reduce our
sales  and/or  result  in the entry of additional competitors into our industry.

WE  MAY  BECOME  SUBJECT  TO LITIGATION FOR INFRINGING THE INTELLECTUAL PROPERTY
RIGHTS  OF  OTHERS  THE  AFFECT  OF  WHICH COULD CAUSE US TO CEASE MARKETING AND
EXPLOITING  OUR  PRODUCTS.

     Others  may initiate claims against us for infringing on their intellectual
property  rights.  We  may  be  subject  to  costly  litigation relating to such
infringement  claims  and  we  may  be required to pay compensatory and punitive
damages  or  license fees if we settle or are found culpable in such litigation.
In  addition,  we  may  be  precluded  from  offering  products  that  rely  on
intellectual property that is found to have been infringed by us. We also may be
required  to  cease  offering  the affected products while a determination as to
infringement  is  considered  and  could  eventually  be  required to modify our
products  to  cease  the  infringing  activity. These developments could cause a
decrease in our operating income and reduce our available cash flow, which could
harm  our  business  and  cause  our  stock  price  to  decline.

WE  MAY HAVE TO EXPEND SIGNIFICANT RESOURCES DEVELOPING ALTERNATIVE TECHNOLOGIES
IN  THE EVENT THAT THIRD PARTY LICENSES FOR INTELLECTUAL PROPERTY UPON WHICH OUR
BUSINESS  DEPENDS  ARE NOT AVAILABLE OR ARE NOT AVAILABLE ON TERMS ACCEPTABLE TO
US.

     We  rely  on  certain intellectual property licensed from third parties and
may be required to license additional products from third parties in the future.
There  can  be no assurance that these third party licenses will be available or
will  continue  to  be  available  to  us  on  acceptable  terms or at all.  Our
inability  to  enter  into and maintain any license necessary for the conduct of
our  business  could result in our expenditure of significant capital to develop
or  obtain  alternate  technologies and to integrate such alternate technologies
into  our  current products, or could result in our cessation of the development
or  sales  of  products  for  which  such  licenses  are  necessary.

WE  MAY  BE  UNABLE TO ATTRACT AND RETAIN QUALIFIED, EXPERIENCED, HIGHLY SKILLED
PERSONNEL, WHICH COULD ADVERSELY AFFECT THE IMPLEMENTATION OF OUR BUSINESS PLAN.

     Our  success  depends  to a significant degree upon our ability to attract,
retain  and  motivate  skilled  and  qualified personnel.  In particular, we are
heavily  dependent  on  the  continued  services  of  Craig Ellins and the other
members  of  our  senior  management  team.  We do not have long-term employment
agreements  with  any of the members of our senior management team, each of whom
may  voluntarily terminate his or her employment with us at any time.  Following
any  termination  of  employment,  these  employees  would not be subject to any
non-competition  covenants  or  non-solicitation  covenants.  The


                                       33
<PAGE>
loss of any key employee, including members of our senior management team, could
result  in  a decrease in the efficacy with which we implement our business plan
due  to  the  loss  of  our  experienced  managers, increased competition in our
industry  and  could  negatively impact our sales and marketing operations.  Our
inability  to attract highly skilled personnel with sufficient experience in our
industry  could  result  in  less  innovation  in  our products and a consequent
decrease  in  our  competitive  position,  and  a decrease in the quality of our
service  to our affiliates and end users and a consequent decrease in our sales,
revenue  and  operating  income.

OUR SENIOR MANAGEMENT HAD NO EXPERIENCE MANAGING A PUBLICLY TRADED COMPANY PRIOR
TO  SERVING  AS  OUR EXECUTIVE OFFICERS.  THIS LACK OF EXPERIENCE MAY DIVERT OUR
MANAGEMENT'S  ATTENTION  FROM  OPERATIONS  AND  HARM  OUR  BUSINESS.

     Prior  to  serving  as  our  executive officers, our management team had no
experience managing the reporting requirements of the federal securities laws as
the  Chief  Executive  Officer  and Chief Financial Officer of a publicly traded
company.  Management  will  be  required  to  implement appropriate programs and
policies  to  comply  with  existing  disclosure  requirements and to respond to
increased  reporting  requirements pursuant to Section 404 of the Sarbanes-Oxley
Act.  These increased requirements include the preparation of an internal report
which  states  the responsibility of management for establishing and maintaining
an  adequate  internal  control structure and procedures for financial reporting
and  containing  an  assessment,  as  of  the  end  of  each fiscal year, of the
effectiveness  of  the  internal  control structure and procedures for financial
reporting.  Management's  efforts  to  familiarize  itself with and to implement
appropriate procedures to comply with the disclosure requirements of the federal
securities  laws  could divert its attention from the operation of our business.
Management's  failure  to comply with the disclosure requirements of the federal
securities  laws  could  lead  to  the  imposition of fines and penalties by the
Securities  and Exchange Commission ("SEC") or the cessation of quotation of our
common  stock  on  the  OTC  Bulletin  Board.

IF WE ARE NOT ABLE TO RESPOND TO THE ADOPTION OF TECHNOLOGICAL INNOVATION IN OUR
INDUSTRY  AND  CHANGES  IN  CONSUMER  DEMAND,  OUR  PRODUCTS  WILL  CEASE  TO BE
COMPETITIVE,  WHICH COULD RESULT IN A DECREASE IN REVENUE AND HARM OUR BUSINESS.

     Our  future  success  will  depend, in part, on our ability to keep up with
changes  in  consumer  tastes  and  our  continued  ability to differentiate our
products  through  implementation  of new technologies.  We may not, however, be
able  to  successfully  do  so, and our competitors may be able to implement new
technologies at a much lower cost.  These types of developments could render our
products  less  competitive and possibly eliminate any differentiating advantage
that  we  might  hold  at  the  present  time.

            OTHER RISKS RELATED TO AN INVESTMENT IN OUR COMMON STOCK

THERE  IS  LIMITED  TRADING,  AND  CONSEQUENTLY LIMITED LIQUIDITY, OF OUR COMMON
STOCK.

     Bid  and  ask  prices  for shares of our common stock are quoted on the OTC
Bulletin  Board  under  the  symbol  "DFXN."  Although  prices for our shares of
common  stock  are quoted on the OTC Bulletin Board, there is limited trading of
our  common  stock  and  our  common stock is not broadly followed by securities
analysts.  The  average  daily volume of our common stock as reported on the OTC
Bulletin  Board  for  the  twelve-month periods ended December 31, 2006 and 2005
were  approximately  4,248  shares  and 395 shares, respectively.  Consequently,
shareholders  may  find  it  difficult  to  sell  shares  of  our  common stock.

     While  we are hopeful that we will command the interest of a greater number
of  investors  and  analysts,  more active trading of our common stock may never
develop  or  be  maintained.  More  active


                                       34
<PAGE>
trading generally results in lower price volatility and more efficient execution
of  buy and sell orders.  The absence of active trading reduces the liquidity of
our common stock.  As a result of the lack of trading activity, the quoted price
for  our  common  stock  on the OTC Bulletin Board is not necessarily a reliable
indicator  of its fair market value.  Further, if we cease to be quoted, holders
of  our  common  stock  would find it more difficult to dispose of, or to obtain
accurate  quotations as to the market value of, our common stock, and the market
value  of  our  common  stock  would  likely  decline.

THE MARKET PRICE OF OUR COMMON STOCK IS LIKELY TO BE HIGHLY VOLATILE AND SUBJECT
TO  WIDE  FLUCTUATIONS,  AND YOU MAY BE UNABLE TO RESELL YOUR SHARES AT OR ABOVE
THE  PRICE  AT  WHICH  YOU  PURCHASED  SUCH  SHARES.

     The  market  price  of our common stock is likely to be highly volatile and
could  be  subject  to wide fluctuations in response to a number of factors that
are  beyond  our control, including announcements of new products or services by
our  competitors.  In  addition,  the  market price of our common stock could be
subject  to  wide  fluctuations  in response to a variety of factors, including:

          -    quarterly variations in our revenues and operating expenses;

          -    developments in the financial markets, and the worldwide or
               regional economies;

          -    announcements of innovations or new products or services by us or
               our competitors;

          -    fluctuations in merchant credit card interest rates;

          -    significant sales of our common stock or other securities in the
               open market; and

          -    changes in accounting principles.

     In  the  past,  shareholders  have often instituted securities class action
litigation  after  periods  of  volatility  in  the  market price of a company's
securities.  If  a  shareholder  were to file any such class action suit against
us,  we  would  incur  substantial legal fees and our management's attention and
resources  would  be  diverted  from  operating  our  business to respond to the
litigation,  which  could  impact  our  productivity  and  profitability.

SUBSTANTIAL  FUTURE  SALES  OF OUR COMMON STOCK IN THE PUBLIC MARKET COULD CAUSE
OUR  STOCK  PRICE  TO  FALL.

     Upon  the effectiveness of any registration statement that we may file with
respect  to  the resale of shares held by our shareholders, a significant number
of  our  shares of common stock may become eligible for sale.  The sale of these
shares  could  depress  the  market  price  of  our  common  stock.  Sales  of a
significant  number  of shares of our common stock in the open market could harm
the  market  price  of  our common stock.  A reduced market price for our shares
could  make  it more difficult to raise funds through future offerings of common
stock.

     Moreover,  as  additional  shares  of our common stock become available for
resale  in  the  open  market  (including shares issued upon the exercise of our
outstanding options and warrants), the supply of our publicly traded shares will
increase,  which  could  decrease  its  price.

     Some of our shares may also be offered from time to time in the open market
pursuant to Rule 144, and these sales may have a depressive effect on the market
price  of our shares.  In general, a person who has held restricted shares for a
period  of one year may, upon filing with the SEC of a notification on Form 144,
sell  into  the  market  shares  up  to an amount equal to 1% of the outstanding
shares.


                                       35
<PAGE>
THE  SALE  OF  SECURITIES  BY US IN ANY EQUITY OR DEBT FINANCING COULD RESULT IN
DILUTION  TO OUR EXISTING SHAREHOLDERS AND HAVE A MATERIAL ADVERSE EFFECT ON OUR
EARNINGS.

     Any sale of common stock by us in a future private placement offering could
result  in  dilution  to  the  existing  shareholders  as a direct result of our
issuance  of  additional  shares of our capital stock. In addition, our business
strategy  may  include  expansion  through  internal  growth,  by  acquiring
complementary  businesses,  by  acquiring  or licensing additional brands, or by
establishing  strategic  relationships with targeted customers and suppliers. In
order  to  do  so,  or to finance the cost of our other activities, we may issue
additional  equity  securities  that  could  dilute  our  shareholders'  stock
ownership.  We  may  also  assume  additional  debt  and incur impairment losses
related  to goodwill and other tangible assets if we acquire another company and
this  could  negatively  impact  our  earnings  and  results  of  operations.

WE  HAVE  NOT  PAID DIVIDENDS IN THE PAST AND DO NOT EXPECT TO PAY DIVIDENDS FOR
THE FORESEEABLE FUTURE, AND ANY RETURN ON INVESTMENT MAY BE LIMITED TO POTENTIAL
FUTURE  APPRECIATION  ON  THE  VALUE  OF  OUR  COMMON  STOCK.

     We  currently  intend  to  retain  any  future  earnings  to  support  the
development  and  expansion  of  our  business and do not anticipate paying cash
dividends  in  the foreseeable future.  Our payment of any future dividends will
be at the discretion of our board of directors after taking into account various
factors,  including  without  limitation,  our  financial  condition,  operating
results, cash needs, growth plans and the terms of any credit agreements that we
may be a party to at the time.  To the extent we do not pay dividends, our stock
may  be  less  valuable because a return on investment will only occur if and to
the  extent  our  stock  price appreciates, which may never occur.  In addition,
investors  must  rely on sales of their common stock after price appreciation as
the only way to realize their investment, and if the price of our stock does not
appreciate,  then there will be no return on investment.  Investors seeking cash
dividends  should  not  purchase  our  common  stock.

OUR  OFFICERS,  DIRECTORS  AND PRINCIPAL SHAREHOLDERS, CONTROLLING APPROXIMATELY
76% OF OUR OUTSTANDING COMMON STOCK, CAN EXERT SIGNIFICANT INFLUENCE OVER US AND
MAY  MAKE  DECISIONS  THAT  ARE  NOT  IN THE BEST INTERESTS OF ALL SHAREHOLDERS.

     Our  officers,  directors  and  principal  shareholders  (greater  than  5%
shareholders)  collectively  control approximately 76% of our outstanding common
stock.  As  a  result, these shareholders will be able to affect the outcome of,
or exert significant influence over, all matters requiring shareholder approval,
including  the  election and removal of directors and any change in control.  In
particular,  this  concentration of ownership of our common stock could have the
effect  of  delaying  or  preventing  a  change  of  control  of us or otherwise
discouraging  or  preventing  a  potential  acquirer  from  attempting to obtain
control  of us.  This, in turn, could have a negative effect on the market price
of  our  common  stock.  It could also prevent our shareholders from realizing a
premium  over the market prices for their shares of common stock.  Moreover, the
interests  of  this  concentration of ownership may not always coincide with our
interests  or  the  interests of other shareholders, and accordingly, they could
cause  us  to  enter into transactions or agreements that we would not otherwise
consider.

ANTI-TAKEOVER  PROVISIONS  MAY LIMIT THE ABILITY OF ANOTHER PARTY TO ACQUIRE US,
WHICH  COULD  CAUSE  OUR  STOCK  PRICE  TO  DECLINE.

     Our  articles  of  incorporation,  as  amended,  our bylaws and Florida law
contain  provisions  that  could discourage, delay or prevent a third party from
acquiring  us,  even  if  doing  so  may  be  beneficial to our shareholders. In
addition,  these  provisions could limit the price investors would be willing to
pay  in  the  future  for  shares  of  our  common  stock.


                                       36
<PAGE>
<TABLE>
<CAPTION>
ITEM 7.     FINANCIAL STATEMENTS DIGITALFX INTERNATIONAL, INC. (FORMERLY
            QORUS.COM, INC.) AND SUBSIDIARIES

                          Index to financial statements

                                                                               PAGE
                                                                               ----
<S>                                                                            <C>
Report of Independent Registered Public Accounting Firm . . . . . . . . . . .    38

Consolidated Balance Sheet at December 31, 2006 . . . . . . . . . . . . . . .    39

Consolidated Statements of Operations for the Years Ended December 31, 2006
and December 31, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . .    40

Consolidated Statements of Stockholders' Equity (Deficit) for the Years Ended
December 31, 2006 and December 31, 2005 . . . . . . . . . . . . . . . . . . .    41

Consolidated Statements of Cash Flows for the Years Ended December 31, 2006
and December 31, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . .    42

Notes to Consolidated Financial Statements for the Years Ended
December 31, 2006 and December 31, 2005 . . . . . . . . . . . . . . . . . . .    43
</TABLE>


                                       37
<PAGE>
             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors
DigitalFX International, Inc. (formerly Qorus.com, Inc.) and Subsidiaries
Las Vegas, Nevada

We  have  audited  the  accompanying  consolidated  balance  sheet  of DigitalFX
International,  Inc.  (formerly Qorus.com, Inc.) (the "Company) and Subsidiaries
as  of  December 31, 2006 and the related consolidated statements of operations,
stockholders'  equity  (deficiency), and cash flows for the years ended December
31,  2006  and  2005.  These  consolidated  financial  statements  are  the
responsibility  of the Company's management. Our responsibility is to express an
opinion  on  these  consolidated  financial  statements  based  on  our  audits.

We  conducted  our  audits  in  accordance  with standards of the Public Company
Accounting  Oversight  Board  (United  States).  Those standards require that we
plan  and  perform  the  audits  to  obtain  reasonable  assurance  whether  the
consolidated  financial  statements are free of material misstatement.  An audit
includes  examining,  on  a  test  basis,  evidence  supporting  the amounts and
disclosures  in  the  consolidated financial statements.  An audit also includes
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 consolidated financial statements referred to above present
fairly,  in  all  material  respects,  the  financial  position  of  DigitalFX
International,  Inc.  (formerly Qorus.com, Inc.) and Subsidiaries as at December
31,  2006 and the results of their operations and their cash flows for the years
ended  December  31,  2006  and  2005,  in conformity with accounting principles
generally  accepted  in  the  United  States  of  America.



Weinberg & Company, P.A.
Los Angeles, California
March 7, 2007


                                       38
<PAGE>
<TABLE>
<CAPTION>
    DIGITALFX INTERNATIONAL, INC. (FORMERLY QORUS.COM, INC.) AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2006
                        (IN THOUSANDS, EXCEPT SHARE DATA)

ASSETS
<S>                                                 <C>
Current assets:
    Cash and cash equivalents                       $ 5,754
    Accounts receivable                                  49
    Inventories, net                                    135
    Prepaid bandwidth charges, affiliate                 72
    Prepaid expenses and other assets                   253
    Deferred income taxes, net                          176
                                                    --------

            Total current assets                      6,439

Property and equipment, net of accumulated
  depreciation and amortization of $135                 277
Deposits, merchant processors                           719
Deposits, software                                      373
Other assets                                             65
                                                    --------

        Total assets                                $ 7,873
                                                    ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Accounts payable                                $   542
    Accrued expenses                                    655
    Accrued commissions                               1,405
    Due to affiliate                                    187
                                                    --------

            Total current liabilities                 2,789
                                                    ========

Commitments and Contingencies

Stockholders' equity:
    Preferred Stock, $0.01 par value, 5,000,000
      shares authorized, no shares issued and
      outstanding                                         -
    Common Stock, $0.001 par value, 100,000,000
      shares authorized, 23,280,563 shares issued
      and outstanding                                    23
    Additional Paid In Capital                        9,403
    Other comprehensive loss                            (20)
    Accumulated deficit                              (4,322)
                                                    --------

            Total stockholders' equity                5,084
                                                    --------
        Total liabilities and stockholders' equity  $ 7,873
                                                    ========
</TABLE>

                 See Notes to Consolidated Financial Statements


                                       39
<PAGE>
<TABLE>
<CAPTION>
    DIGITALFX INTERNATIONAL, INC. (FORMERLY QORUS.COM, INC.) AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

                                                     Years Ended December 31,
                                                   -----------------------------
                                                       2006            2005
                                                   -------------  --------------
<S>                                                <C>            <C>

Revenues                                           $     22,800   $       5,068
Cost of revenues                                          4,444           1,248
                                                   -------------  --------------

Gross profit                                             18,356           3,820

Commission expenses                                      10,459           2,341
Other operating expenses                                  6,732           2,646
                                                   -------------  --------------

Operating income (loss)                                   1,165          (1,167)
                                                   -------------  --------------

Other (income) expense:
Expenses relating to exchange transaction                   635               -
Other (income) expense, net                                 (63)             56
                                                   -------------  --------------

Other (income) expense, net                                 572              56
                                                   -------------  --------------

Income (Loss) before provision for  income taxes            593          (1,223)

Provision for income taxes                                  113               -
                                                   -------------  --------------
Net income (loss)                                  $        480   $      (1,223)
                                                   =============  ==============
Net income (loss) per share:
    Basic                                          $        .02   $        (.06)
                                                   =============  ==============
    Fully diluted                                  $        .02   $        (.06)
                                                   =============  ==============
Weighted average shares outstanding:
    Basic                                            21,032,218      19,631,179
                                                   =============  ==============
    Fully diluted                                    22,832,198      19,631,179
                                                   =============  ==============
</TABLE>

                 See Notes to Consolidated Financial Statements


                                       40
<PAGE>
<TABLE>
<CAPTION>
                             DIGITALFX INTERNATIONAL, INC. (FORMERLY QORUS.COM, INC.) AND SUBSIDIARIES
                                     CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                                                 (IN THOUSANDS, EXCEPT SHARE DATA)

----------------------------------------------------------------------------------------------------------------------------------
                                                                                                  Other
                                                                   Additional                    Compre
                                               Common     Stock     Paid-In        Deferred      hensive    Accumulated
                                               Shares    Amount     Capital      Compensation     Loss        Deficit      Total
----------------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>         <C>      <C>           <C>             <C>        <C>            <C>
OPENING BALANCE, JANUARY 1, 2005             15,790,110       16         3306               -          -         (3,579)     (257)

                                              3,841,069
  Issuance of common stock                                     4          998               -          -              -     1,002

  Distributions to shareholders                       -        -          (43)              -          -              -       (43)

  Issuance of warrants                                -        -          179             (57)         -              -       122

  Amortization of fair value of options               -        -            -                          -              -         -

  Foreign currency translation adjustment             -        -            -               -         (1)             -        (1)

  Net income for the year ended
    December 31, 2005                                 -        -            -               -          -         (1,223)   (1,223)
                                             --------------------------------------------------------------------------------------

ENDING BALANCE, DECEMBER 31, 2005            19,631,179       20        4,440             (57)        (1)        (4,802)     (400)

  Reclassification of deferred compensation           -        -          (57)             57          -              -         -

  Issuance of common stock                    2,519,780        2        4,939               -          -              -     4,941

  Exercise of warrants                          165,247        -           43               -          -              -        43

  Distributions to shareholders                       -        -         (265)              -          -              -      (265)

  Amortization of fair value of warrants              -        -          175               -          -              -       175

  Amortization of fair value of options               -        -          130               -          -              -       130

  Effect of merger transaction                  964,357        1           (2)              -          -              -        (1)

  Foreign currency translation adjustment             -        -            -               -        (19)             -       (19)

  Net income for the year ended
    December 31, 2006                                 -        -            -               -          -            480       480
                                             -------------------------------------------------------------------------------------

ENDING BALANCE, DECEMBER 31, 2006            23,280,563  $    23  $     9,403   $           -   $    (20)  $     (4,322)  $ 5,084
                                             =====================================================================================
</TABLE>

                 See Notes to Consolidated Financial Statements


                                       41
<PAGE>
<TABLE>
<CAPTION>
    DIGITALFX INTERNATIONAL, INC. (FORMERLY QORUS.COM, INC.) AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (IN THOUSANDS)

                                                         Years ended December 31
                                                        -------------------------
                                                            2006          2005
                                                        -------------  ----------
<S>                                                     <C>            <C>
Operating activities:
  Net income (loss)                                     $        480   $  (1,223)
    Adjustment to reconcile net income (loss) to net
    cash provided by (used in) operating activities:
      Depreciation and amortization                              135          78
      Equity based compensation expense                          305         122
      Deferred income taxes                                     (176)          -
  Changes in assets and liabilities:
      Accounts receivable                                        (22)        (24)
      Inventory                                                   19        (138)
      Prepaid expenses and reserves                             (908)         (7)
      Accounts payable and accrued expenses                    1,420         817
      Due to affiliate                                           133         (56)
                                                        -------------  ----------

  Net cash provided by (used in) operating activities          1,386        (431)
                                                        -------------  ----------

Investing activities:
  Purchases of property and equipment                           (174)       (279)
  Deposits on software                                          (373)          -
                                                        -------------  ----------

        Net cash used in investing activities                   (547)       (279)
                                                        -------------  ----------

Financing activities:
  Proceeds from issuance of common stock, net                  4,941       1,002
  Proceeds from exercise of warrants, net                         43           -
  Principal payments on note payable                             (50)          -
  Distributions to shareholders                                 (265)        (43)
                                                        -------------  ----------

      Net cash provided by financing activities                4,669         959
                                                        -------------  ----------

  Foreign currency translation                                   (19)         (1)

Change in cash and cash equivalents                            5,489         248
Cash and cash equivalents, beginning of period                   265          17
                                                        -------------  ----------

Cash and cash equivalents, end of period                $      5,754   $     265
                                                        =============  ==========

Supplemental cash flow information:
  Cash paid for interest                                $          2   $       4
  Cash paid for income taxes                            $        250   $       -
</TABLE>

                 See Notes to Consolidated Financial Statements


                                       42
<PAGE>
      DIGITAL FX INTERNATIONAL, INC. (FORMERLY QORUS.COM) AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA
                     YEARS ENDED DECEMBER 31, 2006 AND 2005

NOTE  1.     THE  COMPANY  AND  BASIS  OF  PRESENTATION

COMPANY

     DigitalFX  International, Inc. (the "Company"), a Florida C corporation, is
a  holding  company, containing a web-based social networking company that hosts
and  markets  a  streaming  video  portal: helloWorld.com. The portal utilizes a
commercial-free,  subscription-based  Application  Service Provider (ASP) model,
providing subscribers with a wide spectrum of streaming video content as well as
an integrated suite of consumer-oriented streaming media applications, including
video  email,  video chat and live web-casting.  The Company sells subscriptions
to  its portal through a unique multi-tiered affiliate program using non-related
independent  distributors,  known  as  "Affiliates."  The  Company  also markets
subscriptions  directly  to  "Retail  Customers"  who  purchase  them  for their
personal  use.  In  addition to offering portal subscriptions, the Company sells
select  products to these Affiliates to assist them in building their businesses
and  in  selling  subscriptions  to  the  portal.

     The  consolidated financial statements include the accounts of the Company,
VMdirect,  L.L.C.  ("VMdirect")  and  its  wholly-owned U.K. subsidiary, and the
Company's  wholly-owned  Nevada  subsidiaries.  Inter-company  transactions  and
balances  have  been  eliminated.

MERGER  AND  STOCK  SPLIT

     On  June  15,  2006,  Qorus.com,  Inc.,  an  inactive  Florida  corporation
("Qorus")  with no current operations, issued to the Company's members 1,014,589
shares  of  Series  A Convertible Preferred Stock, par value $0.01 per share, of
Qorus (the "Preferred Stock"), which were converted into 1,057,547,456 shares of
Qorus'  common  stock  ("Conversion  Shares"). The number of shares of Preferred
Stock  issued to the Members and the number of Conversion Shares gives effect to
the  issuance  of 289,292 membership units by VMdirect for an aggregate purchase
price  of  $625,000,  a  transaction that was completed immediately prior to the
Closing.  The  transaction  has  been  accounted  for  as  a  reverse  merger
(recapitalization)  with  the  Company deemed the accounting acquirer, and Qorus
the  legal  acquirer.  As  such,  the  financial  statements  herein reflect the
historical  activity  of  VMdirect  since  its  inception,  and  the  historical
stockholders'  equity  of  VMdirect  has  been  retroactively  restated  for the
equivalent  number of shares received in the exchange after giving effect to any
differences in the par value offset to additional paid in capital. Subsequent to
the  consummation  of  this  transaction,  Qorus  changed  its name to DigitalFX
International,  Inc.

     On  August  1,  2006,  the Company affected a 1 for 50 reverse stock split.
The effect of this stock split has been retroactively reflected in the financial
statements  as  if  the  stock  split  occurred at the beginning of the earliest
period  reported.

NOTE  2.     ACCOUNTING  POLICIES

USE OF ESTIMATES AND ASSUMPTIONS

     The  financial  statements  are  prepared  in  accordance  with  accounting
principles  generally  accepted  in  the  United  States  of  America. Preparing
financial statements in conformity with generally accepted accounting principles
requires  management  to make estimates and assumptions that affect the reported
amounts  of  assets and liabilities at the date of the financial statements, and
the  reported  amounts  of  revenues  and  expenses  during the reported period.
Examples  of  significant estimates used in preparing the accompanying financial
statements  include,  but  are  not limited to: the carrying value of long-lived


                                       43
<PAGE>
      DIGITAL FX INTERNATIONAL, INC. (FORMERLY QORUS.COM) AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA
                     YEARS ENDED DECEMBER 31, 2006 AND 2005

assets;  useful  lives  of  property and equipment; revenue recognition; and the
valuation  allowances  for  receivables,  inventories and sales returns, and the
value  of  stock  options  issued  for  the  purpose  of determining stock-based
compensation.  Actual  results  and  outcomes  may  materially  differ  from
management's  estimates  and  assumptions.

CASH AND CASH EQUIVALENTS

     The  Company  considers  all  highly  liquid  investments  with  remaining
maturities  of  three  months  or less when acquired to be cash equivalents. The
Company  holds  its  cash  in  what  it  believes  to be credit-worthy financial
institutions.

     At  December  31,  2006,  the  Company  had  $719 of funds held by banks as
reserves  against  any  possible  charge  backs  and  returns  on  credit  card
transactions  related  to  customer  disputes  that  are  not offset against the
Company's  daily sales deposit activity. These amounts are reflected as Deposit,
Merchant  Processors  on  the  Company's  balance  sheet.

INVENTORIES

     Inventories are stated at the lower of cost (determined using the first-in,
first-out  method)  or market. As of December 31, 2006, inventories consisted of
finished  goods.  The  Company reviews on hand inventory for obsolete and excess
finished  goods  on  a  monthly  basis.

PROPERTY AND EQUIPMENT

     Property and equipment is stated at cost, less accumulated depreciation and
amortization. Depreciation is computed using the straight-line method based upon
the  estimated  useful  lives  of  the  assets  or  terms  of  the related lease
agreements.  Computers,  equipment  and  purchased software are depreciated over
three  years.  Depreciation  of  the  assets  begins  in the month following the
in-service date, and maintenance and repairs are charged to expense as incurred.

REVENUES

     The  Company  recognizes  revenue  from  the  sales of starter packages and
selling  aids,  including  shipping revenue in accordance with SAB No. 104, when
persuasive  evidence  of an order arrangement exists, delivery has occurred, the
sales  price  is fixed or determinable and collectibility is reasonably assured.
Generally,  these  criteria  are  met  at  the  time  the  product is shipped to
customers  when  title  and  risk  of loss have transferred.  Sales of the above
products  entail  no  post-customer  support  or  delivery  of  any other items.
Allowances  for estimated subsequent customer returns are provided when revenues
are  recorded.  Costs incurred for the shipping and handling of its products are
recorded  as  cost  of  sales.

     The  Company  recognizes  revenue  from subscriptions to its internet-based
studio  suite  of products including video email, live broadcasting, podcasting,
blogging, instant messenger and media storage when the subscription is initiated
or  renewed  monthly  and  as  the  services  are  billed and provided.  Monthly
subscriptions  are sold to both affiliates and retail customers.  Allowances for
estimated  customer  cancellations  are  provided  when  revenues  are recorded.

     The  Company  also  sells  select  products to affiliates to assist them in
building  their  businesses and in selling subscriptions to the portal.  Revenue
for  these sales including shipping revenue are recognized when all the criteria
of  SAB  No.  104  described  above  are  met, which is generally upon shipment.


                                       44
<PAGE>
      DIGITAL FX INTERNATIONAL, INC. (FORMERLY QORUS.COM) AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA
                     YEARS ENDED DECEMBER 31, 2006 AND 2005

     The  Company  also earns fees for certain events it hosts such as sales and
training  conferences  and  seminars.  Amounts  collected prior to the event are
reflected as deferred revenue, and recognized when the event is held.

SHIPPING AND HANDLING FEES

     Shipping and handling fees are billed to customers and included in revenue.
The  related  costs  are  included  in cost of goods sold. Shipping and handling
costs  are  charged to expense as incurred. Total shipping and handling costs of
$349 and $98 are included in cost of goods sold for the years ended December 31,
2006  and  2005,  respectively.

PRODUCT RETURNS AND CANCELLATIONS

     Affiliate  business  starter  packages  and merchandise returned within the
first  30  days  of  purchase  are  refunded  at  90 percent of the sales price.
Returned  products that were damaged during shipment to the customer is replaced
immediately  at  the  Company's  expense.

     Sales  allowance  is  a monthly estimate of refunds to be issued on starter
packages  that  have  been shipped but are still subject to our return policy at
month  end.  The  allowance  is  based  on an analysis of the historical rate of
credits  and  refunds,  using  the  latest  four  months activity.  Increases or
decreased  to  the  sales allowance are charged to revenue.  The accuracy of the
estimate  is  dependent  on the rate of future returns being consistent with the
historical  rate.

STOCK-BASED COMPENSATION

     The  Company  accounts  for  stock  option  and  warrant  grants  issued to
non-employees  using  the guidance of SFAS No. 123R, "Accounting for Stock-Based
Compensation"  and  EITF  No. 96-18: "Accounting for Equity Instruments that are
Issued  to  Other  Than Employees for Acquiring, or in Conjunction with Selling,
Goods  or Services," whereby the fair value of such option and warrant grants is
determined  using  the  Black-Scholes option pricing model at the earlier of the
date  at  which  the  non-employee's  performance  is completed or a performance
commitment  is  reached.

     Statement  of  Financial  Accounting  Standards  No.  123,  "Accounting for
Stock-Based  Compensation"  ("SFAS No. 123"), established a fair value method of
accounting  for  stock-based compensation plans and for transactions in which an
entity  acquires  goods  or  services  from non-employees in exchange for equity
instruments.  SFAS  No.  123  was  amended  by Statement of Financial Accounting
Standards  No.  148,  "Accounting  for Stock-Based Compensation - Transition and
Disclosure,"  which  required  companies  to  disclose  in  interim  financial
statements  the  pro forma effect on net income (loss) and net income (loss) per
common  share  of  the  estimated fair market value of stock options or warrants
issued  to  employees.  Through  December  31,  2005,  the Company accounted for
stock-based  compensation  utilizing  the  intrinsic  value method prescribed in
Accounting  Principles  Board  Opinion  No.  25, "Accounting for Stock Issued to
Employees" ("APB No. 25"), with pro forma disclosures of net income (loss) as if
the fair value method had been applied. Accordingly, compensation cost for stock
options  was  measured  as  the  excess, if any, of the fair market price of the
Company's  stock  at  the  date of grant over the amount an employee must pay to
acquire  the  stock.

     As the exercise price of stock options and warrants issued to employees was
not less than the fair market value of the Company's common stock on the date of
grant,  and  in  accordance  with  accounting  for  such  options  utilizing the
intrinsic  value  method,  there was no related compensation expense for options


                                       45
<PAGE>
      DIGITAL FX INTERNATIONAL, INC. (FORMERLY QORUS.COM) AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA
                     YEARS ENDED DECEMBER 31, 2006 AND 2005

issued  to  employees  recorded  in  the  Company's  2005 consolidated financial
statements.  The  fair  value  of stock options and warrants issued to officers,
directors  and  employees  on  the  date  of  grant  was  estimated  using  the
Black-Scholes  option-pricing  model, and the effect on the Company's results of
operations  was  required  to be disclosed as if such stock options and warrants
had  been  accounted  for  pursuant  to  SFAS  No.  123.

     The  Company's "reported" and "pro-forma" information for the year December
31,  2005  is  as  follows:

<TABLE>
<CAPTION>
<S>                                                <C>
          Net loss as reported                     $(1,223)
          Deduct: total stock-based employee
            compensation expense determined under
            the fair value method for all vested
            awards, net of related taxes               (11)
                                                   --------
          Pro-forma net loss                       $(1,234)
                                                   ========
          Basic and diluted earnings per share:
          Net loss as reported                     $ (0.06)
                                                   ========
          Pro-forma net loss                       $ (0.06)
                                                   ========
</TABLE>

     In  December 2004, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 123 (revised 2004), "Share Based Payment" ("SFAS No. 123R"), a revision
to  SFAS  No.  123,  "Accounting  for  Stock-Based Compensation."  SFAS No. 123R
superseded  APB  No.  25  and  amended  SFAS  No. 95, "Statement of Cash Flows."
Effective  January  1, 2006, SFAS No. 123R requires that the Company measure the
cost  of  employee  services received in exchange for equity awards based on the
grant  date  fair  value  of  the  awards,  with  the  cost  to be recognized as
compensation  expense  in  the  Company's  financial statements over the vesting
period  of  the  awards.

     Accordingly,  the  Company  recognizes  compensation  cost for equity-based
compensation  for all new or modified grants issued after December 31, 2005.  In
addition,  commencing  January  1,  2006,  the  Company  recognizes the unvested
portion  of the grant date fair value of awards issued prior to adoption of SFAS
No.  123R based on the fair values previously calculated for disclosure purposes
over the remaining vesting period of the outstanding stock options and warrants.

     The  Company  adopted SFAS No. 123R effective January 1, 2006, and is using
the  modified  prospective  method  in  which  compensation  cost  is recognized
beginning with the effective date (a) based on the requirements of SFAS No. 123R
for  all  share-based payments granted after the effective date and (b) based on
the  requirements  of SFAS No. 123R for all awards granted to employees prior to
the  effective  date of SFAS No. 123R that remain unvested on the effective date
(see  Note  6,  Stock  Options  and  Warrants).

EARNINGS (LOSS) PER SHARE

     Statement  of Financial Accounting Standards No. 128, "Earnings per Share",
requires  presentation  of  basic  earnings  per share ("Basic EPS") and diluted
earnings  per share ("Diluted EPS"). Basic earnings (loss) per share is computed
by  dividing  earnings  (loss)  available  to  common  stockholders


                                       46
<PAGE>
      DIGITAL FX INTERNATIONAL, INC. (FORMERLY QORUS.COM) AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA
                     YEARS ENDED DECEMBER 31, 2006 AND 2005

by  the  weighted average number of common shares outstanding during the period.
The  weighted  average  number  of  shares  outstanding  have been retroactively
restated for the equivalent number of shares received by the accounting acquirer
as  a result of the Exchange transaction as if these shares had been outstanding
as  of the beginning of the earliest period presented. The 964,657 shares issued
to  the legal acquirer are in included in the weighted average share calculation
from  June  15,  2006,  the  date  of  the  exchange  agreement.

     Diluted  earnings  per  share  reflects  the  potential dilution, using the
treasury  stock  method,  that  could  occur if securities or other contracts to
issue  common stock were exercised or converted into common stock or resulted in
the  issuance  of  common stock that then shared in the earnings of the Company.
In  computing diluted earnings per share, the treasury stock method assumes that
outstanding  options  and  warrants  are  exercised and the proceeds are used to
purchase  common  stock  at the average market price during the period.  Options
and  warrants  will  have a dilutive effect under the treasury stock method only
when  the average market price of the common stock during the period exceeds the
exercise  price  of  the  options  and  warrants.

     The  following  is a reconciliation of the calculation of basic and diluted
earnings per share for the years ended December 31, 2006 and 2005.

<TABLE>
<CAPTION>
                                        2006                                     2005
-------------------------------------------------------------  ----------------------------------------
                         Income        Shares      Per-Share       Loss         Shares       Per-Share
                      (Numerator)   (Denominator)    Amount    (Numerator)   (Denominator)    Amount
                      ---------------------------------------  ----------------------------------------
<S>                   <C>           <C>            <C>         <C>           <C>            <C>
Basic earnings per
  share:
Income available to
  common
  stockholders        $        480     21,032,218  $     0.02  $    (1,223)     19,631,179  $    (0.06)

Effect of Dilutive
  Securities:
Options and warrants             -      1,799,980           -            -               -           -
                      ---------------------------------------------------------------------------------

Diluted earnings per
  share               $        480     22,832,198  $     0.02  $    (1,223)     19,631,179  $    (0.06)
                      =================================================================================
</TABLE>

     Options  to purchase 291,500 shares of common stock at $7.75 per share were
outstanding during the year ended December 31, 2006 but were not included in the
computation  of  diluted earnings per share for this period because the options'
exercise  price  was  greater than the average market price of the common shares
during this period, and their effect would be anti-dilutive. Options to purchase
818,349  shares  of common stock at $0.26 were outstanding during the year ended
December  31,  2005 but were not included in the computation of diluted earnings
per  share  for this period because the Company incurred a loss for this period,
and  their  effect  would  be  anti-dilutive.


                                       47
<PAGE>
      DIGITAL FX INTERNATIONAL, INC. (FORMERLY QORUS.COM) AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA
                     YEARS ENDED DECEMBER 31, 2006 AND 2005

MEMBER INCENTIVES

The  Company's commission structure is based on a multi-level affiliate program.
Commissions  are recorded for sales, including commissions based on bonus points
assigned  to  products which are independent of the product's price. Commissions
totaled  $10,459  and  $2,341  for  the  years ended December 31, 2006 and 2005,
respectively,  and  are  included in the accompanying consolidated statements of
operations.

IMPAIRMENT OF LONG-LIVED ASSETS

     Long-lived assets are reviewed for impairment whenever events or changes in
circumstances  indicate  that  the  carrying  amount  of  an  asset  may  not be
recoverable.  Recoverability  of  assets  to  be  held and used is measured by a
comparison  of the carrying amount of an asset to future net cash flows expected
to be generated by the asset.  If such assets are considered to be impaired, the
impairment  to  be  recognized  is  measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of  are reported at the lower of the carrying amount or fair value less costs to
sell.

FAIR VALUE OF FINANCIAL INSTRUMENTS

     The  carrying  values  of  cash  and cash equivalents, accounts receivable,
accounts  payable,  accrued  expenses,  accrued commissions and due to affiliate
approximate fair value due to the short maturity of these financial instruments.

QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

     We  currently  have  limited financial market risks from changes in foreign
currency  exchange  rates or changes in interest rates and do not use derivative
financial  instruments.  For  the  year  ended  December  31,  2006, 3% of total
revenue is denominated in British pounds, 7% in Australian dollars and 1% in New
Zealand  dollars.  In  the  future,  we  expect  to  enter  into transactions in
additional  currencies.  An  adverse  change in exchange rates would result in a
decline in income before taxes, assuming that each exchange rate would change in
the  same  direction  relative  to  the  U.S. dollar.  In addition to the direct
effects  of  changes in exchange rates, such changes typically affect the volume
of sales or foreign currency sales price as competitors' products become more or
less  attractive.

INCOME TAXES

     VMdirect had 11 individual members until June 15, 2006.  After the exchange
transaction,  DigitalFX  became  the sole member of VMdirect. Federal income tax
obligations  for  the  period  through  and  including June 15, 2006 were passed
through  to  the  previous  members  of  VMdirect,  and  the Company recorded no
provision  for  such  taxes. The Company has agreed with the previous members of
VMdirect  that  the  Company  will  not  make  any  distributions  to  pay  tax
liabilities,  if any, on income earned prior to June 15, 2006. Consequently, the
taxes,  if  any,  on  the  income  of VMdirect through June 15, 2006 are payable
individually  by  each  member.

     The  Company  accounts  for  income  taxes  and  related accounts under the
liability  method.  Deferred  tax liabilities and assets are determined based on
the  difference  between  the  financial  statement  and tax bases of assets and
liabilities  using  enacted  rates  expected  to be in effect during the year in
which  the  basis  differences  reverse.


                                       48
<PAGE>
      DIGITAL FX INTERNATIONAL, INC. (FORMERLY QORUS.COM) AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA
                     YEARS ENDED DECEMBER 31, 2006 AND 2005

     The  Company's provision for income taxes at December 31, 2006 was based on
income  for  the  period from June 16, 2006 to December 31, 2006 as adjusted for
timing differences outstanding at the date that DigitalFX became the sole member
of  VMdirect.  The  Company's  income  tax  provision  was computed based on the
federal  statutory  rate,  net  of  the  related  deferred  tax  benefit.

FOREIGN CURRENCY TRANSLATION

     The  functional  currency  of our UK subsidiary is the pound sterling.  The
foreign  subsidiary asset and liability accounts are translated for consolidated
financial  reporting  purposes  into  U.S. dollar amounts at period end exchange
rates;  investment  accounts, revenue and expense accounts are translated at the
average  rates  during the period rates in accordance with FASB 52.  The effects
of foreign currency translation adjustments are included in stockholders' equity
as  a component of "Other comprehensive loss" in the accompanying balance sheet.

COMPREHENSIVE INCOME (LOSS)

     SFAS  No.  130, "Reporting Comprehensive Income," established rules for the
reporting  and display of comprehensive income and its components.  SFAS No. 130
requires  unrealized  gains  or  losses  on  the  Company's  foreign  currency
translation  adjustments  to  be reported as a separate component (comprehensive
income/loss)  of  stockholders'  equity.  The components of comprehensive income
(loss)  are  as  follows:

<TABLE>
<CAPTION>
                                Years ended    December 31,
                                   2006            2005
                               -----------------------------
<S>                            <C>            <C>

Net Income (Loss)              $        480   $      (1,223)
Foreign Currency Translation            (19)             (1)
                               -----------------------------
Comprehensive  Income (Loss)   $        461   $      (1,224)
                               =============================
</TABLE>

RECLASSIFICATIONS

     In  the  current  year  we  have  reclassified  certain  components  of our
stockholders' equity section to reflect the elimination of deferred compensation
arising  from  unvested share-based compensation pursuant to the requirements of
Staff  Accounting  Bulletin No. 107, regarding Statement of Financial Accounting
Standards  No.  123(R),  "Share-Based  Payment."  This deferred compensation was
previously  recorded  as  an  increase  to  additional  paid-in  capital  with a
corresponding  reduction to stockholders' equity for such deferred compensation.
This  reclassification has no effect on net income or total stockholders' equity
as  previously  reported.  The  Company  will  record  an increase to additional
paid-in  capital  as  the  share-based  payments  vest.

RECENT  ACCOUNTING  PRONOUNCEMENTS

     In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements,"
which  provides  enhanced  guidance  for  using fair value to measure assets and
liabilities.  SFAS  No.  157  provides  a  common  definition  of fair value and
establishes  a  framework  to  make  the  measurement of fair value in generally
accepted  accounting  principles  more  consistent and comparable.  SFAS No. 157
also  requires  expanded  disclosures to provide information about the extent to
which  fair  value  is  used  to  measure  assets


                                       49
<PAGE>
      DIGITAL FX INTERNATIONAL, INC. (FORMERLY QORUS.COM) AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA
                     YEARS ENDED DECEMBER 31, 2006 AND 2005

and liabilities, the methods and assumptions used to measure fair value, and the
effect  of  fair  value  measures  on  earnings.  SFAS  No. 157 is effective for
financial  statements  issued  in fiscal years beginning after November 15, 2007
and  for interim periods within those fiscal years.  The Company is currently in
the  process of evaluating the effect, if any, the adoption of SFAS No. 157 will
have  on  its  results  of  operations,  financial  position,  or  cash  flows.

     In June 2006, the FASB issued FIN 48, "Accounting for Uncertainty in Income
Taxes--an  interpretation  of FASB Statement No. 109," which seeks to reduce the
diversity  in  practice  associated  with  the  accounting  and  reporting  for
uncertainty  in  income  tax  positions.  This  Interpretation  prescribes  a
comprehensive  model  for  the  financial  statement  recognition,  measurement,
presentation  and  disclosure of uncertain tax positions taken or expected to be
taken in an income tax return. FIN 48 presents a two-step process for evaluating
a  tax  position.  The  first  step  is  to  determine  whether  it  is
more-likely-than-not  that  a  tax  position will be sustained upon examination,
based on the technical merits of the position. The second step is to measure the
benefit  to  be  recorded  from tax positions that meet the more-likely-than-not
recognition  threshold, by determining the largest amount of tax benefit that is
greater  than  50 percent likely of being realized upon ultimate settlement, and
recognizing  that  amount  in  the financial statements. FIN 48 is effective for
fiscal  years beginning after December 15, 2006. The Company is currently in the
process  of  evaluating  the effect, if any, the adoption of FIN 48 will have on
its  results  of  operations,  financial  position,  or  cash  flows.

     In  September  2006,  the  Securities  and Exchange Commission issued Staff
Accounting  Bulletin  ("SAB")  No.  108,  "Considering the Effects of Prior Year
Misstatements  when  Quantifying  Misstatements  in  Current  Year  Financial
Statements."  SAB  No.  108  was  issued  in order to eliminate the diversity in
practice  surrounding  how  public  companies  quantify  financial  statement
misstatements.  SAB No. 108 requires that registrants quantify errors using both
a  balance  sheet  (iron  curtain)  approach  and an income statement (rollover)
approach  then  evaluate  whether  either approach results in a misstated amount
that,  when all relevant quantitative and qualitative factors are considered, is
material.  SAB  No.  108 is effective for fiscal years ending after November 15,
2006.  The  Company  has  adopted the bulletin during 2006. The adoption did not
have  a  material  effect  on results of operations, financial position, or cash
flows.

NOTE  3.     PRODUCT,  CUSTOMER  AND  GEOGRAPHIC  INFORMATION

     SFAS  No.  131,  Disclosure  about  Segments  of  an Enterprise and Related
Information,  establishes standards for the reporting of business enterprises of
information  about  operating  segments, products and services, geographic areas
and major customers.  The standard for determining what information to report is
based  on  operating  segments within DigitalFX International that are regularly
reviewed  and used by the chief operating decision-maker in evaluating financial
performance  and  resource  allocation.

     DigitalFX  International's  chief operating decision-maker is considered to
be  the  chief  executive  officer  (CEO).  Based  on  the financial information
reviewed  by  the  CEO,  the Company has determined that it operates in a single
operating segment, specifically, digital web-based communications services.


                                       50
<PAGE>
      DIGITAL FX INTERNATIONAL, INC. (FORMERLY QORUS.COM) AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA
                     YEARS ENDED DECEMBER 31, 2006 AND 2005

     The  following  table  presents  revenue  by product category for the years
ended  December  31,2006  and  2005.

<TABLE>
<CAPTION>
           REVENUE:                            DECEMBER 31, 2006   DECEMBER 31, 2005
                                               --------------------------------------
<S>                                            <C>                 <C>
           Affiliate business packages         $        7,745,400  $        1,959,700
           Upgrades to business packages                1,551,300             477,400
           Subscription fees for access plans
           and administrative tools                    11,848,400           2,311,000
           Merchandise and Shipping fees                  920,700             179,400
           Other revenue                                  734,200             140,500
                                               --------------------------------------
           Total Revenue                       $       22,800,000  $        5,068,000
                                               ======================================
</TABLE>

     The  breakdown  of  revenues  generated  by geographic region for the years
ended  December  31,  2006  and  2005  is  as  follows:

<TABLE>
<CAPTION>
                                           DECEMBER 31,   DECEMBER 31,
                                               2006           2005
                                           -------------  -------------
<S>                                        <C>            <C>
           United States, Canada & Mexico            89%            88%
           United Kingdom                             3%            12%
           Australia & New Zealand                    8%             -
                                           -------------  -------------
                                                    100%           100%
                                           =============  =============
</TABLE>

     Assets  and liabilities located in countries outside the United States were
not  material  at  December  31,  2006.

     The  breakdown  of  revenues generated by customer type for the years ended
December  31,  2006  and  2005  is  as  follows:

<TABLE>
<CAPTION>
                            DECEMBER 31,   DECEMBER 31,
                                2006           2005
                            -------------  -------------
<S>                         <C>            <C>
          Affiliates                  94%            94%
          Retail customers             6%             6%
                            -------------  -------------
                                     100%           100%
                            =============  =============
</TABLE>


                                       51
<PAGE>
      DIGITAL FX INTERNATIONAL, INC. (FORMERLY QORUS.COM) AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA
                     YEARS ENDED DECEMBER 31, 2006 AND 2005

NOTE  4.     PROPERTY  AND  EQUIPMENT

     Property  and  equipment at December 31, 2006 consists of the following (in
thousands):

<TABLE>
<CAPTION>
<S>                                                  <C>
Furniture and fixtures                               $     16
Computers and equipment                                   302
Purchased software                                        216
                                                     ---------
                                                          534
    Less: accumulated depreciation and amortization      (257)
                                                     ---------
                                                     $    277
                                                     =========
</TABLE>

     All  property  and  equipment  above is depreciated over a three year life.
Depreciation expense for the years ended December 31, 2006 and 2005 was $135 and
$78,  respectively.

NOTE  5.     EQUITY  TRANSACTIONS

2006 TRANSACTIONS

Merger and Stock Split

     As  described  in  Note 1, on June 15, 2006, Qorus issued to the members of
VMdirect  1,014,589  shares  of  Series A Convertible Preferred Stock, par value
$0.01  per  share,  of  Qorus  which were converted into 1,057,547,456 shares of
Qorus'  common  stock.  The  number  of  shares of Preferred Stock issued to the
Members  and  the  number  of  Conversion Shares gives effect to the issuance of
361,603  membership  units  by  VMdirect  for  an  aggregate  purchase  price of
$625,000,  a  transaction  that  was completed immediately prior to the Closing,
resulting  in  net  proceeds  to  the  Company  of  $594,000.

     On  August  1,  2006,  the Company affected a 1 for 50 reverse stock split.
The effect of this stock split has been retroactively reflected in the financial
statements  as  if  the  stock  split  occurred at the beginning of the earliest
period  reported.  The  stock split converted the 1,057,547,456 shares of Qorus'
common  stock  into  approximately  21,150,959  shares  of  common  stock of the
Company,  of  which  1,519,780  shares relate to the sale of membership units by
VMdirect  consummated  immediately  prior  to  the  closing  and  the  remaining
19,631,179  shares represent the converted shares outstanding as of December 31,
2005.

Sale of Common Stock

     On  December  22,  2006,  the  Company  entered  into a Securities Purchase
Agreement  pursuant  to  which  the  Company sold 1,000,000 shares of its common
stock  at a per share price of $4.75 gross proceeds of $4,750.  The Company paid
placement  and  other  closing  costs  of  $405 resulting in net proceeds to the
Company  of  $4,345.

     In  connection  with  the  Closing,  on December 27, 2006, the Company also
entered  into  a  Registration  Rights  Agreement  (the  "Registration  Rights
Agreement")  with  the  Investors,  pursuant  to  which, among other things, the
Company agreed to register the resale of the Shares by the Investors and to keep
the  registration statement effective until the earlier of the date on which all
Shares  have  been sold by the Investors and the date that all of the Shares may
be  sold  by  the  Investors  pursuant  to  Rule  144


                                       52
<PAGE>
      DIGITAL FX INTERNATIONAL, INC. (FORMERLY QORUS.COM) AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA
                     YEARS ENDED DECEMBER 31, 2006 AND 2005

promulgated  under  the  Securities  Act of 1933, as amended (the "Effectiveness
Period").  The  Registration  Rights  Agreement provides that if (i) the Company
does  not  file  a  registration statement on or before January 31, 2007, (ii) a
registration  statement is not declared effective on or prior to March 27, 2007,
which  date  may  be  extended to May 1, 2007 in the event that the registration
statement  is reviewed by the Securities and Exchange Commission, or (iii) after
its  effective  date,  such registration statement ceases to remain continuously
effective  and  available  to the holders of the Shares at any time prior to the
expiration  of  the  Effectiveness  Period  for  an  aggregate  of  more than 30
consecutive trading days or for more than an aggregate of 60 trading days in any
12-month  period (which need not be consecutive), then the Company must pay each
holder  of  Shares on the date of such event, and for each month thereafter that
such  event  continues, an amount in cash as partial liquidated damages equal to
1%  of  the  aggregate  Purchase  Price  paid  by  such Investor pursuant to the
Securities Purchase Agreement for any Shares then held by such Investor, up to a
maximum  of  18%  of  the  aggregate Purchase Price paid by such Investor in any
12-month  period, unless, as a result of the liquidated damages provision of the
Registration  Rights  Agreement, generally accepted accounting principles of the
United  States  require the Shares to be treated as derivative securities, or as
any other financial component other than stockholders equity, in which case, the
maximum  amount  payable  under  the  liquidated  damages  provisions  of  the
Registration  Rights  Agreement  will  not  exceed 18% of the aggregate Purchase
Price  paid  by  such  Investor.

Distributions

     Prior  to  the  merger  transaction  described  above,  members of VMdirect
received  distributions of $265 and $43 during the years ended December 31, 2006
and  2005,  respectively.

2005  TRANSACTIONS

     In  2005,  the Company sold 91.40 membership units (equivalent to 3,841,069
shares  of  common  stock)  for  $11,000  per  unit  receiving  $1,005  from two
individual  investors.

NOTE  6.     STOCK  OPTIONS  AND  WARRANTS

OPTIONS

     The  Company's  2006  Stock  Incentive  Plan  was  adopted  by our board of
directors  and  became  effective  in  August, 2006.  The total number of shares
reserved  for  issuance  under  this  plan  was 1,537,501.  The number of shares
reserved  for  issuance  under  the  2006  Stock Incentive Plan is subject to an
annual increase on the first day of each fiscal year during the term of the 2006
Stock Incentive Plan, beginning January 1, 2007, in each case in an amount equal
to  the  lesser  of  (i)  1,000,000  shares  of  common  stock,  (ii)  5% of the
outstanding  shares of common stock on the last day of the immediately preceding
year,  or  (iii)  an amount determined by our board of directors.  Any shares of
common  stock  subject  to  an award, which for any reason expires or terminates
unexercised,  are  again  available  for issuance under the 2006 Stock Incentive
Plan.  Our  board  of  directors  did  not  increase  the total number of shares
reserved  for  issuance  under the 2006 Stock Incentive Plan for the fiscal year
beginning  January  1,  2007.

     The  2006  Stock  Incentive  Plan  will  terminate  after 10 years from the
effective  date, unless it is terminated earlier by our board of directors.  The
plan  authorizes  the  award  of  stock  options,  stock  purchase grants, stock
appreciation  rights  and  stock  units.


                                       53
<PAGE>
      DIGITAL FX INTERNATIONAL, INC. (FORMERLY QORUS.COM) AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA
                     YEARS ENDED DECEMBER 31, 2006 AND 2005

     The  2006  Stock  Incentive  Plan  provides for the grant of both incentive
stock  options  that  qualify under Section 422 of the Internal Revenue Code and
nonqualified  stock  options. Incentive stock options may be granted only to our
employees  or  to  employees  of  any of our parents or subsidiaries. All awards
other  than  incentive  stock options may be granted to our employees, officers,
directors,  consultants,  independent  contractors  and  advisors  or employees,
officers, directors, consultants, independent contractors and advisors of any of
our  parents or subsidiaries. The exercise price of incentive stock options must
be  at  least  equal to the fair market value of our common stock on the date of
grant. The exercise price of incentive stock options granted to 10% shareholders
must be at least equal to 110% of that value. The exercise price of nonqualified
stock  options  will  be  determined  by  the administrator of the plan when the
options  are granted. The term of options granted under our 2006 Stock Incentive
Plan may not exceed 10 years and typically vest over four years, with 25% of the
options vesting after 12 months and 75% vesting monthly over the remaining three
years.

     As  of  December  31, 2006, 1,246,001 shares were available for grant under
the  2006  Stock  Incentive  Plan.

     The  following is a summary of option activity (including plan and non-plan
options)  for  the  years ended December 31, 2006 and 2005 (in thousands, except
per  share  data):

<TABLE>
<CAPTION>
                                                    Range of      Weighted Average
                                     Shares     Exercise Prices    Exercise Price
                                  ------------  ----------------  -----------------
<S>                               <C>           <C>               <C>
Outstanding at December 31, 2004            -                  -                  -
Granted                                   818   $           0.26  $            0.26
Exercised                                   -                  -                  -
Cancelled                                   -                  -                  -
                                  ------------  ----------------  -----------------
Outstanding at December 31, 2005          818   $           0.26  $            0.26
Granted                                   560   $     0.33-$7.75  $            5.47
Exercised                                   -                  -                  -
Cancelled                                (200)  $     0.26-$7.75  $            3.89
                                  ------------  ----------------  -----------------
Outstanding at December 31, 2006        1,178   $     0.26-$7.75  $            2.12
                                  ============  ================  =================
Exercisable at December 31, 2006          348   $           0.26  $            0.26
                                  ============  ================  =================
</TABLE>


                                       54
<PAGE>
      DIGITAL FX INTERNATIONAL, INC. (FORMERLY QORUS.COM) AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA
                     YEARS ENDED DECEMBER 31, 2006 AND 2005

     The following table summarizes information regarding options outstanding at
December  31,  2006:

<TABLE>
<CAPTION>
                                                                                 Weighted Average
                                                                   Weighted          Remaining
                                                                    Average      Contractual Term      Aggregate
                                     Shares    Exercise Price   Exercise Price       (months)       Intrinsic Value
                                  -----------  ---------------  ---------------  -----------------  ----------------
<S>                               <C>          <C>              <C>              <C>                <C>
Shares Granted Quarter Ended
December 31, 2005                         780  $          0.26  $          0.26                108             4,087
Shares Granted Quarter Ended
March 31, 2006                            106  $          0.33  $          0.33                111               548
Shares Granted Quarter Ended
June 30, 2006                             292  $          7.75  $          7.75                114                 -
                                  -----------  ---------------  ---------------  -----------------  ----------------
Outstanding at December 31,
2006                                    1,178  $    0.26-$7.75  $          2.12                110  $          4,635
                                  ===========  ===============  ===============  =================  ================
Exercisable at December 31, 2006          348  $          0.26  $          0.26                108  $          1,825
                                  ===========  ===============  ===============  =================  ================
</TABLE>

     There  were  no  stock options exercised during the year ended December 31,
2006.  The Company recognized compensation expense from vesting of stock options
of  $130  for  the  year  ended  December  31,  2006  and  had  estimated future
compensation  expense  from  these  stock options of $1,178 at December 31, 2006
which  will  be  recognized over the remaining estimated weighted useful life of
110  months.

WARRANTS

     On  December  31,  2005, the Company granted warrants to purchase 1,551,535
shares  of  common  stock  at  an  exercise  price  of  $0.26 in connection with
professional  services  performed  by  various  consultants.  The  warrants were
granted  under  Individual  Stock  Purchase  Warrant  Agreements which expire on
December  31, 2010.  The warrants vested immediately at the grant date, with the
exception  of  378,664  shares, of which 48,380 shares vested and 330,284 shares
were  cancelled  during  the  year  ended  December  31, 2006.  No warrants were
granted  during  the  year  ended  December  31,  2006.

     During  the  year  ended  December  31,  2006, warrants to purchase 165,144
shares  of common stock were exercised at $0.26 per share, for total proceeds of
$43.  The Company recognized compensation expense from warrants of $175 and $122
during  the  years  ended  December  31,  2006  and  2005,  respectively.


                                       55
<PAGE>
      DIGITAL FX INTERNATIONAL, INC. (FORMERLY QORUS.COM) AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA
                     YEARS ENDED DECEMBER 31, 2006 AND 2005

     The following is a summary of stock purchase warrant activity for the years
ended December 31, 2006 and 2005 (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                                     Weighted
                                                    Range of          Average
                                     Shares     Exercise Prices   Exercise Price
                                  ------------  ----------------  ---------------
<S>                               <C>           <C>               <C>
Outstanding at December 31, 2004            -                  -                -
Granted                                 1,552   $           0.26  $          0.26
Exercised                                   -                  -                -
Cancelled                                   -                  -                -
                                  ------------  ----------------  ---------------
Outstanding at December 31, 2005        1,552   $           0.26  $          0.26
Granted                                     -                  -                -
Exercised                                (165)              0.26             0.26
Cancelled                                (330)              0.26             0.26
                                  ------------  ----------------  ---------------
Outstanding at December 31, 2006        1,057   $           0.26  $          0.26
                                  ============  ================  ===============
Exercisable at December 31, 2006        1,057   $           0.26  $          0.26
                                  ============  ================  ===============
</TABLE>

     The following table summarizes information regarding warrants outstanding
at December 31, 2006:

<TABLE>
<CAPTION>
                                                                Weighted Average
                                                                    Remaining
                                                                   Contractual
                                                                      Term            Aggregate
                                     Shares    Exercise Price       (months)       Intrinsic Value
<S>                               <C>          <C>              <C>                <C>
Outstanding at December 31, 2006        1,057  $          0.26                 48  $          5,532
                                  =================================================================
Exercisable at December 31, 2006        1,057  $          0.26                 48  $          5,532
                                  =================================================================
</TABLE>

VALUATION  ASSUMPTIONS

     The  fair value of options and warrants were estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted-average
assumptions  for  the  years  ended  December  31,  2006  and  2005:

<TABLE>
<CAPTION>
<S>                                   <C>
            Dividend yield             -0-
            Risk-free interest rate    4.50%
            Expected volatility        50.00%
            Expected life of options   4- 6 years
</TABLE>


                                       56
<PAGE>
      DIGITAL FX INTERNATIONAL, INC. (FORMERLY QORUS.COM) AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA
                     YEARS ENDED DECEMBER 31, 2006 AND 2005

NOTE  7.     RELATED  PARTIES

     On  January 1, 2003, the Company entered into a Software Services Agreement
with  RazorStream,  LLC,  an  affiliate  of  the Company through common members,
pursuant  to  which  RazorStream supervised the Company's development of various
software  applications  and  other  software technologies.  Under the agreement,
RazorStream  was  entitled  to  own certain software technology arising from the
development  (the  "Core  Technology"), while the Company owned its pre-existing
technology,  certain  software  applications  created during the development and
other  software  applications  or  technology developed outside the scope of the
Agreement.

     In  connection  with  the  Software Services Agreement, the parties entered
into  a  Technology  License Agreement pursuant to which RazorStream granted the
Company  a  non-exclusive,  royalty-free, worldwide perpetual license to use and
otherwise exploit the Core Technology, including in source code format.

     On  May  1,  2005,  each  of the Software Services Agreement and Technology
License  Agreement  were  terminated  by  mutual  agreement  of  the parties and
superseded  by  the  License,  Hosting  and  Services  Agreement  (the  "License
Agreement"),  entered  into  to  be  effective  as  of May 1, 2005, to which the
Company  and  RazorStream  continue  to  be  parties.  The  Hosting and Services
Agreement  provides  for  a  term  through  December  31,  2006,  and  continues
thereafter  unless  terminated  by  either  party  upon sixty days prior written
notice.  Under the License Agreement, RazorStream (a) will charge the Company $5
per  new  subscriber  account  exceeding  20,000 accounts (purchasable in 20,000
account  increments);  (b) is entitled to (1) ten percent (10%) of the Company's
total gross revenue from all active subscriber accounts billed at $25.00 or more
per  month  total  gross subscription, with a minimum amount of $3 per each such
subscriber  account  per  month,  (2)  terms  to  be mutually agreed upon by the
parties  for  all  subscriber accounts billed at less than $25.00 per month, and
(3)  terms  to  be mutually agreed upon by the parties for all advertising-based
"free" subscriber accounts, provided, however that such terms will provide for a
minimum  amount  of $0.25 per each such subscriber account per month; and (c) is
entitled  to a minimum guarantee of $50,000 per month, commencing April 1, 2006,
that  is non-refundable but that will be credited against the above fees.  Under
the  Services  agreement, the Company may, from time to time, engage RazorStream
for  non-recurring  engineering  services  at  a rate of $200 per hour. The fees
above  apply independently to each individual website operated by the Company or
any  third  party authorized by the Company, and no fees charged with respect to
any  individual  website,  and no subscriber account applied with respect to any
individual  website,  shall  be aggregated with any fees or subscriber accounts,
respectively,  applied  to  any  other  website.  This agreement was amended and
restated  on  January  29,  2007  (see  Note  10).

     In  connection  with  the  services  discussed  above, the Company incurred
expenses  of  $1,554 and $244 during the years ended December 31, 2006 and 2005,
respectively.  Due  to  affiliates  of  $187 and $54 as of December 31, 2006 and
2005,  respectively,  represent  amounts  due to RazorStream.  These amounts are
unsecured,  non-interest  bearing and are due for services rendered as discussed
above.

NOTE  8.      INCOME  TAXES

     The  Company's provision for income taxes at December 31, 2006 was based on
income  for  the  period from June 16, 2006 to December 31, 2006 as adjusted for
timing differences outstanding at the date that DigitalFX became the sole member
of  VMdirect.  The  Company's  income  tax  provision  was computed based on the
federal  statutory  rate,  net  of  the related federal benefit for this period.


                                       57
<PAGE>
      DIGITAL FX INTERNATIONAL, INC. (FORMERLY QORUS.COM) AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA
                     YEARS ENDED DECEMBER 31, 2006 AND 2005

     The  provision  for  income  taxes  consists of the following for the years
ended  December  31,  2006  and  2005  (in  thousands):

<TABLE>
<CAPTION>
                                             DECEMBER 31, 2006   DECEMBER 31, 2005
                                            -------------------  ------------------
<S>                                         <C>                  <C>
       Current tax provision-  federal      $              231   $                -
       Deferred tax provision- federal                    (176)                   -
                                            -------------------  ------------------
           Income tax provision -  federal                  55                    -
                                            -------------------  ------------------

       Income tax provision- foreign                        58                    -
                                            -------------------  ------------------
           Income tax provision             $              113   $                -
                                            ===================  ==================
</TABLE>

     A  reconciliation of the statutory federal income tax rate to the effective
tax rate is as follows for the year ended December 31, 2006:

<TABLE>
<CAPTION>
                                               DECEMBER 31, 2006   DECEMBER 31, 2005
                                              -------------------  ------------------
<S>                                           <C>                  <C>
       Income before income tax provision     $              593   $                -
       Expected tax (federal statutory rate                  202                    -
         34%)
       Foreign tax provision                                 (58)                   -
       Timing differences                                    (31)                   -
                                              -------------------  ------------------

           Income tax provision               $              113   $                -
                                              ===================  ==================
</TABLE>

     The  tax effects of the temporary differences that give rise to significant
portions  of  the net deferred tax asset at December 31, 2006 are as follows (in
thousands):

<TABLE>
<CAPTION>
                                          DECEMBER 31, 2006
                                          ------------------
<S>                                       <C>
           Stock based compensation       $               98
           Depreciation and amortization                  25
           Allowance for sales returns                    23
           Inventory reserve                              21
           Accrued vacation                                9
                                          ------------------
             Deferred income taxes, net   $              176
                                          ------------------
</TABLE>

     The  Company  did  not  record any valuation allowance against deferred tax
assets  at December 31, 2006.  Management has determined, based on the Company's
history  and  expectations  for the future, that operating income of the Company
will  more  likely  than not be sufficient to fully recognize these deferred tax
assets.

     The  Company's provision for income taxes at December 31, 2006 was based on
income  for  the  period from June 16, 2006 to December 31, 2006 as adjusted for
timing differences outstanding at the date that DigitalFX became the sole member
of  VMdirect.  The  Company's  income  tax  provision  was computed based on the
federal  statutory rate, net of the related deferred tax benefit.  The pro forma
net  income  taxes  and  proforma  net income below reflect the effect as if the
Company  had  been taxed in accordance with Subchapter C of the Internal Revenue
Code (a "C" Corporation) for the year ended December 31, 2006.


                                       58
<PAGE>
      DIGITAL FX INTERNATIONAL, INC. (FORMERLY QORUS.COM) AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA
                     YEARS ENDED DECEMBER 31, 2006 AND 2005

<TABLE>
<CAPTION>
                             DECEMBER 31, 2006   DECEMBER 31, 2005
                             ------------------  ------------------
<S>                          <C>                 <C>
     Income taxes:
       As reported           $              113  $                -
       Proforma              $              202  $                -

     Net income
       As reported           $              480  $                -
       Proforma              $              391  $                -
       Net income per share  $             0.02  $                -
</TABLE>

NOTE  9.     COMMITMENTS  AND  CONTINGENCIES

LEGAL  PROCEEDINGS

     From  time  to  time,  we  may be involved in litigation relating to claims
arising  out  of  our operations in the normal course of business.  Except as is
described  below,  we  are  not  currently  party  to any legal proceedings, the
adverse  outcome  of  which,  in  management's  opinion,  individually or in the
aggregate,  would have a material adverse effect on our results of operations or
financial  position.

     On  August 4, 2005, VMdirect filed a lawsuit in the District Court of Clark
County,  Nevada,  against  a  former  employee  alleging  a number of complaints
including  fraud,  breach  of  oral  contract,  intentional  interference,  and
negligent interference, and seeking compensatory and punitive damages in amounts
to  be  proved  at  trial,  rescission  of  the  oral  contract  relating to the
defendant's  equity  interest  in VMdirect, injunctive relief, punitive damages,
attorneys'  fees,  disgorgement  of  ill  gotten profits, revenues and gain, and
restitution.  VMdirect  hired  the defendant in May 2001 as a project manager in
reliance  upon  the  defendant's representations regarding his skill in handling
the  job  duties.  In  May 2002, VMdirect agreed to provide the defendant with a
small  portion  of  the  equity  interest  in  VMdirect,  which  was  expressly
conditioned  upon  the defendant working full time and in good faith for no less
than  3  years  after  May  2002.  VMdirect terminated defendant's employment on
August  10,  2004 due to his continuous lack of diligence and unsatisfactory job
performance  as  well  as  his  creation  of  a  hostile  and  adversarial  work
environment.

     On August 5, 2005, VMdirect was served with a lawsuit filed in the District
Court of Clark County, Nevada, which counterclaim was amended on March 27, 2006,
by  this  same  former  employee  for  alleged breach of employment contract and
wrongful  termination, and seeking general damages in excess of $10,000, special
damages  for  lost wages and converted monies in the amount of $270,000, special
damages  for  the  equity  interest  in  VMdirect in an amount to be determined,
punitive  or  treble  damages  as  allowed  by  law,  attorneys'  fees  and  the
dissolution  of  VMdirect.  This  former  employee alleges that the grant of the
equity  interest in VMdirect had no conditions, and that VMdirect has engaged in
a  campaign  to  defame  said  former  employee.

     A  petition  to consolidate these cases was filed on September 20, 2005 and
is  currently  pending  before  the  courts.  On  May 5, 2006, our legal counsel
representing us in this matter filed a motion to dismiss the defendant's amended
counterclaim,  which motion was denied on September 21, 2006.  Our legal counsel
representing  us  in this matter subsequently filed an answer to the defendant's
amended  counterclaim  on  July 18, 2006, denying all liability.  Our management
believes  there  exists no basis for the former employee's claims and intends to
pursue  VMdirect's  claims, and defend the former employee's claims, vigorously.
In  the  event  our  management's  assessment  of  the case is incorrect, or the


                                       59
<PAGE>
      DIGITAL FX INTERNATIONAL, INC. (FORMERLY QORUS.COM) AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA
                     YEARS ENDED DECEMBER 31, 2006 AND 2005

former  employee  actually obtains a favorable judgment for the claimed damages,
we  believe  that the economic impact on us would be insignificant and would not
materially  affect  our  operations.

     On  February  7,  2007,  VMdirect  and  DigitalFX Solutions jointly filed a
lawsuit  in  the Superior Court of the State of California for the County of Los
Angeles  against  a former affiliate of VMdirect alleging a number of complaints
including  unfair business practice, misappropriation of trade secrets, slander,
intentional interference with contractual relationship, intentional interference
with  prospective  economic  advantage  and  breach  of  contract,  and  seeking
compensatory  and  punitive damages in amounts to be proved at trial, injunctive
relief  and  attorneys'  fees  and  costs.  The defendant became an affiliate of
VMdirect  in  May  2006  and  agreed  to adhere to VMdirect's Code of Ethics for
affiliates.  Upon  signing up as an affiliate, defendant represented that he was
capable  of  bringing a substantial number of new affiliates to VMdirect, and in
reliance  on  this representation, VMdirect agreed to provide certain privileges
to  defendant  including  posting  of  training materials on VMdirect's website.
VMdirect  also  agreed  to  work  with  defendant to develop training materials.
Although  VMdirect paid for all of the costs of developing the materials and its
personnel  actively participated in the development of such materials, defendant
demanded  aggregate  compensation  of  $300,000  for  creating  the training and
motivational  materials  after  they were completed.  After VMdirect did not pay
this  fee  to  defendant,  defendant  requested  that  VMdirect  stop  using the
materials,  began  disparaging  the  company  and  its  officers, and engaged in
cross-recruiting  affiliates from other VMdirect networks, a practice prohibited
by  VMdirect's  Code  of  Ethics  for  its affiliates.  VMdirect then terminated
defendant's  distribution  network  and believes that defendant continues to use
VMdirect's proprietary trade secrets to recruit affiliates to join other network
marketing  companies  that  compete  with  VMdirect.

     On March 6, 2007, the Company, along with VMdirect and DigitalFX Solutions,
were  served  with  a cross complaint for damages filed in the Superior Court of
California  for  the  County  of  Los Angeles, by this same former affiliate for
alleged  breach  of  contract,  fraud-intentional  misrepresentation,
fraud-intentional  concealment/omission,  fraud-false  promises,  negligent
misrepresentation  and  infringement of the rights of publicity and privacy, and
seeking  general,  exemplary and punitive damages in amounts to be determined at
trial and an order enjoining our use of his name, image, photograph and likeness
for  any purpose without his written consent. This former affiliate alleges that
the  officers  of  VMdirect  agreed  to grant him 60,000 shares of the Company's
common  stock,  agreed  to  pay  him  a  percentage  of  FirstStream's  sales in
connection with is creation of certain training materials, agreed to pay for the
costs  of  all  training  materials  created by him and agreed that all training
materials  which  contained his likeness would remain his intellectual property.
This  former  affiliate also alleges that it was expressly agreed that a copy of
such  materials  would  be  made  available  to  him  for posting as promotional
materials  on his own website and that his consent for VMdirect to use his image
and  likeness  on  its  websites  would  be  revocable  at  any  time.

     On  March  6,  2007,  legal  counsel  for the same former affiliate filed a
Notice of Removal of Action with the United States District Court of the Central
District  of  California  seeking  to remove the case from the Superior Court of
California  to  the  United Stated District Court.  Our legal counsel intends to
file  a  motion  to  remand  the  case back to the Superior Court of California.


                                       60
<PAGE>
      DIGITAL FX INTERNATIONAL, INC. (FORMERLY QORUS.COM) AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA
                     YEARS ENDED DECEMBER 31, 2006 AND 2005

OPERATING  LEASES

     The  Company  leased two adjacent facilities under non-cancelable operating
leases  that  expired  on  January  31  2007.  In  February,  2007,  the Company
subsequently consolidated these leases into one and renewed for twelve months at
a  monthly rental of $17. Rent expense for the years ended December 31, 2006 and
2005  was  $93  and  $80,  respectively.

NOTE  10.     SUBSEQUENT  EVENTS

     On  February 20, 2007, Gary Freeman purchased 9,500 shares of the Company's
common  stock  through  the  net issue exercise of a portion of a warrant in the
amount  of  approximately  10,276  shares  of  the  Company's common stock.  The
additional  shares  for which Mr. Freeman exercised his warrant had an aggregate
value  of  approximately $2,716 based on the closing sale price of the Company's
common  stock  on  February  20,  2007  of  $3.50  per  share.

     On  February  22,  2007, Paul Guez purchased 69,049 shares of the Company's
common stock through the net issue exercise of a warrant in the amount of 75,085
shares  of the Company's common stock.  The additional shares for which Mr. Guez
exercised  his  warrant had an aggregate value of approximately $19,315.20 based
on  the closing sale price of the Company's common stock on February 22, 2007 of
$3.20  per  share.

     On  February  22,  2007,  Woodman  Management Corporation purchased 223,577
shares of the Company's common stock through the net issue exercise of a warrant
in  the  amount of 243,121 shares of the Company's common stock.  The additional
shares  for  which  Woodman  Management Corporation exercised its warrant had an
aggregate  value  of approximately $62,540.80 based on the closing sale price of
the Company's common stock on February 22, 2007 of $3.20 per share.

     On  February  22,  2007,  the  Company's  board of directors authorized the
issuance  of 10,000 shares of the Company's common stock to Christopher Bolsover
pursuant  to  our  entry  into  a  Professional Services Agreement with Bolsover
Endeavours.  The shares issued to Christopher Bolsover had an aggregate value of
approximately  $32,000  based  on the closing sale price of the Company's common
stock on February 22, 2007 of $3.20 per share.

     [On February 22, 2007, the Company's board of directors also authorized the
issuance  of  options to purchase an aggregate of 82,000 shares of the Company's
common stock at a per share exercise price of 3.20, to 18 employees.  The shares
underlying  these options had an aggregate value of approximately $262,400 based
on  the closing sale price of the Company's common stock on February 22, 2007 of
$3.20  per  share.]

PROFESSIONAL  SERVICES  AGREEMENT

     On  February  22,  2007,  the  Company entered into a Professional Services
Agreement  with  Bolsover  Endeavours  pursuant  to  which  the  Company engaged
Bolsover  Endeavours, effective January 1, 2007, to provide the Company with the
services  of  Christopher  Bolsover  and  various  other  sales  marketing  and
management  services  set  forth  therein.

     In  consideration of the services to be provided by Bolsover Endeavours and
Christopher  Bolsover,  the  Company  will  pay  Bolsover  Endeavours  monthly
compensation  equal  to  the  greater  of  an  agreed  upon  service  fee or the
commissions  that  would  accrue  to  Bolsover  Endeavours  based  on  an


                                       61
<PAGE>
      DIGITAL FX INTERNATIONAL, INC. (FORMERLY QORUS.COM) AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA
                     YEARS ENDED DECEMBER 31, 2006 AND 2005

agreed  upon  affiliate  level.  The  Professional  Services  Agreement  may  be
terminated  upon  30  days  prior  written  notice  by  either  party and may be
terminated  by the Company upon the occurrence of certain events listed therein.

     The  Registrant  also agreed to issue 10,000 shares of the Company's common
stock  to  Christopher  Bolsover  in  consideration for Bolsover Endeavours' and
Christopher Bolsover's entry into the Professional Services Agreement.

     Pursuant  to  the terms of the Professional Services Agreement, on February
22,  2007,  the  Company also appointed Christopher Bolsover as the President of
International  Development  of  VMdirect.

RELATED  PARTY  AGREEMENT

     On  January  29,  2007,  the  Company  entered into an Amended and Restated
License,  Hosting  and  Services  Agreement  (the  "Amended  Agreement")  with
RazorStream.  The  Amended  Agreement amends and restates the Licensing, Hosting
and  Services  Agreement  effective  May  1,  2005,  between  the  Company  and
RazorStream.

     Pursuant  to  the  terms of the Amended Agreement, RazorStream will provide
hosting,  maintenance  and support services for each individual website operated
by  the  Company or any third party authorized by the Company. While the initial
term  of  the  Amended Agreement ends on January 15, 2008, the Amended Agreement
remains  operative  thereafter  unless  terminated  by either party upon 60 days
prior  written  notice.  Under  the  terms  of  the  Amended Agreement, for each
individual  website operated by the Company or any third party authorized by the
Company,  RazorStream  (a)  charges  the  Company  $5 per new subscriber account
exceeding  20,000  accounts  (purchasable  in 20,000 account increments); (b) is
entitled  to (1) ten percent (10%) of the Company's total gross revenue from all
active  subscriber  accounts,  with  a  minimum  amount  of  $0.69 per each such
subscriber  account  per  month, and (2) terms to be mutually agreed upon by the
parties  for all advertising-based "free" subscriber accounts, provided, however
that  such  terms  will  provide  for  a  minimum  amount of $0.25 per each such
subscriber account per month; and (c) effective February 1, 2007, is entitled to
a minimum guarantee of $50,000 per month that is non-refundable but that will be
credited  against  the  above  fees.  The Company may, from time to time, engage
RazorStream  for  non-recurring engineering services at a rate of $200 per hour.
The  fees  above  apply independently to each individual website operated by the
Company  or  any third party authorized by the Company, and no fees charged with
respect  to  any  individual  website,  and  no  subscriber account applied with
respect  to  any  individual  website,  shall  be  aggregated  with  any fees or
subscriber  accounts,  respectively,  applied  to  any  other  website.

     The  Amended  Agreement  also  provides  the  Company with a non-exclusive,
royalty-free,  worldwide,  perpetual  license  to  use and otherwise exploit the
technology described in an exhibit to the Amended Agreement, including in source
code format, any corrections, modifications and custom enhancements thereto, and
any  interfaces  necessary  for  and  documentation  related to the technology's
functionality.  The license portion of the agreement is available whether or not
RazorStream  provides  its  services  under  the  agreement, and applies to each
individual  website operated by the Company or any third party authorized by the
Company.


                                       62
<PAGE>
ITEM 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
            FINANCIAL DISCLOSURE

     None.

ITEM 8A.     CONTROLS AND PROCEDURES

     As  of  December 31, 2006, 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  Rules  13a-15(e)  and  15d-15(e))  under  the
Securities Exchange Act of 1934, as amended (the "Exchange Act").  Based on this
evaluation,  our  Chief  Executive Officer and Chief Financial Officer concluded
that,  as  of  December  31,  2005,  our disclosure controls and procedures were
effective.

     During  the  quarter  ended December 31, 2006, there were no changes in our
internal  control  over  financial reporting (as defined in Rule 13a-15(f) under
the  Exchange  Act)  that  have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.

ITEM 8B.     OTHER INFORMATION

     None.


                                       63
<PAGE>
                                    PART III

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

     The following table sets forth the names, positions and ages of our current
executive  officers  and  directors.  All  directors serve until the next annual
meeting  of  shareholders  or  until their successors are elected and qualified.
Officers  are appointed by our board of directors and their terms of office are,
except  to  the  extent governed by an employment contract, at the discretion of
our  board  of  directors.

<TABLE>
<CAPTION>
NAME                   AGE                     POSITION
---------------------  ---  ----------------------------------------------
<S>                    <C>  <C>
Craig Ellins (1), (2)   55  Chairman of the Board, Chief Executive Officer
                            and President
Lorne Walker (1)        57  Chief Financial Officer and Secretary
Amy Black (1), (2)      46  President of VMdirect, L.L.C.
Jerry Haleva (1)        61  Director
Kevin R. Keating (3)    67  Director
</TABLE>

     (1)  These persons were appointed to their respective positions effective
          June 15, 2006.
     (2)  Craig Ellins and Amy Black are husband and wife.
     (3)  Mr. Keating was elected as a director on June 22, 2004.

     CRAIG  ELLINS.  Mr.  Ellins  has  served  as the Chief Executive Officer of
VMdirect since November 2001.  Prior to his employment with VMdirect, Mr. Ellins
provided  consulting  services  to  various  companies  related  to their direct
marketing  activities.

     LORNE  WALKER.  Ms.  Walker  has  served  as the Chief Financial Officer of
VMdirect  since September 2005.  Prior to joining VMdirect, Ms. Walker served as
the  Chief  Financial  Officer  of  Haskel  International Inc., Burbank, CA from
December  2000  through March 2005.  Prior to joining Haskel International Inc.,
Ms.  Walker  served  as  the Vice President of Finance-Manufacturing for Mentor,
Inc.,  Santa  Barbara,  CA  from  January  2000  through  October  2000.

     AMY  BLACK.  Ms.  Black  has  served  as  the  President  of VMdirect since
November 2001.  Ms. Black was a founder of helloNetwork, Inc. in 1996 and served
as  its  Vice President of Public Relations and Advertising.  From 1992 to 1996,
Ms.  Black  was  President  of  Academic  Connections.

     JERRY  HALEVA.  Mr. Haleva is President of Sergeant Major Associates, Inc.,
which  he  founded  in  1990.  Mr. Haleva also serves on numerous charitable and
issue-based  boards  and commissions, including the Executive Committees of both
the  Yosemite  National  Institute  (YNI) and the American Israel Public Affairs
Committee  (AIPAC),  as  well  as  on  the  California  International  Relations
Foundation.  Mr. Haleva is a 20-year veteran as a professional staff person with
the  California  Legislature,  and  has  held  appointments  on the Capitol Area
Committee,  as  Chief Counsel to the Governor's Blue Ribbon Fire Commission, the
Long-range  Planning  Committee of the FCC, the Safety Belt Task Force and, most
recently,  as  Chairman  of  the  California  Highway Patrol Citizens' Oversight
Committee.  Beginning  as  a  Ford  Foundation Fellow, he served both houses and
both  parties  during  his  public  service  career.  From


                                       64
<PAGE>
1972  through 1974, he served as the Legislature's chief consultant on the state
prison  system.  In  1976,  as  Chief of Staff to the Senate Minority Leader, he
helped  create and supervised the Joint Committee on Fire, Police, Emergency and
Disaster  Services.  Additionally,  he  oversaw the Select Committee on Business
Development and the Joint Legislative Budget Committee.  Mr. Haleva holds a B.A.
in  Government and a general secondary teaching credential from California State
University  at  Sacramento.

     KEVIN  R.  KEATING.  Mr.  Keating,  our  former  President,  Secretary  and
Treasurer  from  June 22, 2004 through June 15, 2006, is an investment executive
and  for  the  past  nine  years  has been the Branch Manager of the Vero Beach,
Florida,  office  of  Brookstreet  Securities  Corporation.  Brookstreet  is  a
full-service,  national  network  of  independent  investment professionals. Mr.
Keating  services  the investment needs of private clients with special emphasis
on  equities.  For more than 35 years, he has been engaged in various aspects of
the investment brokerage business. Mr. Keating began his Wall Street career with
the  First  Boston  Company  in New York in 1965. From 1967 through 1974, he was
employed by several institutional research boutiques where he functioned as Vice
President  Institutional Equity Sales. From 1974 until 1982, Mr. Keating was the
President and Chief Executive Officer of Douglas Stewart, Inc., a New York Stock
Exchange member firm. Since 1982, he has been associated with a variety of firms
as  a registered representative servicing the needs of individual investors. Mr.
Keating is also the manager and sole member of Vero Management, LLC, which had a
management  agreement with us. Mr. Keating also serves on the board of directors
of 99 Cent Stuff, Inc., Blue Holdings, Inc., People's Liberation, Inc., Catalyst
Lighting  Group,  Inc., Applied Spectrum Technologies, Inc., Wentworth II, Inc.,
Wentworth  IV,  Inc. and Wentworth V, Inc., and on the compensation committee of
the  board  of  directors  of  99  Cent  Stuff,  Inc.

     As  noted in his biography, Mr. Keating is currently a director of People's
Liberation,  Inc.  People's  Liberation  was  formerly  known as Century Pacific
Financial  Inc.,  a  corporation  operating  as a public shell company, until it
completed a merger with two private companies in November, 2005. Mr. Keating has
been a director and shareholder of People's Liberation since February, 2005. Mr.
Keating  was  also  an  officer  of  Century  Pacific  from February, 2005 until
November,  2005.

     As noted in his biography, Mr. Keating is also currently a director of Blue
Holdings,  Inc. Blue Holdings was formerly known as Marine Jet Technology Corp.,
a  corporation  operating  as  a  public  shell  company,  until it completed an
exchange  transaction with Antik Denim, LLC in April, 2005. Mr. Keating has been
a director and shareholder of Blue Holdings since February 2005. Mr. Keating was
also  an  officer  of Marine Jet Technology Corp. from February 2005 until April
2005.

     As  noted  in his biography, Mr. Keating is also currently a director of 99
Cent  Stuff,  Inc.  99  Cent  Stuff  completed  a merger with iVideoNow, Inc., a
corporation operating as a public shell company, in September, 2003. Mr. Keating
has  been  a  director  and  shareholder  of  99 Cent Stuff and its predecessor,
iVideoNow,  since  December,  2001. Mr. Keating was also an officer of iVideoNow
from  December  2001  until  September,  2003.

     As  noted  in  his  biography,  Mr. Keating is also currently a director of
Catalyst  Lighting  Group,  Inc. Catalyst completed a merger with Wentworth III,
Inc.,  a  corporation  operating  as a public shell company, in August 2003. Mr.
Keating  has  been  a  director and shareholder of Catalyst and its predecessor,
Wentworth  III,  Inc.,  since  August  2001.

     During  the  past  five  years,  Mr. Keating has been involved in 12 public
shell  company  reverse  acquisitions.

     Pursuant  to  a certain Voting Agreement, for the one-year period following
the  closing  of our acquisition of VMdirect, KRM Fund and each of Craig Ellins,
Amy  Black,  The  Richard  Kall  Family


                                       65
<PAGE>
Trust  and Richard Kall agreed to vote their shares of our common stock to elect
a director designated by KRM Fund to our board of directors and to vote for such
other persons that may be designated by Craig Ellins to fill any vacant position
on  our  board  of  directors  (other than the director designated by KRM Fund).
Messrs.  Haleva  and  Keating  were  appointed  as  Mr.  Ellins'  and KRM Fund's
respective  designees  under  the  terms  of  the  Voting  Agreement.

     None  of  our  officers  or  directors,  nor  any  of  their  affiliates,
beneficially  owned any of our equity securities or rights to acquire any of our
securities  prior  to  the  closing  of  the transactions contemplated under the
Exchange  Agreement,  and  no such persons have been involved in any transaction
with  us  or  any  of  our  directors,  executive officers or affiliates that is
required to be disclosed pursuant to the rules and regulations of the SEC, other
than  with  respect to the transactions that have been described herein. None of
our  officers  and  directors  have  been  convicted  in  a criminal proceeding,
excluding traffic violations or similar misdemeanors, nor have they been a party
to  any judicial or administrative proceeding during the past five years, except
for matters that were dismissed without sanction or settlement, that resulted in
a  judgment,  decree  or final order enjoining the person from future violations
of, or prohibiting activities subject to, federal or state securities laws, or a
finding  of  any  violation  of  federal  or  state  securities  laws.

Identification  of  Audit  Committee

     Our  Board  of  Directors  has  a  separately  designated  standing  Audit
Committee.  Our Audit Committee currently consists of Messrs. Ellins, Haleva and
Keating.  Our  Audit  Committee  is  responsible  for selecting and engaging our
independent  accountant, establishing procedures for the confidential, anonymous
submission by our employees of, and receipt, retention and treatment of concerns
regarding  accounting,  internal  controls  and  auditing matters, reviewing the
scope  of  the  audit to be conducted by our independent public accountants, and
periodically  meeting  with  our  independent  public  accountants and our chief
financial  officer  to  review matters relating to our financial statements, our
accounting principles and our system of internal accounting controls.  Our Audit
Committee  reports  its  recommendations  as  to  the  approval of our financial
statements  to  our  board  of  directors.  The role and responsibilities of our
Audit  Committee  are  more  fully set forth in a written charter adopted by our
board  of  directors in August 2006.  Our Audit Committee reviews and reassesses
the  Audit Committee Charter annually and recommends any changes to our board of
directors  for  approval.  We are not a "listed company" under SEC rules and are
therefore  not  required  to  have  an  audit committee comprised of independent
directors.  We  have,  however, determined that Jerry Haleva is "independent" as
that term is defined in Section 4200 of the Marketplace Rules as required by the
NASDAQ  Stock  Market.

Audit  Committee  Financial  Expert

     Our  board  of  directors  has determined that our Audit Committee does not
include a person who is an "audit committee financial expert" within the meaning
of  the  rules  and  regulations  of the SEC. Our board of directors has further
determined  that  each  member  of  the  Audit  Committee  is  able  to read and
understand  fundamental  financial  statements  and  has  substantial  business
experience  that results in such member's financial sophistication. Accordingly,
our  board  of  directors  believes  that each member of our Audit Committee has
sufficient  knowledge  and  experience necessary to fulfill such member's duties
and  obligations  on  our  Audit  Committee.

CODE  OF  ETHICAL  CONDUCT

     Our  Board of Directors has adopted a Code of Ethical Conduct (the "Code of
Conduct").  We  require  all  employees,  directors  and officers, including our
Chief  Executive  Officer  and Chief Financial Officer, to adhere to the Code of
Conduct  in  addressing legal and ethical issues encountered in conducting their
work.  The  Code  of  Conduct requires that these individuals avoid conflicts of
interest,  comply  with


                                       66
<PAGE>
all laws and other legal requirements, conduct business in an honest and ethical
manner  and  otherwise act with integrity and in our best interest.  The Code of
Conduct  contains  additional  provisions  that  apply specifically to our Chief
Financial Officer and other financial officers with respect to full and accurate
reporting.  We  will  provide to any person without charge, upon written request
sent  to  our executive offices and addressed to our corporate secretary, a copy
of  the  Code  of  Conduct.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section  16(a) of the Securities Exchange Act of 1934, as amended, requires
our  directors  and  executive  officers  and  the holders of 10% or more of our
Common Stock to file with the Securities and Exchange Commission initial reports
of  ownership  and  reports  of  changes  in ownership of our equity securities.
Based solely on our review of the copies of the forms received by us and written
representations  from certain reporting persons that they have complied with the
relevant  filing  requirements,  we believe that, during the year ended December
31,  2006,  all  of  our executive officers, directors and the holders of 10% or
more  of  our  Common Stock complied with all Section 16(a) filing requirements,
except  for  each  of Lorne Walker, Amy Black, Richard Kall and the Richard Kall
Family  Trust,  who  did  not  timely  file  a  Form  4.

ITEM 10.     EXECUTIVE COMPENSATION

SUMMARY  COMPENSATION  TABLE

     The  following  table  sets  forth,  as  to  our  named executive officers,
information concerning all compensation paid to our named executive officers for
services  rendered  during  our  fiscal  year ended December 31, 2006.  No other
executive  officers  received  total  compensation in excess of $100,000 for the
fiscal  year  ended  December  31,  2006.

<TABLE>
<CAPTION>
Name and Principal Position                      Year  Salary ($)   Bonus ($)   Total ($)
------------------------------------------------------------------------------------------
<S>                                              <C>   <C>          <C>         <C>
Kevin R. Keating                                 2006           --          --          --
President, Treasurer and Secretary
Craig Ellins                                     2006  $    83,467  $   15,478  $   98,945
Chairman, Chief Executive Officer and President
Lorne Walker                                     2006  $   101,922  $   13,898  $  115,820
Chief Financial Officer and Secretary
Amy Black                                        2006  $   107,628  $   15,246  $  122,874
President of VMdirect, L.L.C.
</TABLE>

     Mr.  Keating  served as our President, Treasurer and Secretary from January
1,  2006  through  June  15,  2006  and resigned as our President, Treasurer and
Secretary  on  June  15,  2006 upon the closing of the Exchange Transaction with
VMdirect.

     Mr.  Ellins  became  our Chairman, Chief Executive Officer and President on
June  15,  2006 upon the closing of the Exchange Transaction with VMdirect.  The
compensation  disclosed  for Mr. Ellins in the table above includes $22,476 paid
as salary for services rendered by Mr. Ellins to VMdirect as its Chief Executive
Officer  during  the  period  from January 1 through June 15, 2006.  Mr. Ellins'
current  annual salary is $125,000 and he may also receive a discretionary bonus
as  determined  by  the  compensation  committee of our board of directors.  Mr.
Ellins  does  not  have  an  employment  agreement  with  us.

     Ms.  Walker became our Chief Financial Officer and Secretary effective June
15,  2006  upon  the  closing  of  the  Exchange Transaction with VMdirect.  The
compensation  disclosed  for Ms. Walker in the table above includes $47,499 paid
as  salary  for  services  rendered  by  Ms.  Walker  to  VMdirect  as its Chief


                                       67
<PAGE>
Financial  Officer  during the period from January 1 through June 15, 2006.  Ms.
Walker's  current  annual salary is $110,000 and she may receive a discretionary
bonus  as  determined  by  the compensation committee of our board of directors.
Ms.  Walker  does  not  have  an  employment  agreement  with  us.

     Ms.  Black's  annual salary is $125,000 and she may receive a discretionary
bonus  as  determined  by  the compensation committee of our board of directors.
Ms.  Black  does  not  have  an  employment  agreement  with  us.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE

     The following table presents information regarding outstanding options held
by our named executive officers as of the end of our fiscal year ending December
31,  2006.

<TABLE>
<CAPTION>
                   Number of      Number of
                   Securities     Securities
                   Underlying     Underlying
                  Unexercised    Unexercised      Option      Option
                  Options (#)    Options (#)     Exercise   Expiration
     Name         Exercisable   Unexercisable   Price ($)      Date
----------------------------------------------------------------------
<S>               <C>           <C>             <C>         <C>
Kevin R. Keating           --              --           --          --

Craig Ellins               --              --           --          --

Lorne Walker        188,209(1)      188,210(1)  $     0.26    12/31/15

Amy Black                  --              --           --          --
</TABLE>

(1)  Consists  of options originally issued by VMdirect and assumed by us in the
Exchange  Transaction  with  VMdirect  which  currently  entitle  Ms.  Walker to
purchase  an aggregate of 376,419 shares of common stock at a per share exercise
price  of  $0.26.  These  options  vest  as follows: 25% on 12/31/05, and 25% on
12/31/06, and the remainder monthly thereafter on a ratable basis for 24 months.


     We  have  no  agreements with our named executive officers that provide for
payments  to  such  named executive officers at, following or in connection with
the  resignation,  retirement  or  other  termination  of  such  named executive
officers,  or  a  change  in  control  of  our  company  or  a  change  in  the
responsibilities of such named executive officers following a change in control.

DIRECTOR  COMPENSATION

     Our  non-employee  directors do not receive compensation for their services
but are reimbursed for travel expenses associated with attendance at meetings of
our  board  of  directors.  There were no reimbursements for travel expenses for
the  fiscal  year  ended  December  31,  2006.


                                       68
<PAGE>
ITEM 11.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
             RELATED STOCKHOLDER MATTERS

     The  following  table  sets  forth certain information regarding our common
stock  beneficially owned on March 13, 2007 for (i) each shareholder known to be
the  beneficial owner of more than 5% of our outstanding common stock, (ii) each
executive  officer  and director, and (iii) all executive officers and directors
as  a  group.  In  general,  a  person is deemed to be a "beneficial owner" of a
security  if that person has or shares the power to vote or direct the voting of
such  security,  or  the  power  to dispose or to direct the disposition of such
security.  A person is also deemed to be a beneficial owner of any securities of
which  the  person has the right to acquire beneficial ownership within 60 days.
Unless  otherwise indicated, to our knowledge, each person in the table has sole
voting  and  investment  power  with respect to the shares shown.  The following
table  assumes  a  total  of 23,613,638 shares of common stock outstanding as of
March  13,  2007.

<TABLE>
<CAPTION>
                                                                 ------------------------------
                                                                    SHARES BENEFICIALLY OWNED
                                                                 ------------------------------
NAME OF BENEFICIAL OWNER (1)                                       NUMBER     PERCENT OF CLASS
-----------------------------------------------------------------------------------------------
<S>                                                              <C>          <C>
Craig Ellins (2)                                                  17,558,169              74.4%

Lorne Walker (3)                                                     341,157               1.4%

Amy Black (4)                                                     17,558,169              74.4%

Kevin R. Keating (5)                                                  40,000                 *

Jerry Haleva                                                              --                --

All Executive Officers and Directors as a Group (5 persons) (6)   17,939,326              75.3%


5% SHAREHOLDERS

VM Investors, LLC (7)                                             17,558,169              74.4%

Richard Kall (7)                                                  17,558,169              74.4%
</TABLE>

   * Less than 1%.

     1.   Unless  otherwise  stated, the address is c/o DigitalFX International,
          Inc.,  3035  East  Patrick  Lane,  Suite  9,  Las Vegas, Nevada 89120.

     2.   Consists  of  17,558,169  shares of common stock held by VM Investors,
          LLC. Craig Ellins is a member and one of the managers of VM Investors,
          LLC  and  disclaims beneficial ownership of the shares of common stock
          held  by  VM  Investors,  LLC  except  to  the extent of his pecuniary
          interest  therein.  Mr. Ellins currently serves as our Chairman, Chief
          Executive  Officer  and  President,  and  as  a  manager  of VMdirect.

     3.   Includes  219,578  shares of common stock that may be acquired from us
          within  60  days  of  March  13, 2007 upon the exercise of outstanding
          stock  options.  Lorne  Walker currently serves as our Chief Financial
          Officer  and  Secretary,  and previously served as the Chief Financial
          Officer  of  VMdirect  from  September  2005  through  June  2006.


                                       69
<PAGE>
     4.   Consists  of  17,558,169  shares of common stock held by VM Investors,
          LLC.  Amy  Black is a member of VM Investors, LLC and is the spouse of
          Craig  Ellins,  one  of  the  managers of VM Investors, LLC. Amy Black
          disclaims  beneficial  ownership of the shares of common stock held by
          VM  Investors,  LLC  except  to  the  extent of her pecuniary interest
          therein.  Ms.  Black  currently  serves  as the President of VMdirect.

     5.   Kevin R.  Keating,  a  director  of  the  company,  is  the  father of
          Timothy  Keating,  the  principal  member of Keating Investments, LLC.
          Keating  Investments,  LLC  is  the managing member of Keating Reverse
          Merger Fund, LLC, one of our shareholders. Keating Investments, LLC is
          also  the  managing member and 90% owner of Keating Securities, LLC, a
          registered  broker-dealer. Kevin R. Keating is not affiliated with and
          has  no  equity  interest in Keating Investments, LLC, Keating Reverse
          Merger  Fund,  LLC  or  Keating  Securities,  LLC  and  disclaims  any
          beneficial interest in the shares of our common stock owned by Keating
          Reverse Merger Fund, LLC. Similarly, Keating Investments, LLC, Keating
          Reverse  Merger  Fund,  LLC  and  Keating Securities, LLC disclaim any
          beneficial  interest in the shares of our common stock currently owned
          by  Kevin  R.  Keating.  Kevin  R.  Keating  served  as our President,
          Secretary  and  treasurer  from  June 2004 through June 2006. Kevin R.
          Keating  is an investment executive and the Branch Manager of the Vero
          Beach,  Florida,  office  of  Brookstreet  Securities  Corporation,  a
          registered  broker-dealer.  Kevin  R.  Keating  also  has an immediate
          family  member,  Timothy  Keating, who is an affiliate of a registered
          broker-dealer.  Kevin  R.  Keating purchased or otherwise acquired his
          shares  in  the  ordinary  course of business and, at the time of such
          purchase/acquisition, had no agreements or understandings, directly or
          indirectly,  with  any  person,  to  distribute  the  securities to be
          resold.

     6.   Includes  219,578  shares  of  common  stock that may be acquired from
          us  within  60 days of March 13, 2007 upon the exercise of outstanding
          stock  options.

     7.   Consists  of  17,558,169  shares of common stock held by VM Investors,
          LLC. Craig Ellins and Richard Kall, the managers of VM Investors, LLC,
          exercise  voting  and  investment  authority over the shares of common
          stock  held  by  VM  Investors,  LLC. Mr. Kall currently serves as the
          Chairman  of  VMdirect.

CHANGES  IN  CONTROL

     We  do not have any arrangements which may at a subsequent date result in a
change  in  control.

EQUITY  COMPENSATION  PLAN  INFORMATION

     The  following  table  sets  forth  information  concerning  our  equity
compensation  plans  as  of  December  31,  2006.

<TABLE>
<CAPTION>
                                                                                NUMBER OF SECURITIES
                                                         WEIGHTED-AVERAGE     REMAINING AVAILABLE FOR
                              NUMBER OF SECURITIES TO    EXERCISE PRICE OF     FUTURE ISSUANCE UNDER
                              BE ISSUED UPON EXERCISE       OUTSTANDING      EQUITY COMPENSATION PLANS
                              OF OUTSTANDING OPTIONS,    OPTIONS, WARRANTS     (EXCLUDING SECURITIES
                                WARRANTS AND RIGHTS         AND RIGHTS        REFLECTED IN COLUMN (a))
PLAN CATEGORY                           (a)                     (b)                     (c)
----------------------------  ------------------------  -------------------  --------------------------
<S>                           <C>                       <C>                  <C>
Equity compensation plans                     291,500   $              7.75                   1,246,001
approved by security holders
Equity compensation plans                   886,627(1)  $              0.27                          --
not approved by security
holders
TOTAL                                       1,178,127   $              2.12                   1,246,001
</TABLE>


                                       70
<PAGE>
     (1)     Includes options originally issued by VMdirect and assumed by us in
the  Exchange  Transaction  with  VMdirect  which  currently entitle the holders
thereof  to  purchase  shares  of  our  common stock as follows: an aggregate of
780,000  shares  at a per share exercise price of $0.26 expiring on December 31,
2015;  an  aggregate  of  106,014  shares at a per share exercise price of $0.33
expiring  from  January  3, 2016 through March 27, 2016; and an aggregate of 400
shares  of  common  stock  at  a  per  share  exercise  price  of  $0.50 without
expiration.

2006  STOCK  INCENTIVE  PLAN

     Our  2006  Stock  Incentive Plan was adopted and became effective in August
2006.  A  total of 1,246,001 shares of common stock remain reserved for issuance
upon exercise of awards granted under the 2006 Stock Incentive Plan.  The number
of  shares  reserved for issuance under the 2006 Stock Incentive Plan is subject
to  an  annual  increase on the first day of each fiscal year during the term of
the  2006  Stock  Incentive  Plan, beginning January 1, 2007, in each case in an
amount  equal  to the lesser of (i) 1,000,000 shares of common stock, (ii) 5% of
the  outstanding  shares  of  common  stock  on  the last day of the immediately
preceding  year,  or  (iii) an amount determined by our board of directors.  Any
shares  of  common  stock  subject  to an award, which for any reason expires or
terminates  unexercised,  are  again available for issuance under the 2006 Stock
Incentive  Plan.

     Our  2006  Stock  Incentive  Plan  will  terminate  after 10 years from the
effective  date, unless it is terminated earlier by our board of directors.  The
plan  authorizes  the  award  of  stock  options,  stock  purchase grants, stock
appreciation  rights  and  stock  units.

     Our  2006  Stock  Incentive  Plan  is  administered  by  our  full board of
directors.  To  the extent we expand our board of directors, we intend to form a
compensation  committee,  all  of  the  members  of  which  will  be independent
directors  under  applicable  federal  securities  laws and outside directors as
defined  under  applicable  federal  tax  laws.  Following  its  formation,  the
compensation  committee  will  have  the authority to construe and interpret the
plan,  grant awards and make all other determinations necessary or advisable for
the  administration  of  the  plan.

     Our  2006  Stock  Incentive  Plan  provides for the grant of both incentive
stock  options  that  qualify under Section 422 of the Internal Revenue Code and
nonqualified  stock options.  Incentive stock options may be granted only to our
employees  or  to  employees  of any of our parents or subsidiaries.  All awards
other  than  incentive  stock options may be granted to our employees, officers,
directors,  consultants,  independent  contractors  and  advisors  or employees,
officers, directors, consultants, independent contractors and advisors of any of
our parents or subsidiaries.  The exercise price of incentive stock options must
be  at  least  equal to the fair market value of our common stock on the date of
grant.  The  exercise  price  of  incentive  stock  options  granted  to  10%
shareholders  must  be at least equal to 110% of that value.  The exercise price
of  nonqualified  stock  options  will be determined by the administrator of the
plan  when  the options are granted.  The term of options granted under our 2006
Stock  Incentive  Plan  may  not  exceed  10  years.

     Awards  granted  under our 2006 Stock Incentive Plan may not be transferred
in  any  manner other than by will or by the laws of descent and distribution or
as  determined by the administrator of the plan.  Unless otherwise restricted by
such  administrator,  nonqualified  stock  options  may  be exercised during the
lifetime  of the optionee only by the optionee, the optionee's guardian or legal
representative or a family member of the optionee who has acquired the option by
a  permitted  transfer.  Incentive  stock  options  may  be exercised during the
lifetime  of  the  optionee  only  by the optionee or the optionee's guardian or
legal  representative.  Options  granted  under  our  2006  Stock Incentive Plan
generally  may  be  exercised for a period of three months (twelve months in the
event  of  death,  disability  or  retirement)  after  the  termination  of  the
optionee's  service  with  us or any parent or subsidiary of ours.  Options will
generally  terminate  immediately  upon  termination  of  employment  for cause.


                                       71
<PAGE>
     The  purchase  price  for  restricted  stock  will  be  determined  by  the
administrator of the plan at the time of grant.  Stock bonuses may be issued for
past  services  or may be awarded upon the completion of services or performance
goals.

     If  we  are  subject  to  a  change  in  control  transaction, our board of
directors  would  determine,  in  its sole discretion, whether to accelerate any
vested  or  unvested portion of any award.  Additionally, if a change in control
were  to  occur,  any  agreement between us and any other party to the change in
control  could  provide  for (1) the continuation of any outstanding awards, (2)
the  assumption  of the 2006 Stock Incentive Plan or any awards by the surviving
entity  or any of its affiliates, (3) cancellation of awards and substitution of
other  awards  with  substantially  the  same  terms  or  economic  value as the
cancelled  awards,  or  (4)  cancellation  of  any vested or unvested portion of
awards,  subject  to  providing  notice  to  the  option  holder.

ITEM 12.     CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS,  AND  DIRECTOR
             INDEPENDENCE

     Other  than the transactions described below, since January, 2006 there has
not  been, nor is there currently proposed, any transaction or series of similar
transactions  to  which  we  were  or  will  be  a  party:

          -    in which the amount involved exceeds the lesser of $120,000 or
               one percent of the average of our total assets at year-end for
               the last three completed fiscal years; and

          -    in which any director, executive officer, selling shareholder
               named in this prospectus, other shareholder of more than 5% of
               our common stock or any member of their immediate family had or
               will have a direct or indirect material interest.

DIGITALFX

     On  June  10,  2004,  we  entered into a contract with Vero Management, LLC
("Vero")  for  managerial  and administrative services.  Vero was not engaged to
provide,  and  Vero  did  not  render,  legal,  accounting, auditing, investment
banking or capital formation services.  Kevin R. Keating is the manager of Vero.
The  term  of  the  contract was for one year.  In consideration of the services
provided,  Vero  was paid $1,000 for each month in which services were rendered.
Furthermore, Vero has paid $25,439 of our expenses during the three months ended
March  31,  2006.  As  of March 31, 2006, we owed Vero $31,439, which amount was
paid  by  us  at consummation of our acquisition of VMdirect.  We terminated our
agreement  with  Vero  on  June  15,  2006.

     We  engaged  Garisch  Financial,  Inc.  in  July 2004 to perform consulting
services  for  us  while  we were a public shell and to assist in due diligence,
structuring and negotiating acquisition transactions to which we were party.  We
did  not  enter  into  a  written  consulting  services  agreement  with Garisch
Financial,  Inc.  Upon  the consummation of the acquisition of VMdirect, we paid
Garisch Financial, Inc. a sum of $60,000 for consulting services rendered to us.
Garisch Financial, Inc. no longer provides consulting services to us.

     At the closing of our acquisition of VMdirect, pursuant to the terms of the
Exchange  Agreement, we entered into a certain financial advisory agreement with
Keating  Securities,  LLC  ("Keating  Securities"),  a registered broker-dealer,
under  which  Keating  Securities  was  compensated  by us for advisory services
rendered  to us in connection with our acquisition of VMdirect.  The transaction
advisory  fee  of  $500,000  was  paid  at  the  closing  of  the  acquisition.

     Kevin  R.  Keating,  one  of  our directors, is the father of the principal
member  of  Keating  Investments, LLC.  Keating Investments, LLC is the managing
member  of  Keating  Reverse  Merger  Fund,


                                       72
<PAGE>
LLC.  Keating  Investments,  LLC  is  also  the managing member and 90% owner of
Keating  Securities,  LLC, a registered broker-dealer.  Keating Investments, LLC
is also the managing member and 100% owner of Keating After Market Support, LLC.
Kevin  R.  Keating  is not affiliated with and has no equity interest in Keating
Investments,  LLC,  Keating Reverse Merger Fund, LLC, Keating Securities, LLC or
Keating  After  Market Support, LLC and disclaims any beneficial interest in the
shares  of  our  common  stock  owned  by  Keating  Reverse  Merger  Fund,  LLC.
Similarly,  Keating  Investments, LLC, Keating Reverse Merger Fund, LLC, Keating
Securities,  LLC  and  Keating After Market Support, LLC disclaim any beneficial
interest  in the shares of our common stock currently owned by Kevin R. Keating.

     Immediately  following the closing of our acquisition of VMdirect, pursuant
to  the  terms  of  the  Exchange  Agreement,  we entered into an agreement with
Keating After Market Support, LLC to provide investor relations and after market
support  services  to  us for a period of not less than six months following the
closing of the acquisition.  Under this agreement, Keating After Market Support,
LLC  will  be  paid  a  monthly  fee  of  $7,500  during  the  term.

     On  December 22, 2006, we entered into a Securities Purchase Agreement (the
"Securities  Purchase  Agreement")  with  Kingdon  Associates,  Kingdon  Family
Partnership,  L.P.  and  M.  Kingdon Offshore Ltd. (the "Investors") pursuant to
which we agreed to sell to the Investors an aggregate of 1,000,000 shares of our
common stock (the "Shares") at a per share price of $4.75 (the "Purchase Price")
for  gross  proceeds  of  $4.75  million.  The  transactions contemplated by the
Securities  Purchase  Agreement  closed  on  December  27, 2006 (the "Closing").

     In  connection with the Closing, on December 27, 2006, we also entered into
a  Registration  Rights Agreement (the "Registration Rights Agreement") with the
Investors,  pursuant  to  which,  among  other things, we agreed to register the
resale  of  the  Shares  by the Investors and to keep the registration statement
continuously  effective  until  the  earlier of the date on which (a) all Shares
have  been publicly sold by the Investors or (b) the date that all of the Shares
may be sold by the Investors without volume restrictions pursuant to Rule 144(k)
promulgated  under  the  Securities  Act of 1933, as amended (the "Effectiveness
Period").  The Registration Rights Agreement provides that if (i) we do not file
a  registration  statement  on  or  before January 31, 2007, (ii) a registration
statement  is  not  declared effective on or prior to March 27, 2007, which date
may  be  extended to May 1, 2007 in the event that the registration statement is
reviewed  by  the  SEC,  or  (iii)  after  its effective date, such registration
statement  ceases  to remain continuously effective and available to the holders
of  the  Shares  at any time prior to the expiration of the Effectiveness Period
for  an  aggregate  of more than 30 consecutive trading days or for more than an
aggregate  of  60  trading  days  in  any  12-month  period  (which  need not be
consecutive),  then we must pay each holder of Shares on the date of such event,
and  for  each  month thereafter that such event continues, an amount in cash as
partial  liquidated  damages equal to 1% of the aggregate Purchase Price paid by
such  Investor pursuant to the Securities Purchase Agreement for any Shares then
held  by  such  Investor, up to a maximum of 18% of the aggregate Purchase Price
paid  by  such  Investor  in  any  12-month  period,  unless, as a result of the
liquidated  damages  provision  of  the Registration Rights Agreement, generally
accepted  accounting  principles  of  the United States require the Shares to be
treated as derivative securities, or as any other financial component other than
stockholders  equity,  in  which  case,  the  maximum  amount  payable under the
liquidated  damages  provisions  of  the  Registration Rights Agreement will not
exceed  18%  of the aggregate Purchase Price paid by such Investor.  Pursuant to
the  Registration Rights Agreement, we filed the registration statement of which
this  prospectus  is  a  part  with  the  Securities  and Exchange Commission to
register for resale the shares of common stock identified in this prospectus and
owned  by  the  selling  shareholders.

     In  connection  with the closing, on December 27, 2006, of the transactions
contemplated  under  the  Securities Purchase Agreement with Kingdon Associates,
Kingdon  Family  Partnership,  L.P.  and M. Kingdon Offshore Ltd., each of Craig
Ellins,  our  Chairman,  Chief  Executive  Officer  and  President,  Lorne


                                       73
<PAGE>
Walker,  our  Chief Financial Officer and Secretary, Amy Black, the President of
VMdirect,  VM Investors, LLC, our majority shareholder, and Richard Kall, one of
the  managers  of VM Investors, LLC entered into a Lock-Up Letter Agreement (the
"Lock-Up  Letter Agreement") pursuant to which such parties agreed not to offer,
sell,  pledge  or otherwise enter into any transaction or device designed to, or
could  be  expected  to, result in the disposition of any shares of common stock
owned  or  subsequently  acquired  by  such parties for a period ending 180 days
after  such  closing  without  the  prior  written  consent  of  Kingdon Capital
Management,  LLC.  Kingdon  Capital Management, LLC is the investment advisor of
each  of  Kingdon  Associates,  Kingdon  Family Partnership, L.P. and M. Kingdon
Offshore  Ltd.

     On  January  29,  2007,  we  entered  into an Amended and Restated License,
Hosting  and Services Agreement (the "Amended Agreement") with RazorStream.  The
Amended  Agreement  amends  and  restates  the  Licensing,  Hosting and Services
Agreement  effective  May  1,  2005  with  RazorStream.

     Pursuant  to  the  terms of the Amended Agreement, RazorStream will provide
hosting,  maintenance  and support services for each individual website operated
by us or any third party authorized by us. While the initial term of the Amended
Agreement  ends  on  January  15,  2008, the Amended Agreement remains operative
thereafter  unless terminated by either party upon 60 days prior written notice.
Under  the  terms of the Amended Agreement, for each individual website operated
by us or any third party authorized by us, RazorStream (a) charges us $5 per new
subscriber  account  exceeding  20,000  accounts  (purchasable in 20,000 account
increments); (b) is entitled to (1) ten percent (10%) of our total gross revenue
from  all  active  subscriber  accounts, with a minimum amount of $0.69 per each
such  subscriber  account per month, and (2) terms to be mutually agreed upon by
the  parties  for  all  advertising-based  "free" subscriber accounts, provided,
however that such terms will provide for a minimum amount of $0.25 per each such
subscriber account per month; and (c) effective February 1, 2007, is entitled to
a minimum guarantee of $50,000 per month that is non-refundable but that will be
credited  against the above fees.  We may, from time to time, engage RazorStream
for  non-recurring  engineering  services  at a rate of $200 per hour.  The fees
above apply independently to each individual website operated by us or any third
party  authorized  by  us,  and  no  fees charged with respect to any individual
website,  and  no  subscriber  account  applied  with  respect to any individual
website, shall be aggregated with any fees or subscriber accounts, respectively,
applied  to  any  other  website.

     The  Amended Agreement also provides us with a non-exclusive, royalty-free,
worldwide,  perpetual  license  to  use  and  otherwise  exploit  the technology
described  in  an  exhibit  to  the  Amended Agreement, including in source code
format,  any corrections, modifications and custom enhancements thereto, and any
interfaces  necessary  for  and  documentation  related  to  the  technology's
functionality.  The license portion of the agreement is available whether or not
RazorStream  provides  its  services  under  the  agreement, and applies to each
individual  website  operated  by  us  or  any  third  party  authorized  by us.

VMDIRECT

     Effective  January  1,  2003,  VMdirect  entered  into  a Software Services
Agreement  with  RazorStream,  LLC  ("RazorStream"),  a Nevada limited liability
company  that  is majority owned by our majority shareholder, VM Investors, LLC,
which  is  in turn owned by, among others, Craig Ellins and Amy Black, our Chief
Executive  Officer  and  President,  and  VMdirect's  President,  respectively,
pursuant  to  which  RazorStream  supervised  VMdirect's  development of various
software  applications  and  other  software  technologies. Under the agreement,
RazorStream  was  entitled  to  own certain software technology arising from the
development  (the  "Core  Technology"),  while  VMdirect  owned its pre-existing
technology,  certain  software  applications  created during the development and
other  software  applications  or  technology developed outside the scope of the
agreement.


                                       74
<PAGE>
     In  connection  with  the  Software Services Agreement, the parties entered
into  a  Technology  License  Agreement  pursuant  to  which RazorStream granted
VMdirect  a  non-exclusive, royalty-free, worldwide perpetual license to use and
otherwise  exploit  the  Core  Technology,  including  in  source  code  format.

     Effective  May  1,  2005,  each  of  the  Software  Services  Agreement and
Technology  License Agreement were terminated by mutual agreement of the parties
and  superseded by the License, Hosting and Services Agreement (the "Hosting and
Services  Agreement"), pursuant to which VMdirect and RazorStream continue to be
parties  and  whereby  RazorStream  provides  hosting,  maintenance  and support
services  for  VMdirect.  The Hosting and Services Agreement provides for a term
through  December 31, 2006, and continues thereafter unless terminated by either
party  upon  sixty  days  prior written notice.  We are involved in negotiations
with  RazorStream  to extend the agreement for an additional term to be mutually
agreed  upon  by  the  parties.  We  are  also  involved  in  negotiations  with
RazorStream  to  enter into licensing agreements for each of DigitalFX Networks,
LLC  and  DigitalFX  Solutions,  LLC,  our wholly-owned subsidiaries.  Under the
Hosting  and  Services  Agreement,  RazorStream  (a) charges VMdirect $5 per new
subscriber  account  exceeding  20,000  accounts  (purchasable in 20,000 account
increments)  as  reimbursement  for  additional  bandwidth  and network capacity
required  by RazorStream to support such new subscribers; (b) is entitled to (1)
ten  percent  (10%) of VMdirect's total gross revenue from all active subscriber
accounts  billed  at  $25.00  or more per month total gross subscription, with a
minimum amount of $3 per each such subscriber account per month, (2) terms to be
mutually  agreed  upon by the parties for all subscriber accounts billed at less
than  $25.00  per month, and (3) terms to be mutually agreed upon by the parties
for  all  advertising-based  "free"  subscriber accounts, provided, however that
such  terms  will provide for a minimum amount of $0.25 per each such subscriber
account  per  month;  and  (c) effective April 1, 2006, is entitled to a minimum
guarantee  of $50,000 per month that is non-refundable but that will be credited
against  the  above  fees.

     The  Hosting  and  Services  Agreement  also  provides  VMdirect  with  a
non-exclusive,  royalty-free,  worldwide, perpetual license to use and otherwise
exploit  the  Core  Technology,  including  in  source code format.  The license
portion  of  the  agreement is available whether or not RazorStream provides its
services  under  the  agreement.

     On  June  14,  2006,  VMdirect  sold  an  aggregate  of  361,603 membership
interests  to  each  of  the  Bruce  I.  Raben  Living Trust, Woodman Management
Corporation,  SAM Venture Partners, Mathias Venture Partners, LLC, Lorne Walker,
Kurt  Adelman,  Douglas  and  Terry McNamara, Beverly C. Wolfe, Jorel Management
Corp.,  Strategic Turnaround Equity Partners, LP, MER Investments, Inc. and John
Pretto  for  aggregate  gross  proceeds  equal  to  $625,000.  These  purchasers
currently  hold, in the aggregate, 2,313,434 shares of common stock representing
approximately  9.9%  of  our  issued  and  outstanding  shares  of common stock.
Effective  November  30,  2006, we registered the resale of the shares of common
stock  held  by  these  purchasers.

ITEM 13.     EXHIBITS

     See attached Exhibit Index.


                                       75
<PAGE>
ITEM 14.     PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT  FEES

     Weinberg & Company, P.A., our independent registered public accounting firm
("Weinberg")  billed  us  an  aggregate  of  approximately  $116,000 in fees for
professional  services rendered for the audit of our annual financial statements
for  the  fiscal  years  ended December 31, 2006 and 2005 and the reviews of the
financial  statements  included  in  our  Form  10-QSB  for the second and third
quarters  of  fiscal  2006.

     KBA  Group  LLP,  our  former independent registered public accounting firm
("KBA")  billed us an aggregate of approximately $3,500 in fees for professional
services  rendered  for  the  review of the financial statements included in our
Form  10-QSB  for  the  first  quarter  of  fiscal  2006 and $21,950 in fees for
professional  services rendered for the audit of our annual financial statements
for  the  fiscal  year ended December 31, 2005, and the reviews of the financial
statements  included in our Form 10-QSB for the first, second and third quarters
of  fiscal  2005.

AUDIT-RELATED  FEES

     Weinberg  billed  us  an  aggregate  of  approximately  $29,000 in fees for
assurance  and  related  services  related  to the audit of our annual financial
statements for the fiscal years ended December 31, 2006 and 2005.

     KBA  did not bill us any fees for assurance and related services related to
the  audit of our annual financial statements for the fiscal year ended December
31,  2005.

     Our  Audit Committee is directly responsible for interviewing and retaining
our  independent  registered  public accounting firm, considering the accounting
firm's independence and effectiveness, and pre-approving the engagement fees and
other  compensation  to  be  paid  to,  and the services to be conducted by, the
independent  registered  public  accounting  firm.  The Audit Committee does not
delegate  these  responsibilities.  During  the  fiscal  year ended December 31,
2006,  our Audit Committee pre-approved 100% of the services described above for
Weinberg.

     Prior  to  the  formation  of  our  Audit Committee, our board of directors
performed  the  functions  of  the  Audit Committee.  Our board of directors was
directly  responsible  for interviewing and retaining our independent registered
public  accounting  firm,  considering  the  accounting  firm's independence and
effectiveness,  and  pre-approving the engagement fees and other compensation to
be  paid  to,  and  the  services to be conducted by, the independent registered
public  accounting  firm.  During  the  fiscal year ended December 31, 2005, our
board  of  directors  pre-approved 100% of the services described above for KBA.


                                       76
<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.

                                        DIGITALFX  INTERNATIONAL,  INC.


                                        By:
                                           ----------------------------------
                                           Craig Ellins
                                           Chief Executive Officer and President

                                        Date:  March 15, 2007



                                POWER OF ATTORNEY

     The  undersigned directors and officers of DigitalFX International, Inc. do
hereby  constitute  and appoint Craig Ellins and Lorne Walker with full power of
substitution and resubstitution, as their true and lawful attorney and agent, to
do  any  and all acts and things in their name and behalf in their capacities as
directors  and  officers  and to execute any and all instruments for them and in
their  names  in  the capacities indicated below, which said attorney and agent,
may  deem  necessary  or advisable to enable said corporation to comply with the
Securities  Exchange  Act  of  1934,  as  amended and any rules, regulations and
requirements  of the Securities and Exchange Commission, in connection with this
Annual  Report  on  Form  10-KSB, including specifically but without limitation,
power  and  authority  to  sign  for  them  or any of them in their names in the
capacities  indicated  below,  any  and all amendments (including post-effective
amendments)  hereto,  and  they  do  hereby  ratify  and  confirm  all that said
attorneys  and agents, or either of them, shall do or cause to be done by virtue
hereof.

     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

<TABLE>
<CAPTION>
     Signature                              Title                         Date
------------------  ------------------------------------------------  --------------
<S>                 <C>                                               <C>

                    Chairman, Chief Executive Officer and             March 15, 2007
------------------  President (Principal Executive Officer)
   Craig Ellins

                    Chief Financial Officer and Secretary             March 15, 2007
------------------  (Principal Financial and Accounting Officer)
   Lorne Walker

                    Director                                          March 15, 2007
------------------
     Amy Black

                    Director                                          March 15, 2007
------------------
   Jerry Haleva

                    Director                                          March 15, 2007
------------------
Kevin R. Keating
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                                            EXHIBIT INDEX

EXHIBIT
NUMBER   EXHIBIT TITLE
         -------------
<S>      <C>

2.1      Exchange Agreement by and between the Registrant, VMdirect, L.L.C. and the members of
         VMdirect, L.L.C. owning a majority of the membership interests thereof, dated May 23,
         2006. (1)

3.1.1    Articles of Incorporation of the Registrant effective January 23, 1991. (2)

3.1.2    Articles of Amendment of Articles of Incorporation of the Registrant effective December
         23, 1995. (2)

3.1.3    Articles of Amendment of Articles of Incorporation of the Registrant effective May 4,
         1999. (2)

3.1.4    Articles of Amendment of Articles of Incorporation of the Registrant effective June 7,
         2006. (3)

3.1.5    Articles of Amendment of Articles of Incorporation of the Registrant effective August 1,
         2006. (4)

3.2      Bylaws of the Registrant. (5)

4.1      Articles of Incorporation of the Registrant effective January 23, 1991. (2)

4.2      Articles of Amendment of Articles of Incorporation of the Registrant effective December
         23, 1995. (2)

4.3      Articles of Amendment of Articles of Incorporation of the Registrant effective May 4,
         1999. (2)

4.4      Articles of Amendment of Articles of Incorporation of the Registrant effective June 7,
         2006. (3)

4.5      Articles of Amendment of Articles of Incorporation of the Registrant effective August 1,
         2006. (4)

4.6      Bylaws of the Registrant. (5)

10.1     Management Agreement dated June 10, 2004, between the Registrant and Vero
         Management, LLC. (6)

10.2     Securities Purchase Agreement dated June 10, 2004, among the Registrant, Keating
         Reverse Merger Fund, LLC, Thurston Interests, LLC and certain other shareholders of the
         Company. (7)

10.3     Financial Advisory Agreement between the Registrant and Keating Securities, LLC. (8)

10.4     Lease Agreement dated September 15, 2005, by and between Patrick Airport Business
         Center, LLC and VMdirect, L.L.C. (9)

10.5     Sublease dated August 8, 2005, by and between Public Market Ventures, Inc. and
         VMdirect, L.L.C. (10)

10.6     License, Hosting and Services Agreement dated as of May 1, 2005, by and between
         VMdirect, L.L.C., a Nevada Limited Liability company, and RazorStream, LLC, a Nevada
         limited liability company. (11)

10.7     2006 Stock Incentive Plan. (12)


<PAGE>
EXHIBIT
NUMBER   EXHIBIT TITLE
         -------------

10.8     Form of Membership Interest Purchase Agreement. (13)

10.9     Form of VMdirect, L.L.C. Warrant. (14)

10.10    Form of Warrant Assignment and Assumption Agreement. (15)

10.11    Voting Agreement dated June 15, 2006, among Keating Reverse Merger Fund, LLC, Craig
         Ellins, Amy Black, The Richard Kall Family Trust and Lizanne Kall. (16)

10.12    Securities Purchase Agreement by and among the Registrant and the purchasers identified
         on the signature pages thereto, dated December 22, 2006. (17)

10.13    Registration Rights Agreement by and among the Registrant and the purchasers identified
         on the signature pages thereto, dated December 27, 2006. (18)

10.14    Form of Lock-Up Letter Agreement. (19)

10.15    Form of Amended and Restated License, Hosting and Services Agreement with
         RazorStream LLC.

10.16    Lease Agreement dated February 7, 2007, between Patrick Airport Business Center, LLC
         and the Registrant.

10.17    Professional Services Agreement dated February 22, 2007, between Bolsover Endeavours
         and the Registrant.

21.1     List of Subsidiaries. (20)

24.1     Power of Attorney (included as part of the Signature Page of this Registration Statement).

31.1     Certification by Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the
         Securities Exchange Act of 1934, as amended.

31.2     Certification by Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the
         Securities Exchange Act of 1934, as amended.

32.1     Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
         pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2     Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
         pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
---------------------------------------------------------------------------------------------------
</TABLE>

     (1)  Filed previously as Exhibit 2.1 to the Registrant's Current Report on
          Form 8-K (File #: 000-27551), filed with the Securities and Exchange
          Commission on May 25, 2006, and incorporated herein by this reference.
     (2)  Filed previously as Exhibit 2.1 to the Registrant's Form 10-SB
          Registration Statement (File #: 000-27551), filed with the Securities
          and Exchange Commission on October 5, 1999, and incorporated herein by
          this reference.
     (3)  Filed previously as Exhibit 3.2 to the Registrant's Current Report on
          Form 8-K (File #: 000-27551), filed with the Securities and Exchange
          Commission on June 19, 2006.
     (4)  Filed previously as Exhibit A to the Registrant's Definitive
          Information Statement on Schedule 14C (File #: 000-27551), filed with
          the Securities and Exchange Commission on July 7, 2006, and
          incorporated herein by this reference.
     (5)  Filed previously as Exhibit 2.2 to the Registrant's Form 10-SB
          Registration Statement (File #: 000-27551), filed with the Securities
          and Exchange Commission on October 5, 1999, and incorporated herein by
          this reference.
     (6)  Filed previously as Exhibit 10.1 to Amendment No. 1 to the
          Registrant's Registration Statement on Form SB-2 (File #: 333-136855),
          filed with the Securities and Exchange Commission on October 5, 2006,
          and incorporated herein by this reference.


<PAGE>
     (7)  Filed previously as Exhibit 99 to the Registrants Current Report on
          Form 8-K (File #: 000-27551), filed with the Securities and Exchange
          Commission on June 16, 2004, and incorporated herein by this
          reference.
     (8)  Filed previously as Exhibit 10.1 to the Registrant's Current Report on
          Form 8-K (File #: 000-27551), filed with the Securities and Exchange
          Commission on June 19, 2006, and incorporated herein by this
          reference.
     (9)  Filed previously as Exhibit 10.2 to the Registrant's Current Report on
          Form 8-K (File #: 000-27551), filed with the Securities and Exchange
          Commission on June 19, 2006, and incorporated herein by this
          reference.
     (10) Filed previously as Exhibit 10.3 to the Registrant's Current Report on
          Form 8-K (File #: 000-27551), filed with the Securities and Exchange
          Commission on June 19, 2006, and incorporated herein by this
          reference.
     (11) Filed previously as Exhibit 10.4 to the Registrant's Current Report on
          Form 8-K (File #: 000-27551), filed with the Securities and Exchange
          Commission on June 19, 2006, and incorporated herein by this
          reference.
     (12) Filed previously as Exhibit B to the Registrant's Definitive
          Information Statement on Schedule 14C (File #: 000-27551), filed with
          the Securities and Exchange Commission on July 7, 2006, and
          incorporated herein by this reference.
     (13) Filed previously as Exhibit 10.6 to the Registrant's Registration
          Statement on Form SB-2 (File #: 333-136855), filed with the Securities
          and Exchange Commission on August 23, 2006, and incorporated herein by
          this reference.
     (14) Filed previously as Exhibit 10.9 to Amendment No. 1 to the
          Registrant's Registration Statement on Form SB-2 (File #: 333-136855),
          filed with the Securities and Exchange Commission on October 5, 2006,
          and incorporated herein by this reference.
     (15) Filed previously as Exhibit 10.10 to Amendment No. 1 to the
          Registrant's Registration Statement on Form SB-2 (File #: 333-136855),
          filed with the Securities and Exchange Commission on October 5, 2006,
          and incorporated herein by this reference.
     (16) Filed previously as Exhibit 10.11 to Amendment No. 2 to the
          Registrant's Registration Statement on Form SB-2 (File #: 333-136855),
          filed with the Securities and Exchange Commission on November 2, 2006,
          and incorporated herein by this reference.
     (17) Filed previously as Exhibit 10.12 to the Registrant's Registration
          Statement on Form SB-2 (File #: 333-140047), filed with the Securities
          and Exchange Commission on January 17, 2007, and incorporated herein
          by this reference.
     (18) Filed previously as Exhibit 10.13 to the Registrant's Registration
          Statement on Form SB-2 (File #: 333-140047), filed with the Securities
          and Exchange Commission on January 17, 2007, and incorporated herein
          by this reference.
     (19) Filed previously as Exhibit 10.14 to the Registrant's Registration
          Statement on Form SB-2 (File #: 333-140047), filed with the Securities
          and Exchange Commission on January 17, 2007, and incorporated herein
          by this reference.
     (20) Filed previously as Exhibit 21.1 to Amendment No. 1 to the
          Registrant's Registration Statement on Form SB-2 (File #: 333-136855),
          filed with the Securities and Exchange Commission on October 5, 2006,
          and incorporated herein by this reference.