SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-QSB

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

For the quarterly period ended September 30, 2001

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

For the transition period

Commission file number 000-25111

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

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

236 West 26th Street, Suite 12W, New York, NY 10001
(Address of principal executive offices)

(212) 741-6511
(Registrant's telephone number, including area code)

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

Yes [X] No [ ]

Number of shares outstanding of Registrant's Common Stock as of October 31, 2001
was 2,483,456.

PART I

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

Sept 30,
2001
---------------
(unaudited)

ASSETS:
Current assets:
Cash and cash equivalents ....................................... $ 12,000
Marketable securities ........................................... 158,000
Accounts receivable, billed ..................................... 87,000
Accounts receivable, unbilled ................................... 40,000
Prepaid expenses and other current assets ....................... 107,000
---------------
Total current assets ............................. 404,000
Property and equipment, net .......................................... 3,533,000
Library of movies, net ............................................... 210,000
Deferred financing costs ............................................. 449,000
Deferred lease costs ................................................. 426,000
Other assets ......................................................... 42,000
---------------
Total assets ..................................... $ 5,064,000
===============

LIABILITIES AND STOCKHOLDERS' DEFICIT:

Current liabilities:
Accounts payable ................................................ $ 2,595,000
Accrued expenses and other current liabilities .................. 249,000
Customer deposits ............................................... 359,000
---------------
Total current liabilities ........................ 3,203,000

Deferred rent ........................................................ 25,000
Revolving line of credit ............................................. 4,168,000
Subordinated convertible debentures .................................. 750,000
---------------
Total liabilities ................................ 8,146,000
---------------

Liabilities to be settled in Preferred Stock.......................... 4,650,000
---------------

Commitments and contingencies

Stockholders' deficit
Common stock, $.01 par value; authorized 25,000,000 shares;
2,456,670 shares issued and outstanding at September 30, 2001.. 25,000
Additional paid-in capital ...................................... 23,449,000
Deferred Compensation ........................................... (259,000)
Accumulated other comprehensive loss ............................ (184,000)
Accumulated deficit ............................................. (30,763,000)
---------------
Total stockholders' deficit ...................... (7,732,000)
---------------
Total liabilities and stockholders' deficit ...... $ 5,064,000
===============

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

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

THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2001 2000 2001 2000
------------------------------------- ------------------------------------

Revenues $ 671,000 $ 1,169,000 $ 1,858,000 $ 2,810,000
---------------- ---------------- ---------------- ----------------

Operating expenses:
Salaries, wages and benefits ................. 837,000 827,000 1,709,000 1,636,000
Library amortization ......................... 136,000 162,000 276,000 333,000
Satellite costs .............................. 119,000 1,690,000 481,000 3,363,000
Broadband expenses ........................... 194,000 112,000 660,000 112,000
Selling, general and administrative expenses . 382,000 707,000 816,000 1,268,000
Depreciation ................................. 342,000 351,000 699,000 699,000
---------------- ---------------- ---------------- ----------------
Total operating expenses .............. 2,010,000 3,849,000 4,641,000 7,411,000
---------------- ---------------- ---------------- ----------------

Loss from operations .................. (1,339,000) (2,680,000) (2,783,000) (4,601,000)

Other expenses:
Interest expense ............................. (471,000) (205,000) (825,000) (350,000)
Transponder penalty .......................... -- -- (4,620,000) --
---------------- ---------------- ---------------- ----------------
Total other expenses .................. (471,000) (205,000) (5,445,000) (350,000)

---------------- ---------------- ---------------- ----------------
Loss before extraordinary item ........ (1,810,000) (2,885,000) (8,228,000) (4,951,000)

Extraordinary item:
Gain on extinguishment of transponder
liability................................... 5,220,000 -- 5,220,000 --
---------------- ---------------- ---------------- ----------------
Net income (loss) ..................... $ 3,410,000 $ (2,885,000) $ (3,008,000) $ (4,951,000)
================ ================ ================ ================

Net Income (Loss) per common share:
Basic & Diluted:
Loss before extraordinary gain .......... $ (0.75) $ (1.32) $ (3.46) $ (2.27)
Extraordinary gain 2.17 -- 2.20 --
---------------- ---------------- ---------------- ----------------
Net Income (Loss) .......................... $ 1.42 $ (1.32) $ (1.26) $ (2.27)
================ ================ ================ ================

Weighted average number of common shares outstanding:
Basic & Diluted............................. 2,409,804 2,179,785 2,379,811 2,179,785
================ ================ ================ ================

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

DIRECTRIX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT of STOCKHOLDERS' DEFICIT (unaudited)
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2001
___________________________________________________________________________________________________________________________________

Accumulated
Number Additional Other
of Common Paid-in Deferred Comprehensive Accumulated
Shares Stock Capital Compensation Loss Deficit Total
--------- -------- ------------ ------------ ------------- ------------- ------------

Balance at March 31, 2001 ........ 2,239,785 $ 23,000 $ 21,170,000 $ -- $ -- $(27,755,000) $(6,562,000)

Restricted stock issued
in connection with
salary reductions ........... 163,655 1,000 473,000 (259,000) -- -- 215,000

Intrinsic value of
benenficial conversion
feature of debentures ....... -- -- 313,000 -- -- -- 313,000

Stock issued in connection
with PIK credit facility
interest .................... 53,230 1,000 155,000 -- -- -- 156,000

Adjust value of stock issued
in connection with credit
facility interest to fair
market value ................ -- -- (9,000) -- -- -- (9,000)

Warrants issued to Loral
& executive officers
in connection with
extinguishment of
transponder liability....... -- -- 856,000 -- -- -- 856,000

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

Additional warrants issued
in connection with credit
facility .................... -- -- 267,000 -- -- -- 267,000

Net loss ..................... -- -- -- -- -- (3,008,000) (3,008,000)

Comprehensive loss due to
decline in market
value of marketable
securities .................. -- -- -- -- (184,000) -- (184,000)
------------
Comprehensive Loss ........... -- -- -- -- -- -- (3,192,000)
------------
--------- -------- ------------ ------------ ------------- ------------- ------------
Balance at September 30, 2001 .... 2,456,670 $ 25,000 $ 23,449,000 $ (259,000) $ (184,000) $(30,763,000) $(7,732,000)
========= ======== ============ ============ ============= ============= ============

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

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

Six months ended September 30,
2001 2000
---------------- ----------------

Cash flows from operating activities:
Net loss ........................................................... $ (3,008,000) $ (4,951,000)
---------------- ----------------

Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation of property and equipment ............................. 699,000 699,000
Amortization of library of movies .................................. 276,000 333,000
Amortization of deferred financing costs ........................... 198,000 139,000
Bad debt expense ................................................... 38,000 200,000
Non-cash rent expense .............................................. (24,000) (13,000)
Non-cash interest for beneficial conversion feature of debentures .. 313,000 --
Non-cash interest for PIK of credit facility interest .............. 147,000 --
Deferred compensation .............................................. 215,000 --
Increase in transponder penalty .................................... 4,620,000 --
Gain on extinguishment of transponder liability .................... (5,220,000) --
Changes in assets and liabilities:
Decrease (Increase) in accounts receivable .................... 449,000 (262,000)
Increase in prepaid expenses and other current assets ......... (49,000) (8,000)
Decrease in other assets ...................................... 125,000 51,000
Increase in deferred lease costs .............................. (202,000) --
Increase in accounts payable and accrued expenses ............. 1,074,000 2,091,000
Increase in transponder penalty ............................... -- --
Decrease (increase) in customer deposits ...................... (35,000) 61,000
---------------- ----------------
Total adjustments ................................... 2,624,000 3,291,000
---------------- ----------------

---------------- ----------------
Net cash used in operating activities ............... (384,000) (1,660,000)
---------------- ----------------

Cash flows from investing activities:
Purchase of property and equipment ............................ (52,000) (265,000)
---------------- ----------------
Net cash used in investing activities ............... (52,000) (265,000)
---------------- ----------------

Cash flows from financing activities:
Officer loans ................................................. (8,000) --
Borrowings under revolving line of credit ..................... 2,000 1,604,000
Proceeds from issuance of subordinated convertible debentures . 375,000 -
---------------- ----------------
Net cash provided by financing activities ........... 369,000 1,604,000
---------------- ----------------

Net decrease in cash and cash equivalents .............................. (67,000) (321,000)
Cash and cash equivalents, beginning of the period ..................... 79,000 324,000
---------------- ----------------
Cash and cash equivalents, end of the period ........................... $ 12,000 $ 3,000
================ ================

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest ............................................ $ -- $ 145,000
================ ================

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

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

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

DIRECTRIX, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE & SIX MONTHS ENDED SEPTEMBER 30, 2001 (unaudited)
________________________________________________________________________________
1. Basis of Presentation. The accompanying unaudited financial
statements have been prepared in accordance with accounting principles generally
accepted in the United States of America for interim financial information and
the instructions to Form 10-QSB and do not include all the information and
footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements. In the opinion of
management, all adjustments consisting of normal recurring accruals, considered
necessary for a fair presentation of the results for the interim period have
been included. Operating results for the three and six months ended September
30, 2001 are not necessarily indicative of the results that may be expected for
the year ended March 31, 2002. The accompanying condensed consolidated
financial statements and the information included under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" should be read in conjunction with the condensed consolidated
financial statements and related notes thereto included in Directrix' Annual
Report for the year ended March 31, 2001 as filed with our Form 10-KSB.

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

3. Financial Condition & Liquidity. The accompanying financial
statements have been prepared in conformity with accounting principles generally
accepted in the United States of America, which contemplate continuation of
Directrix as a going concern. However, since becoming a stand-alone company on
March 15, 1999, Directrix incurred net losses of $6.1 million and $10.3 million
for the years ended March 31, 2000 and March 31, 2001, respectively, and a net
loss of $3.0 million for the six months ended September 30, 2001. At September
30, 2001, Directrix has a working capital deficiency of $2.8 million. These
matters raise substantial doubt about Directrix' ability to continue as a going
concern. Directrix' continued existence is dependent upon several factors,
including management's ability to successfully implement the restructuring plan
described below and its ability to generate operating cash flow through the
successful execution of its long-term business plan. The financial statements
do not include any adjustments relating to the recoverability and classification
of recorded asset amounts or amounts and classification of liabilities that
might be necessary should Directrix be unable to continue in existence.
Management's plans and intentions in regard to this matter are described below
in Note 4.

4. Restructuring Plan. Management has developed and begun
implementation of a multi-phase restructuring plan. The restructuring plan
addresses the areas that management believes are critical to the realization of
Directrix' short and long-term plans. The areas addressed by this plan are
outlined below, and include (i) the termination of Directrix' transponder
services agreement, (ii) restructuring of Directrix' revolving line of credit
("Credit Facility"), (iii) the West Coast Facility, (iv) transition of its new
business to the West Coast Facility and attracting new business and
(v) new financing.

Termination of Directrix' Transponder Services Agreement.
Approximately $10.7 million of current liabilities through June 30, 2001 were
attributable to amounts owed to Loral SpaceCom Corporation ("Loral") under
Directrix' Agreement for Transponder Services ("Transponder Agreement"). In
May 2001, Directrix terminated its Transponder Agreement and transferred its
transponder service customers to Loral.

Management believes that the direct leasing of satellite transponders
no longer fits into Directrix' long-term plans and by terminating the
Transponder Agreement, Directrix has eliminated its largest recurring monthly
charge and has ceased providing transponder services.

During the three months ended September 30, 2001, Directrix recorded
an extraordinary gain on the extinguishment of the transponder liability of
approximately $5.2 million. The determination of the amount of the
extraordinary gain is based on management's preliminary estimate of the expected
value of the preferred stock and warrants. The final determination of the
amount of the extraordinary gain will be based on an analysis done by Directrix.

Directrix recognized $0.8 million and $1.9 million, respectively, of
revenue attributable to the leasing of transponders for the three and six months
ended September 30, 2000 of which $0.6 million and $1.6 million, respectively,
related to Emerald Media, Inc. (EMI"). As a result of the May 2001 termination
of the Transponder Agreement, Directrix recognized approximately $0.1 million of
revenue from transponder leasing for the six months ended September 30, 2001.

Restructuring of the Credit Facility. Directrix has a $4.5 million
Credit Facility, from which $4.2 million has been drawn down as of September 30,
2001. The Credit Facility was to mature on March 15, 2002, but after March 15,
2001, Directrix could no longer draw down any further advances under the Credit
Facility. The Credit Facility is secured by a first lien on all of Directrix'
assets.

To facilitate the agreement with Loral and enhance Directrix' ability
to attract new capital, Directrix negotiated a restructuring of the Credit
Facility as part of the Restructuring Agreement. Under the Restructuring
Agreement, the holders of the Credit Facility agreed to (i) extend the maturity
date by one year until March 31, 2003, (ii) permit Directrix to pay in kind
("PIK") the interest payment with shares of Directrix Common Stock and (iii)
revise the stockholders' equity covenant commencing with the fiscal year ending
March 31, 2002 to require that Directrix not allow its stockholders' deficit to
exceed $5.0 million. In consideration of the foregoing, Directrix agreed to
issue to the holders of the Credit Facility, excluding Loral and the two
executive officers of Directrix who agreed to swap their portion of the Credit
Facility for a new Series A of senior preferred stock (which is in the process
of being issued as described below), warrants to acquire 125,000 shares of
Directrix common stock at an exercise price of $3.00 per share. As noted above,
the Restructuring Agreement took effect on the September 20, 2001 consummation
of the Playboy Transaction.

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

West Coast Facility. Management believes that the establishment of
the West Coast Facility is critical to the realization of its long-term business
plan. To finance the acquisition, renovation and outfitting of the West Coast
Facility, Directrix entered into a three party letter of intent with Kingston
Investors Corp. ("Kingston") and Playboy, under which Kingston agreed to
purchase the building and make improvements to the property and enter into a
triple net lease of the property with Directrix for fifteen years. During final
negotiation, the transaction was restructured and under the revised arrangement
among the parties, Kingston acquired the property on September 20, 2001 and
triple net leased the property to Playboy under a 15 year Master Lease.
Playboy then subleased, on a triple net basis, approximately 55% of the property
to Directrix under a 15 year Sublease which provides for monthly sublease
payments of $99,442 in the first year increasing 3% per year for the first 10
years. For the last five years of the sublease, the rent shall be 110% of the
tenth year rent. Directrix is required to pay its proportionate share of the
insurance, real estate taxes and operating expenses of the facility. The
sublease commences in stages; rent on Studio A commences 30 days after Kingston
delivers Studio A renovated in accordance with specifications set forth in the
Master Lease, anticipated to occur in the fiscal quarter ended March 31, 2002.
The sublease commences with respect to the balance of the subleased premises 30
days after they are delivered in accordance with the work letter which is an
exhibit to the Master Lease.

As contemplated by a February 26, 2001 letter of intent between
Playboy and Directrix ("LOI"), the parties negotiated a 15-year Master Services
Agreement under which Directrix will provide network origination and studio
management services for Playboy's networks and productions. The Master Services
Agreement calls for minimum monthly service payments of $257,500 per month,
increasing 3% per year. The Master Services Agreement as it relates to the
studio services commences when Studio A is operational in accordance with
technical specifications set forth in an exhibit to the Master Services
Agreement. It is anticipated that this will occur 30 days after delivery by
Kingston of Studio A. The Master Services Agreement for network origination
services commences when Directrix is capable of originating the networks from
the West Coast Facility. Directrix also has a right of first refusal to provide
substantially all of Playboy's other technical service needs. The LOI also
extended the term of Directrix' current services agreement with Playboy, which
was set to expire on March 15, 2001, to March 31, 2002.

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

In July 2001, Playboy exercised its option to acquire the networks
operated by Califa Entertainment Group, Inc. ("Califa") and VOD, Inc. ("VODI"),
an affiliate of Califa. Under the Master Services Agreement, Directrix will
continue to provide network origination services for the networks acquired by
Playboy from Califa and VODI in addition to providing network origination
services for all of Playboy's other networks from the West Coast Facility.
The Master Services Agreement also provides for the extension of the existing
service agreements until the networks are originated from the West Coast
Facility. Upon execution of the Master Services Agreement, Directrix will issue
a warrant to Playboy to acquire 650,000 shares of its common stock at an
exercise price of $3.45.

Directrix is obligated to provide equipment, integration and
technical improvements necessary to provide the services under the Master
Services Agreement when the facility is operational. Directrix is currently
finalizing the terms of $15 million of equipment lease financing which includes
financing of systems integration fees and extended manufacturers' warranties.
Directrix does not currently anticipate using the entire $15 million and
under the proposed terms, the unused portion of the financing can be drawn down
until December 31, 2002 which will afford Directrix financing to upgrade the
West Coast Facility if required. There are no assurances that
the equipment lease can be finalized.

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

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

New Financing. The final phase of management's plan is to locate a
new source of working capital. Management forecasts that Directrix will require
additional funding to complete the buildout of the West Coast Facility and to
provide for the deficiency in working capital until Directrix generates
operating cash flow. Directrix management and its investment banker are
currently seeking up to $10 million of financing in addition to the equipment
lease financing noted above.

As a first step, Directrix secured $337,500 of interim financing on
October 25, 2001 (the "Interim Financing") in a private placement to existing
shareholders and investors. The terms of the interim financing include a one
year note secured by a perfected first lien on Directrix' assets. Under a
letter agreement dated October 28, 2001, the Credit Facility holders agreed to
subordinate their security interest to the interim financing holders' first
lien. The interim financing bears 20% interest payable upfront in shares
of Directrix common stock. Directrix issued 26,786 shares of common stock as
payment of the interest on the interim financing.

Directrix, with the assistance of its investment bankers, is seeking
$5 million to $10 million of permanent financing under terms to be determined.
The interim financing will be prepaid if Directrix places the permanent
financing. There are no assurances that management will be successful in
securing the permanent financing or even if successful, whether the proceeds of
such financing will be sufficient to maintain Directrix as a going concern.

Management believes that if it is successful in implementing the
restructuring plan described above, Directrix will be able to realize its
long-term business plan and achieve profitability. However, there can be no
assurance that Directrix will be able to implement the restructuring plan or
realize on its long-term business plan. Moreover, there can be no assurance
that the successful implementation of the business plan will improve operating
results and/or result in Directrix achieving profitability. There also can be
no assurance that unforeseen circumstances could prevent Directrix from
achieving its goal.

5. Preferred Stock. As part of the Restructuring Agreement described
above in Note 4, Directrix is in the process of issuing $1.65 million of Series
A Preferred Stock to two of Directrix' executive officers and $3.0 million of
Series B Preferred Stock to Loral. The Series A Preferred Stock will bear a 6%
cumulative dividend which Directrix may, at its option, PIK with Common Stock,
is senior in liquidation preference to the Series B Preferred Stock and
convertible at $1.50 per share. The conversion price is subject to standard
anti-dilution adjustments for stock splits and dividends, recapitalizations,
etc. and volume weighted anti dilution adjustments for below market issuances of
Common Stock and issuances of convertible securities with a conversion price
less than the Series A Preferred Stock conversion price. The Series A Preferred
Stock is also entitled to vote on an as converted basis and the holders have the
right to appoint two members to the Directrix Board of Directors. The holders
of the Series A Preferred Stock may demand redemption after 10 years or upon
change in control of Directrix (a person or group acquires more than 35% of the
outstanding voting securities). Directrix has the option of paying the
redemption price in cash or as a PIK. The Series B Preferred Stock has the same
terms as the Series A Preferred Stock except that it is junior to the Series A
Preferred Stock on liquidation preference, has a $3.00 per share conversion
price and has no voting rights or rights to appoint Board members. The Series A
and B preferred stock are accounted for as long term liabilities to be settled
in preferred stock in the accompanying balance sheet until such time that the
preferred stock is issued.

6. Warrants. As part of the fee arrangement for assisting with the
Playboy Transaction, Directrix issued to Kingston a five-year warrant to acquire
100,000 shares of Directrix common stock at an exercise price of $2.90 per
share, the fair market value of Directrix stock on the grant date. The
aggregate fair market value of the warrants (preliminarily determined by
management using the Black-Scholes pricing model) amounts to approximately $0.2
million and is capitalized as a deferred lease cost on the accompanying balance
sheet. As noted above in Note 4, Directrix has committed to issue to Playboy
upon execution of the Master Services Agreement, a five year warrant to acquire
650,000 shares at an exercise price of $3.45 per share. As noted above in Note
4 and as part of the Restructuring Agreement, Directrix issued five year
warrants to acquire 125,000 shares to the Credit Facility holders and warrants
to acquire 200,000 shares to each of Loral and the two executive officers of
Directrix (as a group). All of the warrants have an exercise price of $3.00 per
share. The aggregate fair market value of the warrants (preliminarily
determined by management using the Black-Scholes pricing model) issued to the
Credit Facility holders amounts to approximately $0.3 million and is being
amortized over the term of the Credit Facility. The final determination of the
valuation of the warrants described above will be based on an analysis done by
Directrix.

7. Net Loss per Share. Net loss per share for the three and six months
ended September 30, 2000 and September 30, 2001 are calculated in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share." Since Directrix reported a loss before extraordinary item for all
periods presented, basic and diluted earnings per share exclude dilution and are
computed by dividing net loss attributable to common shareholders by the
weighted-average common shares outstanding for the period. Options, warrants
and convertible debentures were excluded from the calculation of diluted
earnings per share because their effect would be anti-dilutive. Directrix had
325,219 and 312,973 common stock options outstanding as of September 30, 2001
and September 30, 2000, respectively. At September 30, 2001 and 2000, all
common stock purchase warrants were exercised except for the warrants described
above in Note 6.

8. Significant Customers; Litigation. In May 2001, EMI shut down its
networks, and sold its customer list to its largest competitor, a wholly owned
subsidiary of New Frontier Media, Inc. ("New Frontier"), for cash and 94,137
shares of New Frontier stock. Directrix entered into an agreement with EMI dated
May 1, 2001 that provided for the extinguishment of the option Directrix held to
acquire the business or assets of EMI (the "EMI Option") and for EMI's transfer
of the cash and stock proceeds from the sale of its customer list to Directrix
in settlement of the EMI receivable which amounted to approximately $0.6
million. At May 1, 2001, the 94,137 shares of New Frontier stock were recorded
at a value of $3.63 each, which was the per share market value, aggregating
approximately $0.3 million of marketable securities. During the six months
ended September 30, 2001, Directrix recorded approximately $0.1 million of cash
basis revenue associated with recovery of amounts owed in excess of the EMI
receivable.

In accordance with SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities," on May 1, 2001, Directrix classified the 94,137
shares of New Frontier stock as "available for sale." At September 30, 2001,
the 94,137 shares of New Frontier stock were recorded at a value of $1.68 each,
which was the per share market value. In accordance with SFAS No. 130,
"Reporting Comprehensive Income," the $0.2 million loss associated with the
decrease in per share market value through September 30, 2001 is recorded as
equity under "Accumulated other comprehensive loss."

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

On July 12, 2001, New Frontier filed a cross complaint against Logix,
EMI, Roger Faherty and Donald McDonald, Directrix' Chief Executive Officer and
President, respectively, and Daniel J. Barsky, counsel to EMI in the New
Frontier transaction. The cross complaint alleges, among other things, that EMI
breached its representations and warranties concerning its rights to the
customer list and that Messrs. Faherty, McDonald and Barsky had misrepresented
EMI's rights to the customer list. Directrix has undertaken the defense of the
cross complaint on behalf of Messrs. Faherty, McDonald and Barsky. Subsequently,
Mr. Barsky was dismissed from the action. Directrix believes the Logix suit and
the cross complaint are without merit and plans a vigorous defense.

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

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

In consideration of their agreement to continue the salary reductions
through March 31, 2002, the Compensation Committee awarded Messrs. Faherty,
McDonald and Kirby 96,552, 11,948 and 10,903 restricted shares, respectively, of
Directrix common stock. In consideration of the additional salary reduction
that took effect on May 1, 2001, the Compensation Committee granted each of the
executives 11,063 restricted shares of Directrix common stock. All the shares
of restricted stock were issued on May 1, 2001. Directrix recorded
approximately $475,000 of deferred compensation, of which $215,000 was expensed
at September 30, 2001. The remaining amounts will be amortized over the
remainder of the fiscal year.

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

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

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

10. Subordinated Convertible Debentures. Directrix placed $500,000 of
convertible debentures ("Debentures") in an offering completed in June 30, 2001.
The Debentures are convertible into shares of Directrix common stock at any
time, at the option of the holders, at a conversion rate of $1.50 per share of
common stock. The conversion rate is subject to anti-dilution protection for
stock splits, stock dividends, stock reclassifications and mergers. Directrix
can require conversion at any time if the average trading price of its common
stock is over $5.00 for any ten consecutive trading days prior to maturity. The
Debentures mature on March 31, 2003, are senior to all of Directrix' other
obligations other than the Credit Facility and bear interest at 6% per annum,
payable at maturity. Directrix can elect to PIK the interest payment in lieu of
a cash interest payment. Directrix has granted the Debenture holders
registration rights for the shares of common stock into which the Debentures are
convertible and has committed to file the registration statement during the year
ended March 31, 2002.

In July 2001, Directrix offered up to $600,000 of a second series of
convertible debentures with the same terms as the Debentures. Through September
30, 2001, Directrix placed $250,000 of Debentures from the second series;
$50,000 of Debentures were issued to an executive officer of Directrix.

During the three and six months ended September 30, 2001, Directrix
recorded interest expense attributable to the intrinsic value of the beneficial
conversion feature of the convertible debenture of $250,000 and $312,500,
respectively, based on the difference between the conversion price and the fair
market value of Directrix common stock on the February 28, 2001 commitment date.

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

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

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

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

Overview

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

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

In September 1999, Directrix relocated its master control and
playback facility from New York City to Northvale, New Jersey.

Directrix' service agreements with Playboy and Califa were set to
expire on March 15, 2001. During the negotiations to secure an extension and
expansion of Playboy's service agreements, Directrix agreed to establish a
network origination, studio services and uplink facility in Los Angeles ("West
Coast Facility") with Playboy as its anchor tenant and primary customer. Under
the transaction which was completed on September 20, 2001, Directrix will build,
outfit and operate a 109,000 square foot teleport, master control, and
soundstage complex at the West Coast Facility. When complete, Directrix will
provide network origination and production services, digital archiving, studio
facilities and personnel, and production and post-production offices to Playboy
at the facility over a 15-year term (collectively, the "Playboy Transaction").
In June 2001, Playboy acquired the four networks operated by Califa and its
affiliate and these networks were included in the Master Services Agreement
between Directrix and Playboy.

Results of Operations

Revenues. Total revenue for the six and three months ended September
30, 2001 decreased by approximately $1.0 million and $0.5 million, respectively,
as compared to the same periods in 2000. The decrease in revenue was primarily
attributable to a decrease in revenue from EMI of $1.7 million and $0.7 million
for the six and three months ended September 30, 2001, respectively, offset by
the inclusion of revenue attributable to broadband services of $0.7 million and
$0.2 million for the six and three months ended September 30, 2001,
respectively. For the six and three months ended September 30, 2001, revenue
from additional networks operated by Playboy and Califa increased by $0.2
million and $0.1 million, respectively, as compared to the corresponding periods
in 2000.

The decrease in revenue from EMI was attributable to the shut down of
the EMI networks. In May 2001, EMI shut down its networks, and sold its
customer list to its largest competitor, a wholly owned subsidiary of New
Frontier Media, Inc. ("New Frontier"), for cash and 94,137 shares of New
Frontier stock. Directrix entered into an agreement with EMI that provided for
the extinguishment of the EMI Option and for the settlement of the EMI
receivable, which amounted to approximately $0.6 million, in consideration of
EMI's transfer of the cash and stock proceeds from the sale of its customer list
to Directrix. At May 1, 2001, the 94,137 shares of New Frontier stock were
recorded at a value of $3.63 each, which was the per share market value,
aggregating approximately $0.3 million of marketable securities. For the six
months ended September 30, 2001, Directrix recorded approximately $0.1 million
of cash basis revenue associated with recovery of amounts owed in excess of the
EMI receivable.

Directrix' original service agreements with Playboy and Califa
expired on March 15, 2001. Directrix extended the term of its service
agreements with Playboy through March 31, 2002 under the terms of a February 26,
2001 letter of intent ("LOI") concerning the arrangements surrounding the West
Coast Facility. Directrix continued to provide services to Califa and its
affiliate VOD, Inc. ("VODI") and was in negotiation to extend their agreements
and to provide additional services. In June 2001, Playboy exercised its option
to acquire the networks operated by Califa and VODI. Under the Master Services
Agreement with Playboy, Directrix will provide network origination services for
the four networks operated by Califa and VODI in addition to providing network
origination services for several Playboy owned and operated networks from the
Los Angels based facility. The agreement will also provide for the extension of
the existing service agreements until the networks are originated from the West
Coast Facility.

Salaries, Wages and Benefits. Salaries, wages and benefits for the
six months ended September 30, 2001 increased by $0.1 million as compared to the
same period in 2000. The increase in salaries, wages and benefits was primarily
attributable to the recording of compensation expense associated with the
issuance of restricted stock issued in consideration of salary reductions taken
by key executives during the six months ended September 30, 2001, which exceeded
the amount that would have been recorded had the executives received cash
compensation.

Salaries, wages and benefits for the three months ended September 30,
2001 were comparable to salaries, wages and benefits for the same period in
2000. Decreases in salaries, wages and benefits for the executive and sales &
marketing departments during the three months ended September 30, 2001 were
offset by the recording of compensation expense associated with the issuance of
restricted stock for the salary reductions described above.

Library Amortization. Library amortization for the six and three
months ended September 30, 2001 was comparable to library amortization for the
same periods in 2000.

Satellite Costs. Satellite costs for the six and three months ended
September 30, 2001 decreased by approximately $2.9 million and $1.6 million,
respectively, as compared to the same periods in 2000. The decrease in
satellite costs was primarily attributable to the termination of Directrix'
Agreement for SkyNet Transponder Services ("Transponder Agreement") with Loral
SpaceCom Corporation ("Loral") in May 2001, as more fully described in
"Liquidity and Capital Resources, Restructuring Plan, Transponder Agreement."

Broadband Expenses. Broadband expenses for the six and three months
ended September 30, 2001 increased by approximately $0.5 million and $0.1
million, respectively, as compared to the same periods in 2000. The increase in
broadband expenses was attributable to the activities of a wholly-owned
subsidiary, Directrix Broadband, Inc, which was a reseller of Internet media
delivery services provided by Akamai Technologies, Inc. ("Akamai") under an
Amended and Restated Akamai Reseller Agreement dated August 15, 2000, as amended
(the "Reseller Agreement").

On July 30, 2001, the parties terminated the Reseller Agreement. The
Reseller Agreement calls for Akamai to directly provide services to Directrix'
customers unless these accounts choose to move to another content delivery
network. Directrix is currently seeking a replacement broadband services
provider. There can be no assurance that Directrix will be successful in
securing a replacement broadband services provider or if a replacement provider
is found, then the terms of any such agreement would be acceptable at all.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the six and three months ended September 30, 2001
decreased by approximately $0.5 million and $0.3 million, respectively, as
compared to the six and three months ended September 30, 2000. The decrease in
selling, general and administrative expenses was attributable to decreases in
various expenses including bad debt expense, production costs, public relation
costs, convention and trade show costs and office cleaning costs.

Depreciation of Fixed Assets. Depreciation of fixed assets for the
six and three months ended September 30, 2001 was comparable to the
corresponding periods in 2000.

Interest Expense. Interest expense for the six and three months
ended September 30, 2001 increased by approximately $0.6 million and $0.3
million, respectively, as compared to the six and three months ended September
30, 2000. The increase in interest expense was primarily attributable to
interest associated with the intrinsic value of the beneficial conversion
feature of the convertible debentures issued in March 2001, interest on the
amounts drawn down from Directrix' revolving line of credit, and the
amortization of additional common stock purchase warrants issued in October 2000
in connection with the revolving line of credit.

Transponder Penalty & Extraordinary gain. Directrix recorded an
early termination charge of $4.6 million associated with the termination of the
Transponder Agreement in May 2001.

When the Transponder Agreement was terminated, Directrix owed Loral
approximately $6.1 million for past due service fees and a $4.6 million early
termination charge. Under a July 13, 2001 letter agreement and Term Sheet
("Restructuring Agreement"), Loral agreed to settle this amount. The
Restructuring Agreement as it relates to the Transponder Agreement is described
below under "Liquidity and Capital Resources, Restructuring Plan, Transponder
Agreement".

During the three months ended September 30, 2001, Directrix recorded
an extraordinary gain on the extinguishment of transponder liability of
approximately $5.2 million. The determination of the amount of the
extraordinary gain is based on management's preliminary estimate of the expected
value of the preferred stock and warrants. The final determination of the
amount of the extraordinary gain will be based on an analysis done by Directrix.

Directrix recognized $0.8 million and $1.9 million, respectively, of
revenue attributable to the leasing of transponders for the three and six months
ended September 30, 2000 of which $0.6 million and $1.6 million, respectively,
related to EMI. As a result of the May 2001 termination of the Transponder
Agreement, Directrix recognized approximately $0.1 million of revenue from
transponder leasing for the six months ended September 30, 2001.

Net Loss. For the six months ended September 30, 2001, Directrix
reported a net loss of $3.0 million as compared to a net loss of $5.0 million
for the corresponding period in 2000. For the three months ended September 30,
2001, Directrix reported net income of $3.4 million as compared to a net loss of
$2.9 million for the corresponding period in 2000. The decrease in the net loss
for the three and six months ended September 30, 2001 was attributable to all
the factors noted above.

Liquidity and Capital Resources

Working Capital. Directrix had a working capital deficiency of $2.8 million on
September 30, 2001 as compared to a working capital deficiency of $11.4 million
on March 31, 2001. The increase in working capital for the six months ended
September 30, 2001 was primarily attributable to the extinguishment of the
transponder liability and the reclassification of the revolving line of credit
due to the extension of the maturity date during the three months ended
September 30, 2001, as described below in "Restructuring Plan, Restructuring of
the Credit Facility."

Credit Facility. Directrix has a $4.5 million revolving line of credit pursuant
to the terms of a March 15, 1999 Loan and Security Agreement, as amended by the
Amended and Restated Loan and Security Agreement dated February 15, 2000 (as
amended, the "Loan Agreement"). The providers of the Credit Facility include
the Chief Executive Officer, the President and four unrelated parties
(collectively, the "Lenders"). The Credit Facility bears interest at 11% per
annum, payable monthly, and was to mature on March 15, 2002. As part of the
restructuring, the maturity date was extended to March 31, 2003. Substantially
all of Directrix' assets have been pledged as collateral for this obligation.

As of September 30, 2001, Directrix has drawn down approximately $4.2
million from the Credit Facility, with $0.3 million unused funds remaining under
the facility. Under the Credit Facility, Directrix is not permitted to draw
down on the Credit Facility after March 15, 2001.

At March 31, 2001, the Lenders agreed as part of modifications to the
Credit Facility to revise the stockholders' equity financial covenant as more
fully described below. The Credit Facility was further amended under the
Restructuring Agreement which is described below under "Restructuring Plan,
Restructuring of the Credit Facility."

Subordinated Convertible Debentures. Directrix placed $500,000 of convertible
debentures ("Debentures") in an offering completed in June 30, 2001. The
Debentures are convertible into shares of Directrix common stock at any time, at
the option of the holders, at a conversion rate of $1.50 per share of common
stock. The conversion rate is subject to anti-dilution protection for stock
splits, stock dividends, stock reclassifications and mergers. Directrix can
require conversion at any time if the average trading price of its common stock
is over $5.00 for any ten consecutive trading days prior to maturity. The
Debentures mature on March 31, 2003, are senior to all of Directrix' other
obligations other than the Credit Facility and bear interest at 6% per annum,
payable at maturity. Directrix can elect to pay the interest by issuing
additional shares of Directrix common stock in lieu of a cash interest payment.
Directrix has granted the Debenture holders registration rights for the shares
of common stock into which the Debentures are convertible and has committed to
file the registration statement during the year ended March 31, 2002.

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

Restructuring Plan. Since becoming a stand-alone company on March 15, 1999,
Directrix incurred net losses of $6.1 million and $10.3 million for the years
ended March 31, 2000 and March 31, 2001, respectively, and a net loss of
approximately $3.0 million for the six months ended September 30, 2001. At
September 30, 2001, Directrix has a working capital deficiency of $2.8 million.
These matters raise substantial doubt about Directrix' ability to continue as a
going concern. Directrix' continued existence is dependent upon several
factors, including management's ability to successfully implement the
restructuring plan described below and its ability to generate operating cash
flow via execution of its long-term business plan.

Management has developed and begun implementation of a multi-phase
restructuring plan. The restructuring plan addresses the areas that management
believes are critical to the realization of Directrix' short and long-term
plans. The areas addressed by this plan are outlined below, and include (i) the
termination of Directrix' transponder services agreement, (ii) restructuring of
Directrix' revolving line of credit ("Credit Facility"), (iii) the West Coast
Facility, (iv) transition of its new business to the West Coast Facility and
attracting new business and (v) new financing.

When the Transponder Agreement was terminated, Directrix owed Loral
approximately $6.1 million for past due service fees and a $4.6 million early
termination charge. Under the terms of a July 13, 2001 letter agreement and term
sheet (the "Restructuring Agreement"), Loral extinguished its receivable and the
early termination charge in exchange for Directrix' issuance to Loral of: (i) a
$1.65 million note under the Credit Facility, (ii) $3.0 million face amount of a
new Series B junior preferred stock which is in the process of being issued and
(iii) a five-year warrant to acquire 200,000 shares at an exercise price of
$3.00 per share. The Restructuring Agreement took effect with the
consummation of the Playboy Transaction on September 20, 2001. The Series B
Preferred Stock has the same terms as the Series A Preferred Stock (which are
described below in Restructuring of the Credit Facility) except that it is
junior to the Series A Preferred Stock on liquidation preference, has a $3.00
per share conversion price and has no voting rights or rights to appoint Board
members. The Series B preferred stock is accounted for as long term liability
to be settled in preferred stock in the accompanying balance sheet until such
time that the preferred stock is issued.

During the three months ended September 30, 2001, Directrix recorded
an extraordinary gain on the extinguishment of the transponder liability of
approximately $5.2 million. The determination of the amount of the
extraordinary gain is based on management's preliminary estimate of the expected
value of the preferred stock and warrants to be issued to Loral. The final
determination of the amount of the extraordinary gain will be based on an
analysis done by Directrix.

To facilitate the agreement with Loral and enhance Directrix' ability
to attract new capital, Directrix negotiated a restructuring of the Credit
Facility as part of the Restructuring Agreement. Under the Restructuring
Agreement, the holders of the Credit Facility agreed to (i) extend the maturity
date by one year until March 31, 2003, (ii) permit Directrix to pay in kind
("PIK") the interest payment with shares of Directrix Common Stock and (iii)
revise the stockholders' equity covenant commencing with the fiscal year ending
March 31, 2002 to require that Directrix not allow its stockholders' deficit to
exceed $5.0 million. In consideration of the foregoing, Directrix agreed to
issue to the holders of the Credit Facility, excluding the two executive
officers of Directrix who agreed to swap their portion of the Credit Facility
for a new Series A of senior preferred stock (which is in the process of being
issued as described below), warrants to acquire 125,000 shares of Directrix
common stock at an exercise price of $3.00 per share. As noted above, the
Restructuring Agreement took effect on the September 20, 2001 consummation of
the Playboy Transaction.

The Credit Facility notes held by two executive officers of
Directrix, which aggregated $1.65 million at September 20, 2001, were cancelled
and replaced with $1.65 million face amount of a new Series A senior preferred
stock which is in the process of being issued, and warrants to acquire 200,000
shares of Directrix common stock. The Series A Preferred Stock will bear a 6%
cumulative dividend which Directrix may, at its option, PIK with Common Stock,
is senior in liquidation preference to the Series B Preferred Stock and
convertible at $1.50 per share. The conversion price is subject to standard
anti-dilution adjustments for stock splits and dividends, recapitalizations,
etc. and volume weighted anti dilution adjustments for below market issuances of
Common Stock and issuances of convertible securities with a conversion price
less than the Series A Preferred Stock conversion price. The Series A Preferred
Stock is also entitled to vote on an as converted basis and the holders have the
right to appoint two members to the Directrix Board of Directors. The holders
of the Series A Preferred Stock may demand redemption after 10 years or upon
change in control of Directrix (a person or group acquires more than 35% of the
outstanding voting securities). Directrix has the option of paying the
redemption price in cash or as a PIK in common stock. The Series A preferred
stock is accounted for as long term liability to be settled in preferred stock
in the accompanying balance sheet until such time that the preferred stock is
issued. The warrants have an exercise price of $3.00 per share and are
exercisable for five years.

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

West Coast Facility. Management believes that the establishment of
the West Coast Facility is critical to the realization of its long-term business
plan. To finance the acquisition, renovation and outfitting of the West Coast
Facility, Directrix entered into a three party letter of intent with Kingston
Investors Corp. ("Kingston") and Playboy, under which Kingston agreed to
purchase the building and make improvements to the property and enter into a
triple net lease of the property with Directrix for fifteen years. During final
negotiation, the transaction was restructured and under the revised arrangement
among the parties, Kingston acquired the property on September 20, 2001 and
triple net leased the property to Playboy under a 15 year Master Lease. Playboy
then subleased, on a triple net basis, approximately 55% of the property to
Directrix under a 15 year Sublease which provides for monthly sublease payments
of $99,442 in the first year increasing 3% per year for the first 10 years. For
the last five years of the sublease, the rent shall be 110% of the tenth year
rent. Directrix is required to pay its proportionate share of the insurance,
real estate taxes and operating expenses of the facility. The sublease
commences in stages; rent on Studio A commences 30 days after Kingston delivers
Studio A renovated in accordance with specifications set forth in the Master
Lease, anticipated to occur in the fiscal quarter ended March 31, 2002. The
sublease commences with respect to the balance of the subleased premises 30 days
after they are delivered in accordance with the work letter which is an exhibit
to the Master Lease.

Directrix is obligated to provide equipment, integration and
technical improvements necessary to provide the services under the Master
Services Agreement when the facility is operational. Directrix is currently
finalizing the terms of $15 million of equipment lease financing which includes
financing of systems integration fees and extended manufacturers' warranties.
Directrix does not currently anticipate using the entire $15 million and under
the proposed terms, the unused portion of the financing can be drawn down until
December 31, 2002 which will afford Directrix financing to upgrade the
West Coast Facility if required. There are no assurances that the equipment
lease can be finalized.

As a first step, Directrix secured $337,500 of interim financing on
October 25, 2001 (the "Interim Financing") in a private placement to existing
shareholders and investors. The terms of the interim financing include a one
year note secured by a perfected first lien on Directrix' assets. Under a
letter agreement dated October 28, 2001, the Credit Facility holders agreed to
subordinate their security interest to the interim financing holders' first
lien. The interim financing bears 20% interest payable upfront in shares of
Directrix common stock. Directrix issued 26,786 shares of common stock as
payment of the interest on the interim financing.

Commitments and Contingencies.

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

On July 12, 2001, New Frontier filed a cross complaint against Logix,
EMI, Roger Faherty and Donald McDonald, Directrix' Chief Executive Officer and
President, respectively, and Daniel J. Barsky, counsel to EMI in the New
Frontier transaction. The cross complaint alleges, among other things, that EMI
breached its representations and warranties concerning its rights to the
customer list and that Messrs. Faherty, McDonald and Barsky had misrepresented
EMI's rights to the customer list. Directrix has undertaken the defense of the
cross complaint on behalf of Messrs. Faherty, McDonald and Barsky.
Subsequently, Mr. Barsky was dismissed from the action. Directrix believes the
Logix suit and the cross complaint are without merit and plans a vigorous
defense.

PART II - OTHER INFORMATION

Item 1: Legal Proceedings.

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

On July 12, 2001, New Frontier filed a cross complaint against
Logix, EMI, Roger Faherty and Donald McDonald, Directrix' Chief
Executive Officer and President, respectively, and Daniel J.
Barsky, counsel to EMI in the New Frontier transaction. The
cross complaint alleges, among other things, that EMI breached
its representations and warranties concerning its rights to the
customer list and that Messrs. Faherty, McDonald and Barsky had
misrepresented EMI's rights to the customer list. Directrix has
undertaken the defense of the cross complaint on behalf of
Messrs. Faherty, McDonald and Barsky. Subsequently, Mr. Barsky
was dismissed from the action. Directrix believes the Logix
suit and the cross complaint are without merit and plans a
vigorous defense.

Item 2: Changes in Securities and Use of Proceeds.

On March 28, 2001, Directrix issued an aggregate of $375,000 of
a total offering of $500,000 of Subordinated Convertible
Debentures ("Debentures") in a private placement to five
persons. During the three months ended June 30, 2001, Directrix
issued the remaining $125,000 of Debentures to four persons, one
of which participated in the March 28, 2001 offering. All
proceeds were paid in cash and there were no underwriting
discounts or commissions paid in connection with the offering.
The offering was made solely to accredited investors who had
made previous investments in Directrix and had a preexisting
business relationship with Directrix and its senior executive
officers in reliance of Section 4(2) of the Securities Act of
1933.

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

In July 2001, Directrix offered up to $600,000 of a second
series of convertible debentures which have the same terms as
the Debentures. The offering was made solely to accredited
investors who had made previous investments in Directrix and/or
had a preexisting business relationship with Directrix and its
senior executive officers and in reliance of Section 4(2) of the
Securities Act of 1933. Through September 30, 2001, Directrix
has issued $250,000 of Debentures from the second series;
$50,000 of Debentures were issued to Mr. Faherty, Directrix'
Chairman and Chief Executive Officer.

The proceeds of the Debenture offerings were used for working
capital purposes.

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

(a) Exhibits.

Exhibit 4.8 - Form of Common Stock Purchase Warrant issued to
Andrita Management, LLC. for 200,000 shares.

Exhibit 10.22 - Sublease agreement between Playboy Entertainment
Group, Inc. and Directrix dated September 20, 2001.

Exhibit 10.23 - Letter agreement dated September 19, 2001
between Playboy Entertainment Group, Inc. and Directrix.

(b) Reports on Form 8-K.

None.

SIGNATURES

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

DIRECTRIX, INC.

Dated: November 19, 2001

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