DIGITAL ANIMATION PRESENTS

Digital Animation, Inc.Corporate Headquarters

142 North Milpitas Boulevard, Suite 159, Milpitas, California 95035

What Is RIXA™?

Far more than merely an Internet compression technology

RIXA™ provides genuine full screen, full frame, DVD plus quality entertainment

RIXA™ is deployable now on a massive scale

RIXA™ can support millions of concurrent users

RIXA™ can be delivered to the consumer on demand over the Internet today.

RIXA™ redefines the medium of online entertainment

New! Revolutionary! Superior! Unique!

State of the Market

Defining Entertainment Quality Video

Entertainment quality should be at least as good as VHS, full screen 30 Frames Per Second (fps) with good quality sound. RealPlayer and Windows Media Player and QuickTime all fail to meet these fundamental requirements on even the fastest Broadband connections. Genuine Video On Demand (VOD) over the Internet continues to be constrained by both bandwidth and platform limitations:

• Bandwidth limitations• The existing and near term infrastructure cannot support the true bandwidth-per-user

requirements for entertainment quality video. The fastest video codec (On2) requires 150Kbps for less than VHS quality and 450Kbps for near DVD.

• Platform limitations• The PC has not and will not replace the television as the primary entertainment medium.• Compared to any television, PC’s have inferior screens and a more complex user interface.• And yet they are powerful machines.• The emergence of the broadband capable Set Top Box is changing this landscape forever.• The Set Top Box takes the power of the PC and the Internet directly into the television.

The Problem

VOD Solutions Have Consistently Failed to Deliver

•• This universal failure has led desperate VOD pundits to advocate Tivo-style Download & This universal failure has led desperate VOD pundits to advocate Tivo-style Download & Replay (D&R) as the answer pending the arrival of true VOD Replay (D&R) as the answer pending the arrival of true VOD somewhere down the roadsomewhere down the road..

•• Distributors and content owners fear a repeat of the Napster debacle but on a much larger Distributors and content owners fear a repeat of the Napster debacle but on a much larger scale despite a growing awareness of the profit potential in inferior solutions like D&R.scale despite a growing awareness of the profit potential in inferior solutions like D&R.

•• Significant numbers of VOD-capable boxes are now appearing everywhere but widespread Significant numbers of VOD-capable boxes are now appearing everywhere but widespread deployment of D&R to millions of once-a-week users would cripple the existing broadband deployment of D&R to millions of once-a-week users would cripple the existing broadband infrastructure.infrastructure.

VOD and D&R are not commercially viable

VOD and D&R are not consumer friendly

This situation will not improve until fiber optic cable lies at the end of every street

QUESTION: WHEN?QUESTION: WHEN?

ANSWER: WHO KNOWS?ANSWER: WHO KNOWS?

The Answer?

The solution is in our name…

Digital ANIMATION

Animated TV and Film On Demand for everyone because RIXA™…

Delivers existing animated content today

Operates effectively within the existing infrastructure

Exploits animation’s unique aspects to deliver what no-one else can

Is the definitive model for viable VOD

Provides entertainment on demand that’s deployable NOW!

AOD works - VOD does not

Frequent repetition of identical frames

Large areas of same color

Lengthy dialogue scenes with only mouth movementAnimation is created at 15 fps.

Few scene changes

Backgrounds do not move

Moving objects are always solid color

Unique “clean-up” process significantly improves content during compression which results in higher quality of the original content upon return to the client

Less drawing = cost reduction

Low cost visual F/X used often. RIXA™ exploits this fact

RIXA™ Performance

• Minimum of 640 by 480 Pixels with full wide-screen capability

• Guaranteed 30 Frames Per Second (fps)

• Actual full screen edge-to-edge display

• Loss less compression - Studio quality plus

• Entertainment quality sound

• Only 50K bits per second sustained Internet connection

• 600 Simultaneous users on single 30Mb/S node

• Standard HTTP Internet connection

• No special equipment needed

• Available NOW…

• Broadband’s high speed glory days are already ending.

• FACT: The reality is an average throughput of 50Kbits/Second.

• FACT: Neither VOD nor D&R can perform in this congested environment.

Bandwidth Reality Now

Kbps

Average throughput observed by 800 testers.Represents real-world performance and incorporates latency, overhead, and HTTP limitations

Bandwidth Problem - Cable

• Cable companies are set to choke on their own success.

• Today - Cable Broadband is a viable (if not always profitable) enterprise.

• Tomorrow - Congestion = Frustration = Loss.

(Kbps)

DA’s analysis on users supported by each cable head end

• Economic and technical limitations have hindered the telephone companies in their deployment of DSL and its many variants (xDSL).

• The copper wire limits both maximum speed and distance from the central office. The greater the distance, the slower the connection.

• Economic considerations have restricted the rapid deployment of xDSL. The installation cost is prohibitively expensive due to competitive pricing from the Cable companies. xDSL providers are not making money. Many are delaying deployment, waiting for the inevitable congestion problem to hit the Cable companies.

Bandwidth Problem - xDSL

The Opportunity

• Broadband is booming and bigger than ever.

• The PC market is currently Broadband’s biggest beneficiary.

• This market will be eclipsed by the deluge of Set Top Boxes in the future.

• Broadband is already beginning its migration from the home office to the far more lucrative living room.

• Set Top Box capability already far exceeds infrastructure capacity.

US Broadband Market

• 96% of the US population lives in the 75% of zip codes where at least one Broadband provider offers service. (Federal Communications Commission)

• Within the next 12 months, the number of US residential Broadband subscribers will reach nearly 50,000,000. (Forrester Research.)

ROW Broadband Market

There are 55,000,000 residential subscribers to Cable and xDSL Internet access outside of the US (excluding all other broadband platforms). Globally, Cable and xDSL subscribers will have risen to 80,000,000 in total. This is a more than 800% increase over this year’s total of just over 10,000,000.

Source: DA’s analysis on forecasts from Ovum, Forrester, IDG and Screen Digest/ Van Dusseldorp & Partners

ROW Broadband Residential Subscribers

5.210.2

19.7

34.7

5.1

9.0

12.1

19.7

2.12.4

0

10

20

30

40

50

60

2000 2001 2002 2003 2004

Millio

n

DSL Cable

Set Top Box Market

• More than 12,000,000 households (in the US alone) have access to the Internet through a Set-Top-Box.

• IDC predicts that shipments of digital TV Set-Top-Boxes will exceed 24,000,0000 in the US, and reach nearly 70,000,000 worldwide.

• Jupiter research predicts that there will be nearly 40,000,000 interactive TV households in the United States.

2000 2001 2002 2003 20040

20

40

60

80

Mil

lio

ns

Set-Top Box Shipments WorldwideSource: Jupiter Research & IDC

US ROW

70 M

Relationship Web

MicrosoftTV

Liberate OpenTV PowerTV PassportNexperia

Philips

Samsung

ScientificAtlanta

Grundig

Nokia

AOL TV

Imprimis

Pace(6.5 m)

Octal

Samsung

Philips

Worldgate

Pioneer(1m )

14 m16 m

Panasonic

Pace

Sony

Nokia

8 m

ScientificAtlanta

Pace

GeneralInstrument

ScientificAtlanta

Set-Top Box & Operating Systems Set-Top Game Box

Microsoft xBox

Sony PS2

Nintendo

Green: Partnership with Digital Animation EstablishedBlue: Developer Partnership Not Yet EstablishedKEY: Set Top Box Operating System

Pace(6.5 m)

Motorola

Motorola

Motorola

WindowCE

Linux

NokiaPhilips

Philips

Philips

Partners & Alliances “WE ARE NOT ALONE”

The Products

• The RIXA™ PortalThe RIXA™ Portal

Each RIXA™ Portal is unique and customized specifically to meet the client's needs. This is where the only limits are your imagination. Working closely with your company, Digital Animation's experienced in-house web team will ensure that your Portal is unique, building in whatever level of customisation and specificity is required, such as:

– RIXA™ e-Commerce including Shopping Cart, email and E-cards– RIXA™ kids email– RIXA™-enabled Ads– RIXA™ Communities– RIXA™ Education (including RIXA™ school, RIXA™ Award & RIXA™

Kids Books)– RIXA™ Interactive– RIXA™ Kids Kredit Kard, Portal Currency– RIXA™ Customer Support

Generic RIXA™ PortalGeneric RIXA™ Portal

The Products

• The RIXA™ Player

The RIXA™ Player is free to all for download to one or more of the following Broadband capable machines:- The Set Top Box- The PC- The new breed of games consoles including Sony’s PS2,

Microsoft’s Xbox and Nintendo’s Game Cube.

• The RIXA™-Enabled Site

Sites that want the core benefits of RIXA™ without the end-to-end solution provided by the RIXA™ Portal. These companies may license the technology and incorporate it into their own sites, as entertainment delivery sites. Even non entertainment sites can benefit from RIXA™ animated content via animated advertising on their otherwise non video commercial sites.

Clients For RIXA™ Enabled Site Licenses

Content Owners Major Studios

Television networks

Film Libraries

Independent content owners

Independent Studios

Clients for RIXA™Player Software Enabling

Set Top Box Manufacturers & Operating System Providers

–The Set Top Box manufacturers and Set Top Box operating system providers gain features by adding RIXA™ functionality to their operating system or hardware platform.

Clients For RIXA™An Ageless Appeal

Most Popular Sites for Kids, 1999 (Source: Media Metrix)

Stickiest Kid Sites by Average Minutes Spent, 1999(Source: Media Metrix)

Clients for RIXA™ Advertising

Advertisement Agents or Server Companies

ASPs•Third Parties

–The marketing & advertising agents, advertising server companies, ASP, animation contractors.

•More…

–Large corporations who have used animated advertising since their inception including Kellogg’s, General Mills and Coca-Cola.

–Corporations who commission animated advertising as a result of the benefits provided by personalized advertising.

–Any individual or entity that sees the potential provided by personalization, whether applied to advertising, content or something else entirely.

Existing ContentReady and Waiting

Animations - by Studio

696 2332 1478

962

6232

4059827

1700

994 2928

Columbia Disney Filmation 20th Century Fox

Hanna-Barbera MGM Other Studios Paramount

Universal Warner Bros

Source: The Big Cartoon Database, 2001

There is an enormous amount of existing animated content. More than fifteen thousand hours in the US alone.

Worldwide volume is conservatively estimated at 90,000 titles, ranging from feature-length motion pictures such as The Lion King and Snow

White to long-running lucrative TV series like The Simpsons.

Consumer Appetite

Source: DA’s Analysis on Kagan Associates; Blockbuster Annual Report 2000

The Home Video market prizes what was - until now - a unique selling point to the consumer… Watch what you want, when you want.

US video rentals and retail reached $7.9 Billion last year. Worldwide rentals and sales reached $12.6 Billion last year. At least 10% ($1.2 Billion) of this was animation.

True VOD, D&R and RIXA™ are all far more user friendly than the local video store… but only RIXA™ can feed consumer appetite now.

Worldwide Home Video Rental & Retail

$0

$2

$4

$6

$8

$10

$12

$14

1996 1997 1998 1999 2000

Bil

lio

n

US

International

12.6 B

On Demand…In Demand

• RIXA™ caters for animated content - more than 10% of the overall entertainment market.

• RIXA™ realistically introduces the VOD concept to the consumer, without crippling the current infrastructure when widely deployed.

• RIXA™ streaming encryption technology protects distributors and content owners more effectively than the most widely used anti-piracy technologies.

• RIXA™ is the only viable and massively deployable VOD entertainment solution until at least the year 2007 in the US and even later in other countries.

The Benefits of RIXA™A Pricing Strategy Overview

RIXA™ Processing FeesPricing Strategy

RIXA™ LicensingPricing Strategy

RIXA™ Player Licensing

RIXA™ Ad-server Profit SharePricing Strategy

Why Choose RIXA™?Ahead Of The Game

• RIXA™ technology is based on theories that have been gestating for the last six years and has been actively developed over the last 12 months, thus affording Digital Animation a significant technology lead.

• DA is a formidable team of respected individuals from a variety of sectors including animation, technology, entertainment, publishing, marketing, finance and law.

• DA has formulated a business methodology which enhances existing revenue streams and also creates entirely new sources of income.

• There are several incentives and deterrents to prevent existing clients moving to any competition:– DA is the first to enter the AOD (Animation On Demand) arena. – Processed content already converted into RIXA™ files is useless to any prospective competitor.– Patents and multiple levels of security checks are in place to ensure anti-piracy of client content.

• The RIXA™ Portal is a breakthrough not only for the Internet but also for the worlds of marketing, distribution and sales. RIXA™ is an exciting new way to distribute animated content and can also be utilized to market almost any product.

• Digital Animation continues to roll back the limits of the imagination, prepare for our next generation product – Personalized Animation on Demand (PAD). Our Patented technology, due to arrive next year, RIXA™ will enable you, your child, anyone, to enter the world of animation and, an become our super-hero, the Sentinel Avenger, save the world. Each animation is unique. Each animation stars your child as the Sentinel.

Put simply, the synergistic applications of RIXA™ technologyare unique and unrivalled

RIXA™ has the Advantage

• RIXA™ is the only technology focusing exclusively on the existing animation market.

• Digital Animation is the first to specialize in the field of animation compression. This ground floor approach ensures numerous competitive benefits over potential competitors when they eventually emerge.

• Digital Animation’s second and third generation technologies ensure that DA will continue to benefit as a dominant (if not monopolistic) force in the market.

Going to the MarketThe B2C Route

Digital Animation is primarily a B2B company but has identified the needs of its client base, most of whom operate on a B2C basis. DA addresses these needs in a number of ways:

Promote consumer awareness

Encourage high volume of RIXA™ Player downloads

Market DA’s unique personalized animation series under different Brand Names (such as PS2).

Promote the efficacy of Digital Animation’s Parental Controlled content filters.

Guarantee satisfaction for all RIXA™-mediated currency transactions.

Promote Brand recognition of the colored ‘X’ symbol on RIXA™-enabled website banner ads, identifying them as fun and safe surfing for kids.

Emphasize the use and effectiveness of RIXA™ interactive educational courseware.

Plug the RIXA.TV website as the Yellow Pages of RIXA™ enabled and portal affiliates.

The Distribution Plans Outsource to Public Relations firm (which may be an existing Digital Animation client):

Marketing campaign for A Great New Player- Full Screen!

Marketing campaign for The first digital personalized animation- See you kid star in a professional animation feature.

News & Activities – Partnerships, new titles available, new personalized games.

Educational implementation through Kid Communities – Rixa™ surfing is safe surfing.

Digital Animation & Digital Imagination (DA’s sister company) Cross Marketing.

Marketing Push for Downloadable RIXA™ Player.

Introduction of next generation products, heralded by the arrival of DA’s own Sentinel Avenger.

Various marketing channels including web marketing, email marketing and partner cross marketing.

Going to the MarketThe B2B Route

Via Commissioned sales representatives to known business customers, Digital Animation seeks yearly renewable license deals. These are Value based deals for our clients.

• Those who benefit include Major Animation Studios, Independent Animation Studios, TV Animation Libraries, Independent Film Libraries, Content Aggregators, TV & Film Distributors and Foreign Animation Libraries for starters.

• Regional (export of RIXA™ and the business model) deals with various countries on either a yearly license basis or a one time buyout deal with a different “Brand” name.

• Educational content providers and game developers, corporate training software developers - sell per sku or per course licenses to these content providers who wish to use our interactive version of RIXA™ Technology.

• Child orientated websites sell RIXA™ -enabled content and or ad-server technology licenses to any web site catering to younger audiences or animation.

• Advertising agencies and ad-server companies as an intermediary between DA and corporate advertisers to sell both personalized and non personalized RIXA™ advertising animations as a novel and effective new medium of web advertising geared to children.

Sales Forecast Value Based Projection

• DA establishes its proprietary RIXA™ technology and launches this year.

• Early adopters expected first quarter 2002.

• 2003 - DA expects to be mainstream and the de facto standard.

• 2004 - DA’s initial studio market begins to saturate.

• 2005 - true VOD begins to draw substantial revenues and DA anticipates levelling out at an 8% per annum increase.

Profit & Loss Analysis

• Detailed financial data is currently available through authorized access to Digital Animation’s corporate website - http://www.digital-animation.TV

• The graph below offers a simplified summary of DA’s balance sheet through 2005.• However, even this graph clearly demonstrates that DA benefits from the envied formula

of low cost sales + high value product + sizeable market = high margins.

Exit Strategy (1)Acquisition by Hardware Companies.

Candidates include:

AOL Time Warner Nintendo

AT&T Nokia

AMD nVidia

British Telecom Octal

Ericsson Philips

French Telecom Pioneer

Intel Samsung

Liberate Scientific-Atlanta

Microsoft Sony Corp. of America

Motorola Via (Diamond)

Acquisition by Content Companies.Candidates include:

Exit Strategy (2)

AOL Time Warner

DIC

Disney

DreamWorks

H.I.T. Entertainment

Vivendi Universal

Sony Pictures Entertainment

Sullivan Bluth

Twentieth Century Fox

Exit Strategy (3)

Dividend Generation

• Positive operating cash flow early on will present an opportunity to either declare dividends or repurchase of shares.

• As a private company, Digital Animation is more cost-effective, saving the time and resources associated with compliance and SEC procedures and regulations.

• By remaining a privately held company, it is easier for DA to engage in strong PR-based public awareness campaigns absent SEC scrutiny.

Exit Strategy (4)

Reverse Merger

• A reverse merger gives Digital Animation a fast track to Wall Street.

• In this instance, DA effectively buys a public company (listed but dormant) which, in turn, then purchases DA, followed by a name change.

• Preferable to a standard IPO since DA is better able to control the underwriter’s fees and the costs of SEC filings.

• One of DA’s board advisors is an expert in this type of transaction and will guide us through the process.

Exit Strategy (5)

IPO (Initial Public Offering)

• This exit strategy remains a distinct possibility, although some may question why we need the money - certainly not operational costs.

• Nevertheless, Digital Animation benefits from a clean balance sheet, strong IP and various first to market advantages.

• DA has very strong ties with several underwriting banks including Credit Suisse - First Boston who underwrote Lightspan, and who are also well acquainted with several of DA’s executive team through other underwritings.

Risk Reward Ratio

Digital Animation offers a diverse range of attractive exit strategies.

DA’s business model reflects fiscal prudence and risk minimization while still maximizing revenue potential.

DA’s core team possesses a wealth of successful experience in all relevant business sectors.

DA’s market is enormous ($1 BILLION +) with no known competitors and multiple opportunities for early revenue generation.

DA’s perpetual ownership of registered patents on both its personalization technology and its business methodology and protection systems both serve to minimize risk exposure in a tough economic climate.

********An investment into Digital Animation is comparatively low risk with high

earnings potential

********

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