Loudwolf Security Loudwolf Security Holdings Ltd.Holdings Ltd.

Investment Case StudyInvestment Case Study

Revised 2-15-2003Revised 2-15-2003Confidential Information © 2000-2003 LoudWolf Security Holdings Ltd. All rights Reserved.Confidential Information © 2000-2003 LoudWolf Security Holdings Ltd. All rights Reserved.

Corporate Center PhilosophyCorporate Center Philosophy

Guernsey based “Off Shore” profitsGuernsey based “Off Shore” profits Experienced London managementExperienced London management The best Silicon Valley technologyThe best Silicon Valley technology Edison research center CaliforniaEdison research center California Efficient Taiwan based Efficient Taiwan based

manufacturing manufacturing Singapore sourcing & distributionSingapore sourcing & distribution

Corporate StructureCorporate Structure

Digital Animation Inc.(Silicon Valley – USA)

LoudWolf Security Ltd.

(London)

Loudwolf Manufacturing Ltd.

(Singapore)

Edison Research Laboratories Inc.

(Edison, California – USA)

RIXA STEEL™ Consumer Products Co.

(Taiwan – ROC)

InterSec Military Inc.(Silicon Valley – USA)

RIXA Edu-Mation Ptrs.(Kuala Lumpur – Malaysia)

Loudwolf Security GMBH(Berlin – Germany)

Loudwolf Security Ltd.(Tel Aviv – Israel)

Loudwolf Security Holdings Ltd.Loudwolf Security Holdings Ltd. ( (Gurnsey)Gurnsey)

Owns & Protects All intellectual propertyOwns & Protects All intellectual property Files Patents, Trade Marks, Copyrights, etc.Files Patents, Trade Marks, Copyrights, etc.

Excellent “Tax Free” banking center for the groupExcellent “Tax Free” banking center for the groupLegal forum based upon familiar British lawLegal forum based upon familiar British lawCorporate & investor friendly tax structureCorporate & investor friendly tax structureExcellent relations with Madrid Patent partnersExcellent relations with Madrid Patent partnersOpportunities for Deferred tax liabilityOpportunities for Deferred tax liabilityAttractive investment location for VC capitalAttractive investment location for VC capital

Loudwolf Security Ltd. (London)Loudwolf Security Ltd. (London)

Functions as the group’s top management center Functions as the group’s top management center Access to top-notch management expertiseAccess to top-notch management expertiseWorld-class finance and banking services World-class finance and banking services Excellent access to the EEC marketsExcellent access to the EEC marketsPreferred access to the US markets Preferred access to the US markets No limitations imposed by US export policiesNo limitations imposed by US export policiesIdeal marketing control communication centerIdeal marketing control communication center

Digital Animation Inc. (Silicon Valley, USA)Digital Animation Inc. (Silicon Valley, USA)

6 Yrs. planning & Over 2 yrs. intense development6 Yrs. planning & Over 2 yrs. intense development1.15 Million USD Venture capitalization1.15 Million USD Venture capitalizationWeb presence & name brand (RIXA™) establishedWeb presence & name brand (RIXA™) establishedUnique & fully developed software productUnique & fully developed software product1.4 Billion USD verified market opportunity 1.4 Billion USD verified market opportunity Verified customer demand (Awaiting security)Verified customer demand (Awaiting security)Complete marketing and deployment plan in placeComplete marketing and deployment plan in placeMarket domination assured by security productMarket domination assured by security productPlanned transition from entertainment to education Planned transition from entertainment to education

Edison Research Labs. (Edison, California)Edison Research Labs. (Edison, California)

Strategic Central California location Strategic Central California location

Secure R&D facility with relatively moderate costsSecure R&D facility with relatively moderate costs

Access to economically-priced high-tech labour Access to economically-priced high-tech labour

Easy access to Los Angeles and Silicon ValleyEasy access to Los Angeles and Silicon Valley

Experienced and proven high-tech R&D teamExperienced and proven high-tech R&D team

““Talent magnet” attracting World-class researchersTalent magnet” attracting World-class researchers

Showcase: A privileged glimpse of new products.Showcase: A privileged glimpse of new products.

What Is RIXA™?What Is RIXA™?

Digital Animation is developing the technology and tools that will enable the transmission of compelling entertainment-quality television Digital Animation is developing the technology and tools that will enable the transmission of compelling entertainment-quality television over the Internet on-demand. This means entertainment-quality, animated video for on-demand streaming television delivered through the over the Internet on-demand. This means entertainment-quality, animated video for on-demand streaming television delivered through the Internet to personal computers and the new generation of set-top-box devices (X-Box, PS2). Our second-generation products include Internet to personal computers and the new generation of set-top-box devices (X-Box, PS2). Our second-generation products include animated video games and interactive educational content, in addition to personalized animated advertising.animated video games and interactive educational content, in addition to personalized animated advertising.

Our core technology is a compression method dubbed “RIXA™” technology that makes it possible to deliver animated content on-line at Our core technology is a compression method dubbed “RIXA™” technology that makes it possible to deliver animated content on-line at DVD quality. This technology (RIXA™) is available now and can be deployed over the existing broadband network. Of equal importance, DVD quality. This technology (RIXA™) is available now and can be deployed over the existing broadband network. Of equal importance, our technology is immune to the inevitable future broadband congestion. It is no secret that cable companies, telephone companies and our technology is immune to the inevitable future broadband congestion. It is no secret that cable companies, telephone companies and content owners are actively seeking the “holy grail” of Video On Demand (VOD). Despite huge investments and incredible efforts in this content owners are actively seeking the “holy grail” of Video On Demand (VOD). Despite huge investments and incredible efforts in this field, there is no existing technology; hardware or software that can truly deliver a deployable VOD that is both high quality and field, there is no existing technology; hardware or software that can truly deliver a deployable VOD that is both high quality and sustainable. Tests on special high-speed networks have proven that there is a consumer demand for VOD. Unfortunately, these same sustainable. Tests on special high-speed networks have proven that there is a consumer demand for VOD. Unfortunately, these same tests have proven that the deployment economics for VOD within the next decade or so does not justify the potential revenues. Some tests have proven that the deployment economics for VOD within the next decade or so does not justify the potential revenues. Some small sites are providing small window, slow frame rate video using Real Player 8, QuickTime or Windows Media Player and are relegated small sites are providing small window, slow frame rate video using Real Player 8, QuickTime or Windows Media Player and are relegated to news information enhancement, theatrical preview or training uses. None can be considered a viable, profit-yielding video entertainment.to news information enhancement, theatrical preview or training uses. None can be considered a viable, profit-yielding video entertainment.

Digital Animation creates and markets the RIXA™ Technology that enables animated entertainment content to be streamed over Digital Animation creates and markets the RIXA™ Technology that enables animated entertainment content to be streamed over the existing broadband connection. the existing broadband connection. In short, Digital Animation will not only provide an on-line video portal, but also a technology solution In short, Digital Animation will not only provide an on-line video portal, but also a technology solution for existing content owners to deliver a true entertainment medium solution. This product is deployable for existing content owners to deliver a true entertainment medium solution. This product is deployable NOWNOW. .

Digital Animation are already in discussions with a number of strategic partners and/or investors including VOD companies, insurance Digital Animation are already in discussions with a number of strategic partners and/or investors including VOD companies, insurance companies, a box manufacturer and cable companies - but are looking to secure European investment to cover operating costs and companies, a box manufacturer and cable companies - but are looking to secure European investment to cover operating costs and advanced marketing until our anticipated product launch at the end of Q2 2002. In the meantime it is intended that any potential investment advanced marketing until our anticipated product launch at the end of Q2 2002. In the meantime it is intended that any potential investment would cement a long-term mutual business partnership. would cement a long-term mutual business partnership. 

Why RIXA™? Why now?Why RIXA™? Why now?

Broadband’s high speed glory days are already over…Broadband’s high speed glory days are already over…Neither VOD nor D&R can perform - the reality is an average throughput of 50Kbits/Second. The end Neither VOD nor D&R can perform - the reality is an average throughput of 50Kbits/Second. The end result? Neither VOD nor D&R can perform effectively in this congested environment.result? Neither VOD nor D&R can perform effectively in this congested environment.

Cable Companies are set to choke on their own success…Cable Companies are set to choke on their own success…The winning formula of today is about to become the losing formula of tomorrow as CONGESTION = The winning formula of today is about to become the losing formula of tomorrow as CONGESTION = FRUSTRATION = LOSS.FRUSTRATION = LOSS.

xDSL continues to be hindered by both economic and technical limitations…xDSL continues to be hindered by both economic and technical limitations…Installation costs are still prohibitively expensive and even the most forward-thinking telecom companies Installation costs are still prohibitively expensive and even the most forward-thinking telecom companies can only delay deployment as they wait for the inevitable congestion problem to hit the cable companies.can only delay deployment as they wait for the inevitable congestion problem to hit the cable companies.

Video On Demand and Download & Replay are not commercially viable.

In Short, they don’t work!

VOD and D&R are not consumer friendly.

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

… many years from now

The AnswerThe Answer

The solution is in our name…The solution is in our name…

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

Delivers existing animated content todayDelivers existing animated content today

Operates effectively within the existing infrastructureOperates effectively within the existing infrastructure

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

Is the definitive model for viable VODIs the definitive model for viable VOD

Provides entertainment on demand that’s deployable NOW!Provides entertainment on demand that’s deployable NOW!

RIXA™ Performance:RIXA™ Performance:

*Minimum of 640 by 480 Pixels with full wide-screen capability*Minimum of 640 by 480 Pixels with full wide-screen capability *Actual full screen edge-to-edge display*Actual full screen edge-to-edge display

*Loss less compression - Studio quality plus *Loss less compression - Studio quality plus *Standard HTTP Internet connection*Standard HTTP Internet connection

*Only 50K bits per second sustained Internet connection *Only 50K bits per second sustained Internet connection *Entertainment quality sound*Entertainment quality sound

*Guaranteed 30 Frames Per Second (fps)*Guaranteed 30 Frames Per Second (fps) *Available NOW…*Available NOW…

AOD works - VOD does notAOD 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

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

Communications Commission, August 2001.)Communications Commission, August 2001.)

•• Within the next 36 months, the number of US residential Broadband subscribers will reach nearly 50,000,000. (Forrester Within the next 36 months, the number of US residential Broadband subscribers will reach nearly 50,000,000. (Forrester Research, 2001.)Research, 2001.)

The Opportunity•Broadband is booming and bigger than ever.

•The PC market is Broadband’s biggest beneficiary but will be eclipsed by the deluge of Set Top Boxes in 2002.•Set Top Box capability already far exceeds infrastructure capacity.

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

ROW Broadband Market• By the year 2004, there will be at least 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.

Set Top Box Market• By the year 2002, more than 12,000,000 households (in the US alone) will access the Internet through a Set-Top-Box.

• By the year 2004, 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.

• By the year 2004, Jupiter research predicts that there will be nearly 40,000,000 interactive TV households in the United States, rising steeply from 2.2 million in 2000.

The ProductsThe ProductsThe RIXA™ PortalThe RIXA™ Portal

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

The RIXA™ PlayerThe RIXA™ PlayerThe RIXA™ Player is free to all for download to one or more of the following Broadband capable machines:The RIXA™ Player is free to all for download to one or more of the following Broadband capable machines:

• The Set Top BoxThe Set Top Box• The PCThe PC• The new breed of games consoles including Sony’s PS2, Microsoft’s Xbox and Nintendo’s Game CubeThe new breed of games consoles including Sony’s PS2, Microsoft’s Xbox and Nintendo’s Game Cube

••The RIXA™-Enabled SiteThe RIXA™-Enabled Site

Sites that want the core benefits of RIXA™ without the end-to-end solution provided by the RIXA™ Portal. These 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 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 entertainment sites can benefit from RIXA™ animated content via animated advertising on their otherwise non video commercial sites.commercial sites.

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”

Existing ContentExisting ContentReady and WaitingReady and Waiting

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 AppetiteThe 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.

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

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 A On Demand…In Demand A 100% Secure Product100% Secure Product

• 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.

• The reality is that VOD does not work on the existing cable infrastructure and does not have the security to combat theft of intellectual property from the Internet - the bane of all content providers. With Digital Animation's advanced security hardware, content is 100 % SAFE from hackers.

• 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 2006 in the US and even later in other countries.

Why Choose RIXA™?Why Choose RIXA™?Ahead Of The GameAhead Of The Game

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

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

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

There are several incentives and deterrents to prevent existing clients moving to any competition: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. 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.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.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, 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 distribution and sales. RIXA™ is an exciting new way to distribute animated content and can also be utilized to market almost any product.utilized to market almost any product.

Digital Animation continues to roll back the limits of the imagination, prepare for our next generation 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 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 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 super-hero, the Sentinel Avenger, save the world. Each animation is unique. Each animation stars your child as the Sentinel.your child as the Sentinel.

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

RIXA™ has the AdvantageRIXA™ 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.

Sales Forecast Sales Forecast Value Based ProjectionValue 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•This graph offers a simplified summary of DA’s balance sheet through 2005 and clearly demonstrates that DA benefits from the envied formula of low cost sales + high value product + sizeable market = high margins.

Potential Exit StrategiesPotential Exit Strategies

Acquisition by Content CompaniesAcquisition by Content Companies

Acquisition by Hardware CompaniesAcquisition by Hardware Companies

Acquisition by Software CompaniesAcquisition by Software Companies

Acquisition by Multiple Interest Companies

Dividend Generation

IPO (Initial Public Offering)

Reverse Merger

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

********