Baby Genius Investor Presentation by dvorchak

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									 Pacific Entertainment
Corporate Presentation
      August 2010

          1
                           Safe Harbor
This presentation contains forward-looking statements made by or on behalf of Pacific
Entertainment Corporation. All statements expressing general optimism about future
growth are forward-looking statements. These forward-looking statements are based
on management’s current views and we cannot assure that anticipated results will be
achieved. These statements are subject to numerous risks and uncertainties, among
other things, uncertainties relating to the Company’s success in judging consumer
preferences, financing the Company’s operations, entering into strategic partnerships,
engaging management, seasonal and period-to-period fluctuations in sales, failure to
increase market share or sales, inability to service outstanding debt obligations,
dependence on a limited number of customers, increased production costs or delays in
production of new products, intense competition within the industry, inability to
protect intellectual property in the international market for our products, changes in
market condition and other matters disclosed by us in our public filings available from
the Company without charge and from the OTC Markets website at
www.otcmarkets.com. Readers are cautioned not to place undue reliance on forward-
looking statements and are encouraged to consider the risk factors that could affect
actual results. The Company disclaims any intent to update forward-looking
statements.




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       Investment Highlights
• Established consumer brand
  – 11 years in the market
• Large addressable market
  – Evergreen market of new parents
• Multiple growth drivers
  – Music products, character licensing
• Management track record of success


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           The Baby Genius Brand
Baby Genius, the premier musical edu-tainment pre-school
brand offering gender neutral, child-friendly, quality content
along with play patterns that nurture and stimulate.




                                Oboe the                Tempo the
                                Monkey                  Tiger




      DJ the
      Dinosaur
                  Frankie the
                  Elephant                 Vinko the
                                           Bear
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            Corporate History
• Baby Genius brand developed in 1998 as a music
  and video brand by the four current partners of
  Pacific Entertainment.
• Company went public.
• Subsequently became a major distribution company
  for their own and third party content.
• Majority shareholding was sold to Weinstein Co.
  (Miramax founders)



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            Corporate History
• Four years ago the original partners bought
  back the Baby Genius brand assets
  (trademarks, characters, etc.) as well as
  several other prominent brands.
• These became the assets of a new company,
  Pacific Entertainment Corp.
• PEC went public through a self-registration in
  2009.


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                   Management
• Klaus Moeller - Chief Executive Officer. Founder and CEO of
  Genius Products, Inc. from 1998 to 2005.
• Michael Meader – President. In charge of the day-to-day
  operations of the Company. Mr. Meader was a co-founder
  and executive with Genius Products.
• Larry Balaban - Chief Creative Officer. Larry was a founder
  and Head of Production of Genius Products.
• Howard Balaban - Executive Vice President of New Business
  Development. A co-founder of Genius Products.




                              7
           Market Opportunity
• Large, growing, evergreen. Driven by:
   – Demographics - US has roughly 4 million new births per
     year
   – Parental interest child’s development
      • University access remains intensely competitive
      • Parents strive to give their children a competitive advantage as
        early as possible, especially with the use of early childhood
        development products
      • Numerous studies demonstrate the effectiveness of early infant
        education through the use of visual and audio stimulation




                                 8
         DVD & CD Retail Highlights
Evergreen DVD and CD content selling well at major retailers

Wal-Mart
• Strong sales during initial launch which resulted in expansion to 3 DVD titles
• Baby Genius CD titles are best selling titles in the department

Target
• Successful sell through of Baby Genius products for 9 consecutive years
• 4-way end cap and recent 2009 and 2010 placements
• Baby Genius CDs have in-line placement with new titles to refresh assortment

Toys R Us/Babies R Us
• Expanding DVDs and CDs in 2010 after successful 2 title test

KMart
• Placement of DVDs chainwide



                                          9
               Licensing Model
• Baby Genius consumer products launched Fall 2009
  with a dedicated marketing campaign, supported
  by:
  –   Sell through numbers of audio and video titles
  –   Success of Comcast Video-On-Demand
  –   Averaging over one million VOD views/month
  –   Baby Genius is Baby Boost's number content provider!




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               Licensing Model
• Exclusive licensing broker is Joester Loria Group
   – Joester Loria Group is a full-service licensing and
     marketing agency.
   – Represents Jeep and Chrysler, Pepsi, Mountain Dew,
     Aquafina and AMP, Entenmann’s, and more.
• First product category is Toys
   – First license was a toy deal with Wal Mart and Battat
   – Toys sold extremely well with $16 m in sales H2 2009
     at Wal Mart
   – Toy program will have considerable growth in 2010


                             11
             Licensing Model Partners
• Battat Incorporated - Master Toy
   Licensee, Learning & Developmental Toys
• Canadian Group - Board Games &
   Puzzles
• Meadowbrook Press - Board Books
   (learning/song activity)
• Capitol Cups - Sippy Cups
• United Legwear – Socks, Leggings,
   Shoes
• Ed Ash - Soft Soled Shoes & Booties
• Winfat – Preschool laptops
• NancyCo – Carnival plush toys


                                    12
               Pre-school Toys
• Baby Genius toys launched at Wal-Mart Fall 2009
   – Dedicated space in the preschool department
   – Baby Genius gooseneck signage call out product
• Strategic partnership with Battat Toys as master toy
  partner
• Initial assortment of early leaning and development toys
  targeting children ages 2-5 includes:
   – Activity toys
   – Musical toys
   – Construction sets


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Toys




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         2010 Marketing Support
• Create a strategically tiered media schedule that anchors
  with broadcast TV, leverages Satellite TV, includes highly
  targeted, proven performer of Online, and social media

• Media Mix Recommendation
   –   Qubo: Broadcast
   –   Nick Jr.: Satellite Dish Network (Nick Jr. day part)
   –   NickJr.com: Online
   –   BSM MediaMom parties




                                     15
Public Relations Campaign




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Public Relations Campaign




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                    Competitors
•   DVD and CD
    §   Baby Einstein, Brainy Baby, So Smart, Wiggles, Sesame Baby.
    §   Disney and Universal Studios
    §   Independent production companies

•   We are positioned as a high quality, value brand.
•   All tracks in both English and Spanish.
•   DVDs packaged with companion music CDs




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                Financial History
                           2007      2008      Q1       Q2       Q3       Q4       2009      Q1       Q2
Baby Genius Direct Sales               890      968      377      448       642     2,435     373      452
Other Licensed Products                211       14       13       25       107       159     370      112
         License/Royalty             1,026       15       63       25       606       709     232      148
         Total Revenue     1,722     2,127      997      453      498     1,355     3,303     975      712

             Y/Y Growth              23.5%                                         143.8%    -2.2%    57.2%

            Total COGS       153       428      512      189      295      421      1,417     470      354

           Gross Profit    1,569     1,699       485      264      203      934    1,886       505      358
                           91.1%     79.9%     48.6%    58.3%    40.8%    68.9%    57.1%     51.8%    50.3%

             Total SG&A    1,581     2,498      765      566      628      895      2,854     651      569

                  R&D         32        34        1        9       10       27        47        0        1
            Depr&Amort       590       601      151      152      156      200       659      169      168

     Operating Income       (634)    (1,434)    (432)    (463)    (591)    (188)   (1,674)    (315)    (380)

        Interest Expense    (408)     (346)      (66)     (61)     (18)       1      (144)               (1)

 Other Income/Expenses        14        36        (3)              10       21        28       10       10

          Pretax Income    (1,028)   (1,744)    (516)    (540)    (613)    (182)   (1,851)    (316)    (382)

                EBITDA        (30)    (797)     (284)    (311)    (425)     33       (987)    (136)    (202)




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Funding Growth: Circle of Education
 • In partnership with San Diego State University, Baby Genius has
   developed the Circle of Education

 • Baby Genius Circle of Education music is used as a learning tool, and a
   guide to change behavior in the classroom

 • In addition, a home system is a reinforcement tool for parents to use
   to support the efforts in the classroom

 • Preschool learning program designed to utilize songs to introduce
   children to what is expected of them as they transition from
   Preschool to Kindergarten

 • Addresses 38 skills, such as:
     –   Basic education fundaments
     –   Socialization skills
     –   Hygiene
     –   Exercise
     –   Motor skills
                                      20
       Funding Growth: Kids Tunes
• An iTunes-like
  store for streaming
  and downloadable
  children's audio
  and video content.




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          Funding Growth: Website
• The Baby Genius
  interactive website
  provides additional
  opportunities for
  consumers to engage
  with their favorite Baby
  Genius characters

• Website goals:
  – more transactional
  – increase direct
    sales to consumer
    at high margin



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             Term Sheet Summary
General Information:

Amount:                            $5,000,000

New Securities Offered:            1 share common +
                                   1 warrant ($0.40 strike, 3 year term)

Lead Investor(s):                  Management

Current Capital & Debt Structure
   Prior Rounds:                   $3,039,500
   Founder(s):                     66%
   Other Investors:                34%
   Debt:                           $2,548,364

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           Term Sheet Summary
Valuation (before warrant exercise):

Price:                                   $0.40

Pre-Money Valuation:                     $27,000,000

Post-Money Valuation:                    $32,000,000

$100,000 investment owns:                0.3125%

Special Terms or Conditions:
Investors receive one unit consisting of one common share and one
warrant with $0.40 strike price and three year term to expiration.

Company is already publicly traded on Pink Sheets (PENT).


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                        Summary
• Under the same management team that successfully
  developed the Baby Genius brand
• Business run with low overhead
          – Two small offices
          – 9 employees
• Bottom line drivers:
          –   Company produces high margin DVD/CD products
          –   Licenses brand to many third parties
          –   Direct distribution into all major retailers
          –   Motta Group growing Latin American distribution
          –   Baby Genius available in over 50 countries



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