AN0C™ Brand Growth

Overall, the joint venture (JV) AN0C business has performed very well within the past 6 months since the initial JV announcement with our bottler (CAHFC) resulting in our first products launched at the end of March. Management's view is that AN0C has achieved a number of firsts in China including the set-up of its national distribution within 6 months, the rollout of its all-naturally sweetened zero-calorie products and, the sale of approximately 27 million bottles within a three month period.

Great tasting products

AN0C is the only company in China with a national naturally sweetened zero-calorie product. Our JV Partner, CAHFC, spent over two years developing the beverage and food formulations which we are working with today. Our AN0C Vice President of Formulation has been working with these baseline formulations, refining them to deliver the great tasting zero calorie ready-to-drink (RTD) teas that AN0C has already launched. It should be noted that for one of our RTD teas, over 500 formulations were tested before the final recipe was signed off. Working with stevia as a sweetener has proven to be a challenge to many companies globally. We are pleased to report that our formulations have addressed many of the common issues around aftertaste that has hampered others in the development of stevia sweetened products.

Consumer reaction to AN0C™ products

AN0C has received very positive feedback to its RTD teas in the market research conducted prior to launch and post launch of its six original products. During the pre-launch, the market research showed a 70% interest in a zero calorie naturally sweetened product and a 50% intention to purchase. We have seen strong indications of our first products success. It has shown that approximately 90% of the purchases are for our three zero calorie SKU's. As a result, the AN0C team decided to capitalize on the consumers' interest and demand for the naturally sweetened zero calorie RTD teas and will discontinue the low calorie version. Consumers clearly indicated that they preferred the zero calorie products above the low-calorie option. Consequently, the product-line expansion strategy will change and we will only be pursuing our consumer beverage products that are naturally sweetened with zero calories.

Sales and re-ordering by our customers to date

A review of our sales orders to date, after approximately three months of sales from our 400 Tier I distributors, indicates that 75% of our distributors have initiated repeat orders (second or more) and 25% of our distributors are still on their first order. Of the 75% of distributors who are repeat ordering, 60% have placed their second order, 20% are on their third order, 13% are on their fourth order and 7% are on their fifth order. AN0C Management sees this as clear support of the success of the AN0C ready-to-drink (RTD) Tea within China and that the zero calorie naturally sweetened product concept is one that we plan to capitalize on over the next few months across a number of major beverage categories.

Product category expansion in 2011

Previous formulation development by our partner CAHFC has allowed AN0C to accelerate into a number of product categories that we are planning to launch in 2011. Originally, we had planned 12 SKU's for two beverage categories, but today we are announcing a total of 32 SKU's that will be launched in 2011, across six traditional beverage categories and in two in the functional beverage category (anti-aging, detoxification). The following table provides a summary of the key beverage categories that AN0C plans to launch in 2011, along with the planned SKU's and the approximate market size of each:

	RTD Teas	Vitamin enriched Waters	Carbonated Soft Drinks	Juice Milk	Herbal Drink	Children's Drinks	Functional (Health) Beverage & Foods	Total
Market Size (USD)	$5.3 Billion	$0.6 Billion	$6.5 Billion	$3.1 Billion	$2.8 Billion	$2.9 Billion	N/A	>$21 Billion
Original Planned SKU's	6	6						12
Revised Planned SKU's	3	6	6	3	1	9	4	32

AN0C has increased the market potential for its products in 2011 and in the future by planning to roll out naturally sweetened zero calorie products across six major categories in the mainstream and functional health beverage markets. The size of these combined markets is estimated to be in excess of $21 billion compared to approximately $6 billion with AN0C's original product rollout strategy. AN0C announced on July 20th that it had finalized the formulation of its vitamin enriched waters and production of the products had commenced. We expect sales to begin in the second week of August. We are expecting to launch all of the other mainstream categories before September 30th, 2011. We also expect our functional beverage line of products to reach the marketplace on or before October 31st, 2011. The Chinese government is introducing new regulations for public schools that are expected to encourage lower calorie/reduced sugar products to be sold into schools in order to deal with the growing problem of childhood obesity the country is experiencing. The timing of this regulation and the launch of our fruit milk drinks for children is expected to result in a win-win opportunity for the company. These new products will further establish the Dr. Zhang AN0C brand as the market leader giving us a clear first mover advantage in China for our high quality, great tasting naturally sweetened zero calorie products.