Beverages: Energy Drinks INDUSTRY ANALYSIS

Havoc Distribution, Inc. BY

2544 Tarpley Rd. Suite 104
Carrollton, TX 75006 CHET GUTOWSKY
972-418-0225 (Office) CHARTERED
972-418-8558 (Fax) FINANCIAL ANALYST
www.havocenergy.com

Energy Drink Overview

Energy drinks stormed the U.S. beverage market last year, outperforming all other
categories. With energy drink sales rising 52.1 percent higher than last year,
according to market researcher Information Resources Inc. (IRI), niche-marketed
energy brands targeting specific consumer interests or demographics continue to
expand.

Energy drinks entered the market 10 years ago. Since then the energy drinks
category has enjoyed tremendous success, displaying a staggering 516 percent sales
growth between 2001–2006, according to market research firm Mintel. In fact,
energy drinks, led by the Red Bull and Monster brands, grew by more than 49
percent in 2006. With growing consumer demand and increased profit margins, it's
projected to exceed $10 billion by 2010.

"Energy drinks are an interesting category because there are a ton of new product
launches," explained Tom Vierhile, director of Productscan Online. "We're seeing a
lot of product innovation, a lot of smaller companies have chosen to attack the energy
drink market as opposed to coming out with a soft drink to compete against PepsiCo
and Coca-Cola. It's a category with a melting pot of different influences."

In 2006 in the U.S. alone, ProductScan Online reported 321 new sports or energy
drinks, compared to only 149 introductions in 2003. "The long-term trend is
definitely up," Vierhile said.

Breaking it Down

Energy drinks tend to break down into a few distinct categories that target specific
consumer interests or demographics. According to Vierhile, there are celebrity-
oriented energy drinks that appeal to the younger generation. "Here it's all about
creativity and pushing the boundaries. There's a bit of a hip-hop, urban element that's
provocative." Havoc energy drink leverages this strategy through key relationships
with major sports franchises and entertainment venues. There are energy drinks that
are more functional; and finally, there are the all-natural and organic energy drinks
that appeal to those seeking health and wellness.

The segment has been dominated by carbonated options that contain added sugar and
synthetic ingredients such as taurine – including Havoc.

There is now more of a focus on lower calorie products. That's definitely a trend to
watch. Part of the reason energy drinks give that buzz is because they are loaded
with sugar. We're definitely seeing more products that are getting the sugar content
under control a bit. Havoc has announced its new sugar-free product as well.
 Energy Drinks
INDUSTRY ANALYSIS
BY
CHET GUTOWSKY
CHARTERED
FINANCIAL ANALYST

“Energy drinks outperformed Business Description:

all beverage categories
In 2006” Havoc Distribution, Inc. a subsidiary of publicly traded American Enterprise
Development Corporation, [OTC: AEND], develops, markets and distributes
energy drinks under the Havoc™ brand. Marketing is driven by Havoc’s core
marketing strategy of co-branding with professional and college sports
franchises to gain market share more quickly than with advertising based
marketing campaigns. Havoc licenses the right to co-brand with established
sports brands and market to their fan base. It currently sponsors athletic
conferences covering over 100 colleges and universities as well as multiple
professional teams. AEND owns a 35% interest in beverage distributor,
Dynamic Distribution based out of Dallas, Texas. See,
www.havocenergy.com.

Because energy drink consumers consist largely of young, active consumers

less than 40 years of age, Havoc targets young, active sports fans and athletes
with its co-branding strategy. The generational nature of the energy drink
market dictates creative, guerrilla style marketing for energy drink
competitors.

We believe that Havoc’s brand strategy, combined with a practical strategy

for growing distribution, will drive its growth. The leading energy drink
brands, such as Red Bull and Monster, have built market share through
execution rather than advertising. Similarly, Havoc’s decision to create a
close bond with distribution channels should provide an effective platform for
future growth.

For a young company, Havoc has established an impressive list of brand

partners including:

The Houston Rockets Big West Conference

The Dallas Stars Gulf South Conference
The Sunbelt Conference Florida Panthers
The Arena Football Oklahoma State University
League 2
Washington Wizards United States Military
Academy.

In short, Havoc has taken the innovative approach of co-branding with major
brand names from college and professional sports franchises and has used the
leverage of those established brands to open doors to new markets.

We believe that Havoc has established a strong foundation with its current
marketing relationships that will allow it to grow geometrically in the next 18
months not unlike the growth earlier experienced by both Red Bull and
Monster energy drinks. Growth must be driven by increased distribution
HAVOC the official energy drink combined with the financing necessary to support expansion.
of the arenafootball2.
 Energy Drinks
INDUSTRY ANALYSIS
BY
CHET GUTOWSKY
CHARTERED
FINANCIAL ANALYST

Financial Analysis Competitors and Peers:

The energy drink industry is a smart industry that is continually developing, Hanson Natural, Inc., Nasdaq, HANS,
expanding, and using innovative marketing techniques. The energy drink $56.60, with sales of $605 million.
industry is not dominated by large, giant companies like the soft-drink Hanson made its mark with the popular
industry, but instead characterized by stiff competition between an increasing Monster energy drink. The company
number of smaller companies, all catering to a very select consumer base. expanded its line of drinks to include other
Havoc is a small company with a good marketing foundation in place. The products like fruit juice, smoothies, iced
primary target for the majority of energy drink companies is male teenagers tea, and dry juice mixes -- most of which
are sold under the Hansen's brand name.
and young people, mostly in the 20s age bracket. It is a small segment of Hanson’s stock is up 6,000% since
society and seemingly a very tight market, but these potential consumers have Monsters introduction.
so far been exceptionally receptive to energy drink products.
Jones Soda, Nasdaq, JSDA, $12.06, with
Energy drinks provide a far larger profit margin than most soft drinks.
sales of $39.7 million. The company
Havoc’s per case economics will provide $7-10 in contribution margin per bottles and distributes brightly colored
case depending on the volume of production (24 cans per case). Havoc out- beverages with wacky flavors like Twisted
sources the manufacturing, mixing and distribution of its product – as do Lime and Fufu Berry. The company sells a
nearly all energy drink manufacturers. This means that operating overhead is line of noncarbonated beverages (Jones
not front loaded or capital intensive. Costs will scale up in direct proportion Naturals), with added ginseng, zinc, and
to growth allowing the company to grow without the need for major capital other ingredients, and citrus-flavored
expenditures. energy drinks under the Jones Energy and
WhoopAss labels.
The primary challenge to growth in the crowded energy drink market is brand
differentiation and effective distribution. Havoc has achieved effective brand Leading Brands, Inc., NASDAQ, LBIX,
development through its sports licensing agreements. It is now beginning to $2.75, with sales of $50 million. LBIX
gain traction in its distribution efforts through independent distributors and launched its “Stoked” energy drink in
through its captive distributor, Dynamic Distribution, Inc. 2007. It’s stock has underperformed due
to capital costs related to operating its
Valuation bottling operations. This Canadian
company claims to be the only fully
integrated beverage company in America.
The following companies were used for our peer group analysis: Jones Soda,
[JSDA], $12.06; Hanson Natural, Inc. [HANS]; $56.60; Leading Brands, Sweet Success, Inc., NASDAQ, OTCBB,
[LBIX], $2.75; Sweet Success, Inc., [SWTS], $0.23 and Reed’s, Inc. [REED], SWTS, $0.23, with annual sales of only
$7.05. The average share price for the peer group is $15.74. We believe $79,000, engages in the production,
Havoc, although under the radar of the market, has laid the foundation distribution, and marketing of ready-to-
necessary to perform well against its peer group in price appreciation over the drink functional health beverages in the
next 18 months. United States.

Price Target Reed’s, Inc., NASDAQ, OTCBB, REED,

$7.05, with sales of $11.5 million. Reed’s,
develops, manufactures, markets, and sells
At a recent $0.85 per share, Havoc [AEND] lags its peers in price to value in natural non-alcoholic and New Age
the market. As the Company steps out of the shadows, we expect the market beverages, candies, and ice creams in the
to realize the buying opportunity represented by AEND. As a result, we are United States and Canada. Its beverages
initiating coverage of AEND – Havoc as a strong but speculative buy and product line includes various ginger brews,
hold. We target price appreciation to $3.40 by the end of the fourth quarter. which consist of Reed’s Original Ginger
Brew, and Reed’s Extra Ginger Brew.
 Energy Drinks
INDUSTRY ANALYSIS
BY
CHET GUTOWSKY
CHARTERED
FINANCIAL ANALYST

Distribution

Energy drinks penetrate new markets through convenience stores and clubs.
As a brand becomes established, it then expands into grocery and big-box
stores. Marketing and distribution must be coordinated to drive new
customers to the product as distribution rolls out in new markets.

Havoc has taken the creative step of acquiring a 35% ownership stake in a
captive distributor – Dynamic Distribution, Inc. that focuses on distribution
to convenience stores and clubs. This gives the company dedicated,
product specific distribution and marketing in a single package as jobbers
call on stores and clubs specifically selling the Havoc product.

Havoc also distributes through major sports venues where it has

licensing agreements. The Company indicates that it intends to
pursue contracts with big-box stores and grocery stores as it gains
traction in each of its core markets. The energy drink industry,
though in some respects like other beverage industries, actually has
some important differences. The primary distinction of the energy
drink industry is the lack of one or two dominating companies.
Although RedBull currently has the lead in the market because of its
long-standing renown and popularity, there are many more
competitors, such as Energy Fizz or Sobe Energy, that are fighting
for a top place that will distinguish them from the myriad of others.
Most of the small companies that are involved in the energy drink
industry do not yet have a nationwide distribution, so their
advertising techniques and strategies are more specific and selective.
HAVOC announces a partnership with
Lush Entertainment Group. Lush Marketing
Entertainment Group operates Lush
the premier dining and nightlife spot in Many energy drink companies are directing their products at very
St. Louis, Missouri and has combined
forces with HAVOC Energy Drink to specific groups of consumers, such as extreme sports enthusiasts,
produce a co-branded energy drink. video game players, or the hip-hop crowd. In fact, many of the names
of the beverages clearly relate to one of these areas. Little, if any,
advertising for most of these energy drinks is done with television
ads. A good number of the companies sponsor extreme events and
publicity stunts to promote awareness of their product to the desired
consumer group. Other energy drink companies rely on celebrity
endorsements to promote their beverages. Although the energy drink
is unlike many of the other successful beverage industries, its
innovation and timely product development continue to develop it
into a profitable industry with great potential. The good news for
companies like Havoc is that there is room in the top echelon for a
quality beverage with strong distribution and branding strategies.
 Energy Drinks
INDUSTRY ANALYSIS
BY
CHET GUTOWSKY
CHARTERED
FINANCIAL ANALYST

History:

Although there is currently an energy drinks craze in the United States and
other parts of the world, energy drink history begins many years earlier.
Energy drinks contain a variety of ingredients, but the primary ones are
energy-producing elements like caffeine or guarana and vitamins. Energy
drinks were developed in response to the public demand for a dietary addition
or supplement that would give a boost of energy and provide vitamins, all in
one. The increasing demands of daily schedules have not only made people
more tired but also left less time for important tasks like sleeping and eating.
Energy drinks, therefore, quickly found a very receptive market because they
offer stimulant energy, vitamins and have a nutritional value.

Energy drink history really begins in Europe and Asia where these popular
drinks were first developed. Although there are many different varieties in
countries throughout the world, RedBull was the first to be introduced in the
United States and still remains one of the most popular choices. Most energy
drinks, especially the initial ones, are non-alcoholic and offer a combination “With the inception of the Havoc Fanatics
during the 2006-2007 hockey season,
of energy and vitamins, primarily B vitamins. These drinks were first
came a rebirth at the American Airlines
accepted mostly by athletes in the United States who would use the drinks to Center. A burst of energy infused Stars
give them extra energy before and during workouts or competitions and games and the entire fan population
games. However, as word spread about the effects of energy drinks, the witnessed a new level of hockey
general public entered into the energy drink craze, as well. fanaticism” –www.StarsFanatics.com

Energy drinks are experiencing rapid growth and increasing in popularity:

they are currently thought to be the next high-growth sector of the soft drink
industry as more and more companies take advantage of the lucrative market.
As people continue to seek new and better ways of achieving any kind of
“high,” many people have started mixing these energy drinks with alcohol for
even more excitement and fun. In fact, alcohol companies are even getting
involved with the energy drink market by producing alcoholic energy drinks,
such as Anheuser-Busch’s new drink 180.

Because energy drinks are still relatively new, despite being nearly twenty
years old, new products are continually emerging. The choices and exact
effects of energy drinks are becoming more diverse as more people seek out
energy drinks for a myriad of reasons. Now, in addition to the well-known
RedBull, and Monster other drinks such as Havoc are becoming popular
choices.
 Energy Drinks
INDUSTRY ANALYSIS
BY
CHET GUTOWSKY
CHARTERED
FINANCIAL ANALYST

Breaking it Down

Energy drinks tend to break down into a few distinct categories that target
specific consumer interests or demographics. There are the energy drinks
that are more functional and sports-oriented and there are the all-natural and
organic energy drinks that appeal to those seeking health and wellness.
As more people seek out energy drinks for a myriad of reasons — a quick
energy fix, improved mental clarity, health and wellness — the choices are
becoming broader every day.

Though the segment has been dominated by carbonated options that contain
added sugar and synthetic ingredients such as taurine, only recently have
healthier energy drink versions come to market. The variety of options
continues to grow in this category. Havoc applies this healthy stance to
their formula by adding several Vitamin B’s.

There's significant growth for lower calorie products. That's definitely a

trend to watch. Part of the reason energy drinks give that buzz is they are
loaded with sugar. We're definitely seeing more products that are getting the
sugar content under control a bit.

The Energy Drink Goes Hybrid

Heeding the consumer call for healthier products, beverage manufacturers

have introduced a slew of new juice-based energy drink hybrids with good-
for-you ingredients like berries such as pomegranate, acai, goji and noni.
There's also a sub-category of energy drinks flooding the market based on
tea, especially green and white tea, herbs like yerba mate, and vitamin and
dietary supplements — which are all being marketed for their antioxidant
content and associated health benefits.

A rather interesting new product launch is Anheuser-Busch’s recently

introduced 180 Red with Goji. The Goji berry, a small red fruit from Tibet,
is said to contain high antioxidant levels and is believed to increase energy,
according to the company.

To meet the needs of consumers seeking an energy drink with the nutrition
HAVOC Energy Drink was proud to present of real juice, PepsiCo's SoBe brand developed SoBe Essential Energy, a line
Bill Edler the World Poker Tour Champion of juice-based energy drinks made with ginseng, guarana, real fruit juice
event winner with the “Best All Around and buzzworthy yerba mate. The drink, available in two flavors — orange
Player” award at the Gulf Coast Poker and berry pomegranate — also contains vitamins B-6, B-12, C and zinc.
Championship held at the Beau Rivage Another introduction from PepsiCo, Fuelosophy High Protein Energy
Casino & Resort.. Drink, wants customers to "Rethink your energy source." The beverage is
said to be a longer energy source that is high in protein, B vitamins and
complex carbs. On-trend flavors include Pomegranate Berry, Pineapple
Mango and Citrus Blend.
 Energy Drinks
INDUSTRY ANALYSIS
BY
CHET GUTOWSKY
CHARTERED
FINANCIAL ANALYST

Management

In evaluating Havoc’s management team we look for both

industry experience and breadth of skills necessary to grow a
company to the size necessary to compete with RedBull and
Monster.

Havoc is led by its President, C.K. Williams. Mr. Williams

has over seven years of energy drink experience before taking
the helm at Havoc. He pioneered the use of energy drinks in
the club scene and brings a deep knowledge of energy drink
marketing to the Company’s leadership. Prior to joining
Havoc Mr. Williams worked in management at a distribution
company and a promotions agency – both of which we see as
foundational skills for the leadership of Havoc. He holds a "We distribute the private label HAVOC -- 'Cowboy
Masters of Education and a B.S. degree from Texas Tech Kick' to Oklahoma State University. It has been a 'home
run' for Natural Water Company," stated Robert Miller,
University. He played varsity basketball, competed President of Natural Water Company. "I can honestly
internationally and was drafted by the Seattle Supersonics of say it's been a huge success! Natural Water Company is
the NBA. excited to be a partnering distributor of HAVOC Energy
Drink. In the past, we have had the opportunity to carry
The Chairman of AEND’s board of directors is William several items that were new to the market.
Samuel Davis, who met Mr. Williams while working on Unfortunately, we have had to turn down 99% of them.
Personally, I have tried almost all of the energy drinks
distribution and logistics for Spike Energy Drinks. Mr. Davis
on the market and have not cared for the taste or after
attended Tarleton State University for two years before taste. When HAVOC was sampled in my office, I was not
returning to work with his father in the plumbing, heating and excited to try another Energy drink. However, after just
air conditioning business. He has an established track record one drink, I am now a true believer in this product," he
as an entrepreneur in the home construction and land added. "We have been contacted by other schools and
development field in addition to his experience in the beverage Universities to do the same type of HAVOC product for
industry. He is also the President of Vending Ventures, a them," he concluded.
vending machine company that distributes and services energy
drink vending machines.

The board includes independent directors such as Jerry Martin

who is the President of MMR Investment Bankers, Inc.
registered securities firm in Wichita, Kansas. MMR raised the
initial round of capital for Havoc. He is also the co-founder
and part owner of NET Engineering Technologies, LLC that
assists nonprofit and for profit corporations with their
computer systems. He graduated from Southern Nazarene
University with a Bachelor of Arts degree in 1968 and earned
a Master of Arts degree in 1972.
 Energy Drinks
INDUSTRY ANALYSIS
BY
CHET GUTOWSKY
CHARTERED
FINANCIAL ANALYST

Other key employees include the following: ARENA FOOTBALL LEAGUE 2

Andre Nicholson, who oversees the marketing

operations and branding for Havoc. His prior
employment includes Verizon Professional Services
and MA Import & Export, Inc. He holds a bachelors
degree in computer science from Howard Payne
University in Brownwood, Texas.
Marco Arce, is in charge of logistics and
manufacturing for the Company. His prior experience
was focused on the South American import market.
He worked with logistics management for Western
Hemisphere, a global oil trading company based in
France, and was the founder and owner of Advanced
Multimedia Advertising in Dallas, Texas. He holds a UNITED STATES MILITARY ACADEMY
Bachelor of Science in Electronic Engineering from
Recife, PE Brazil.
Aylin Gormus, executive management background is
in hospitality, staffing and retail industries. Her prior
employment was with RCM Technologies a publicly
traded, staffing and solutions company. She has
worked as a Regional Manager, has managed
operations in multiple branches with a budget of over
10 million dollars. Mrs. Gormus oversees operations,
development of business plans and implementation of
new contracts for HAVOC Distribution, Inc. She
graduated with a bachelor’s degree in Business
Management from Texas Tech University.
Brim Basom, has an extensive background with
project management in information technology and the JON ANDERSEN WORLD RENOWNED
retail industries. Mr. Basom’s prior employment was STRONGMAN
with ARGO Data Resource Corporation the largest
banking software company in the U.S.A. He has
managed multi-million dollar projects with top-tier
financial institutions that have over 90+ Billion dollars
in assets. He is responsible for business development,
contracts, marketing and support of current and new
business opportunities for HAVOC Distribution, Inc.
He graduated with a Bachelors degree in Management
Information Systems from Texas Tech University.
 Energy Drinks
INDUSTRY ANALYSIS
BY
CHET GUTOWSKY
CHARTERED
FINANCIAL ANALYST

Analyst Certification Chet Gutowsky is a Chartered Financial Analyst (“CFA”) with over 30 years
experience in banking, business and investment evaluation. The views
expressed in this report are those of the analyst and are based upon publicly
available information on which the analyst has relied as true in the formation of
his opinions. No part of my compensation is, or will be, directly or indirectly,
related to the specific recommendations or views expressed in this research
report.

Compensation for the preparation of this report was made on a flat rate basis
and was not conditioned in any form on the nature or content of the analysts
recommendations or conclusions. The Analyst does not own shares in the
company and is not allowed to trade in its shares or securities. No
representations, express or implied are made by the analyst as to the accuracy,
completeness or correctness of its research. Opinions and estimates expressed
in this report represent the analysts judgment as of the date of this report and
are subject to change without notice. This research report is not an offer to sell
or a solicitation to by any securities. The securities discussed may not be
eligible for sale in all jurisdictions and the analyst expresses no opinion in that
regard. The analyst does not warrant its opinions and conclusions and does not
accept any liability of any kind for any direct or indirect loss resulting from any
use of this research report by any party.

(c) 2007 Chet Gutowsky