EFTA00605032.pdf

EFTA00605032  IS B IkE DISCLOSURE THIS PRESENTATION MATERIAL CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE OPINIONS, FORECASTS, PROJECTIONS OR OTHER STATEMENTS, OTHER THAN STATEMENTS OF HISTORICAL FACT, ARE FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY BELIEVES THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, THEY DO INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES. THIS PRESENTATION IS ISSUED PURSUANT TO RULE 135C UNDER THE SECURITIES ACT AND SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY OF THE COMPANY'S SECURITIES, NOR SHALL THERE BE ANY SALE OF THE COMPANY'S SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO THE REGISTRATION ON OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. Isbre Holding Corp. Confidential EFTA00605033  IS 8 IkE Osa Valley lsbre Holding Corp. 3 Confidential EFTA00605034  1S B IkE Table of Contents Page I. EXECUTIVE OVERVIEW 6 II. MARKET OVERVIEW 10 III. BUSINESS MODEL AND GROWTH STRATEGY 15 IV. FINANCIAL INFORMATION OVERVIEW 30 V. MANAGEMENT, EMPLOYEES AND OWNERSHIP 32 VI. EXHIBITS 37 Isbre Holding Corp. Confidential EFTA00605035  IS B IkE I. EXECUTIVE OVERVIEW Isbre Holding Corp. 5 Confidential EFTA00605036  ISB E Isbre Holding Corp. ("lsbre" or the "Company") is a super-premium water company with a unique bulk water shipping and sales capability. Isbre (the Norwegian word for "glacier") owns an exclusive 99-year right to extract up to 5 MM gallons per day from the purest natural water source in the world. Isbre's source is a glacial aquifer in the Osa Valley, at the end of the Hardanger Fjord on the west coast of Norway. Hydrogeological research and working and monitoring wells have confirmed the quality and quantity of Isbre water. The unique geography of Isbre's source (adjacent to a deep water port) allows bulk-shipping for bottling in leading bottled water markets, providing superior cost economics and multiple operating efficiencies and advantages. Isbre has identified a site on the Delaware River in Bristol, PA for construction of a U.S. bottling facility. Isbre's strategy is to focus initially on the U.S. super-premium water market (this category contains all imported waters). The U.S. is the world's largest super-premium bottled water market, with approximately $470 MM in wholesale sales. In contrast to the fractionated European bottled water industry, the U.S. is a homogeneous bottled water market with the greatest demand for super-premium water. Concentrating initially on the U.S. simplifies Isbre's business model, from marketing and distribution to shipping and production, without sacrificing near- and medium-term growth opportunity. Isbre is well positioned for penetration and rapid growth in the U.S. Isbre's strategy is to be the low-cost producer and high-volume distributor in the U.S. super- premium water market. The right water pedigree: Isbre's water is the "purest" natural water ever tested. There are two major competitors in the U.S. super-premium market: Fiji and Evian. Fiji and other smaller competitors have taken market share from Evian. While Evian has lost market share (from $220 MM to $130 MM in sales in the past 7 years), Fiji has grown from $13 MM to $131 MM during the same time period. The newest super-premium growth story, Voss, has achieved about $30 MM in revenue with a mixed U.S. and UK distribution strategy. Specifically, Isbre water has 4 parts per million (ppm) of total dissolved solids ("tds"). For comparison, Fiji has 230 ppm, Evian has 310 ppm, and Voss has 64 ppm. Consequently, Isbre has a better pedigree in terms of product quality than the two growth leaders in the U.S. bottled water market. The right cost economics — shipping bulk water to the U.S. for bottling: Bottling away from the source is an innovation in the super-premium category and will immediately make Isbre the most efficient competitor in this market, even at a relatively small market share. Isbre is deploying a staged bulk shipment strategy. Initially, Isbre imported product bottled at the Osa Valley plant. Importing bottled product (from the Osa source to a warehouse in the Northeast) has a landed cost of approximately $11.00 per case; this is order of magnitude the same cost experienced by Isbre's competitors. In September 2008, Isbre began shipping water in bulk via flexitanks (food grade plastic containers holding 24,000 liters [6,300 gallons)) to existing U.S. bottling plants with excess production capacity. This approach ("Flexitank to U.S.") allows Isbre to expand capacity and lower its unit cost while being capital lean. Due to lower U.S. raw material (bottles, caps, cartons, etc.) and labor costs, the Flexitank to U.S. strategy produces U.S. landed cost savings of approximately $4.00 per case versus the cost of importing bottled product. In 2010, following development of a bottling plant at the Bristol site, including installation of a stainless steel water storage tank and related infrastructure, the Company will be ready to deploy its "Tanker to U.S.' bulk shipment capability. Isbre water will be loaded directly into tanker ships at the Osa Valley source and transported to the Bristol plant for bottling. The Tanker to U.S. strategy will produce an additional $3.00 per case in savings, making Isbre far and away the lowest cost provider of any imported water. Isbre Holding Corp. 6 Confidential EFTA00605037  ISBRE A successful focus to-date of building a mass-distribution platform for its super- premium product (high volume, low cost, high price): Isbre's focus has been penetrating East Coast high-volume distributors. Isbre has placement in the three largest Northeast supermarket chains: • ShopRite. 220 stores. Began in January 2008, has progressed to where the Company is now in 177 stores. Expects to be in the remainder by mid-2009. • Stop & Shop. 541 stores. Roll out began in late June 2008. Isbre is now in all divisions. • A & P. 390 stores. Includes A&P, Waldbaums, and Super Fresh. Roll out began in February 2009. Other notable supermarkets placements include: • Whole Foods. 17 NJ and NY stores; 95 regional balance pending. • King's. 26 NJ stores. • Foodtown. 20 NJ stores; remaining 40 by midyear. • Giant Carlisle. 140 Southwest PA stores. • Ukrops. 23 VA stores. • Kroger. 90 stores (Houston division). • Fresh Market. 91 East Coast stores. Other retailers who have approved Isbre and when shipments will commence: • Duane Reade. 240 stores. 2O'10. • Hannaford. 170 stores. 2Q 10. Additionally, lsbre is sold in over 3,000 "street" accounts (convenience stores, delicatessens, pizza parlors, etc.) and over 250 restaurants and hotels. Isbre has established itself firmly in the super-premium category, selling retail at $5.99 per six- pack, which is approximately the same price point as Fiji and Evian. The Company sold 64,000 cases of water in the US in 2008 and 40,000 cases in 2009. Note: As lsbre awaits funding, it had to curtail sales and marketing efforts in 2009. Bulk shipping combined with broad-based distribution and its superior water pedigree will give Isbre an unassailable position as the low cost competitor in the U.S. super-premium bottled water market, and thus allow it to grow market share efficiently. As noted above, importing bottled product (as all other super-premium waters do) has a landed cost of approximately $11.00 per case. This cost is reduced to approximately $7.00 per case using flexitanks, and to approximately $4.30 per case with bulk tanker shipping. Isbre's unique ability to employ bulk tanker shipping produces a total landed cost of less than 50% of the cost of other imported waters. Consequently, Isbre will be by far the lowest cost competitor in the U.S. super-premium market. As the lowest cost producer in the super-premium category, lsbre will be able to spend more money on marketing on a per-unit basis (including focused promotions to retailers) to rapidly gain market share. The tanker bulk shipment strategy will also permit production flexibility and responsiveness and packaging size and innovation unprecedented in the imported water industry. Isbre's bulk shipping capability also gives the Company the ability to sell water in bulk. The Company is not aware of any other high quality water location that permits bulk extraction and transport. Consequently, until a comparable capability is developed, lsbre will enjoy a compelling Isbre Holding Corp. 7 Confidential EFTA00605038  ISBRE competitive advantage in the creation and exploitation of an international market for bulk water sales. The profit margin on bulk water sales exceeds 90%. Offering and Use of Proceeds The Company is seeking to raise $14,000,000. Use of proceeds is to finance the remaining docking and infrastructure work in Norway, the construction and equipping of the Bristol plant (retrofit of an existing facility), including a stainless steel holding tank allowing for bulk shipment, the launch of a comprehensive marketing initiative, and working capital. An itemization of the use of proceeds appears in Exhibit I. The Company expects to be EBITDA positive by the end of 2010 and beyond. Corporate Structure lsbre Holding Corp., headquartered in Montvale, N.J., is an operating company and holding company. The Company was incorporated in Maryland in 1996. The Company is a pink sheet, non-reporting company trading under the symbol "ISBH'. Volume is low and trades are infrequent. The current management team joined in 2006/7. lsbre has registered trademarks in several jurisdictions protecting its award-winning bottle design and the phrase "The World's Best Drinking Water®.' A list of lsbre's trademarks appears in Exhibit II. The Company's website is www.isbre.com. lsbre Holding Corp. 8 Confidential EFTA00605039  IS B IkE II. MARKET OVERVIEW Isbre Holding Corp. 9 Confidential EFTA00605040  IS IkE The U.S. Bottled Water Market The U.S. bottled water market is the world's largest market and has grown in volume consistently over the last 20 years (see Table 1). As shown in Table 2, the U.S. market has grown from $4.2 billion in wholesale sales in 1997 to $11.7 billion in 2007. Table 1: US Bottled Water Per Capita Consumption Gallons Per Capita, 20-Year Trend '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 19 '00 '01 '02 '03 '04 '05 '06 '07 Table 2: Total U.S. Bottled Water Sales Wholesale Dollar Sales (in Millions) and Growth, 1997-2007 $11,705.915.0% $12,000.0 15.0% 14.8% $10,857. 13.9° $10,007. 12.6° $9,169. $9,000.0 8,526. 12.0% $7,901 4I =Volume • 10.5% $6,880.: $6,1131 Growth $6,000.0 $5,314.7. 9.0% 22141666.1i 1. 8 .`.°/ 0 7.E% 8% $3,000.0 I I I I I 6.0% 97 98 '99 00 '01 02 '03 '04 '05 '06 '07 Source: Beverage Marketing Corporation lsbre Holding Corp. 10 Confidential EFTA00605041  ISB IkE Bottled water is the largest beverage growth market in the U.S. (according to Beverage Marketing Corporation, it has 15% U.S. share in 2007 up from 8% in 1999). Although it is second to carbonated beverages (which Beverage Marketing Corporation states has a 27% U.S. share), bottled water will become larger in the next 5 years if relative growth rates continue (7 to 8% CAGR vs. carbonated beverages' flat to negative growth rate in recent years). The super-premium water market has grown as quickly on a volume basis but has been more robust in maintaining its price per unit of volume than the rest of the market, which has dropped by five percent from 2002-2007. Table 3 shows the growth of the U.S. bottled water market relative to the growth of the U.S. Super- Premium bottled water market. Table 3: US Bottled Water to the Super-Premium Water Market Comparison U.S. Super-Premium Bottled U.S. Bottled Water Market Water Market 2007 Volume (MM Gallons) 8,823 181 CAGR Volume (2002-2007) 8.7% 8.0% 2007 Wholesale Revenue $11,550 $470 $1Gallon $1.24 $3.35 CAGR $ / Gallon (1%) 2%(a) Source: Beverage Marketing Corporation. (a) Largely due to emergence of Fiji vs. Evian, where Fiji has actually gained market share with a higher price point than Evian. which has kept prices almost flat during this period. As shown in Table 4, in 2007 the super-premium category increased in volume at a greater rate than the rest of the U.S. bottled water market. Table 4: U.S. Bottled Water Market (Volume) Category Gallonage (million) Market Share Growth 2006 2007 2006 2007 2007 Domestic 8,089.20 8,636.90 98.00'% 97.90% 6.80% Super-Premium 164.3 181 2.O0, 2.10% 10.40% Total Market 8,253.50 8,823.00 100% 100% 6.90% Source: Beverage Marketing Corporation Over the longer term, the expectation is that bottled water will continue to grow in popularity in the United States. Convenience has been and continues to be the primary reason for this growth. That said, two factors will militate against sustained growth: (a) the current downturn in the US economy and (b) environmental concerns regarding bottled water versus tap water (energy, plastic, etc). While these concerns may be less relevant to the super-premium bottled water market (as opposed to the premium or 'everyday" price sectors), it is prudent to take into account both factors in forecasting near- and medium- term growth. Isbre Holding Corp. 11 Confidential EFTA00605042  ISB The Competitive Landscape The U.S. bottled water market is dominated by the larger beverage companies. Nestle Waters (Poland Spring and other regional brands) continues to be the leading bottled water company with market share around 30%. Pepsi's (Aquafina) market share is approximately 12% . While Coke (Dasani) is #3 behind Nestle and Pepsi at about 11%, its growth rate has been higher over the past five years. Coke's market share was 4.4% in 2000 and increased to 10.5% in 2005. All three companies have gained market share in recent years at the expense of smaller competitors. While the major beverage companies dominate the mainstream water market, the opportunity for smaller players to acquire meaningful market share in the super-premium segment is appealing (see Figure 1A). In fact Fiji and Voss, both smaller firms, have taken share from Danone's Evian (distributed by Coke), which traditionally had been the top player in this market. Fiji is the stellar example of small player growth in the super-premium market (see Figure 1B). In 2006, Fiji passed Evian to become the leading imported water in the U.S. Fiji has more than tripled its revenues since its acquisition by Roll Industries in 2004. While Evian has slipped dramatically, it has slowed its revenue shrinkage trend. Both Evian and Volvic have been owned by Danone Group since 1992; however, Volvic is not widely marketed in the U.S. Privately-held Voss has grown from almost zero in 2002 to over $30 MM in revenue by 2007; however, Voss has focused almost exclusively on the on-premise (restauranVhotel) business. While Voss hopes to grow its supermarket presence, it has not achieved success in 2007/2008 in its pursuit of this channel (which is the largest U.S. channel for super-premium water). Figure 1: US Leading Bottled Super-Premium Water Brands Figure 1A: Super-Premium Brands US Volume Figure 1B: Fiji Water Revenue (2002 —2007) (2002— 2007) ( s 00m0 0:0 (1nits) wo V4) 13). 1 $20 I . E UM co. $63 .0 14 2,. IM o 10 20:0 2003 2CO3 2006 2000 2030 102 2003 MN 105 20:6 2007 .1. • Ens a ta Sim. Pars mass hrs • 003 •4e. Source: Beverage Marketing Corporation 'Increased from 7.4% to 12% during 2002-2005. more Holding Corp. 12 Confidential EFTA00605043  ISBRE Brand Positioning of Bottled Water Players in the US Market Isbre is focused on the top of the U.S. bottled water market. This is naturally a smaller but also less elastic market. Because of the uniqueness of its water, lsbre is able to enter the market as a high quality provider, despite competing against bottled water companies that are many times its size. Because lsbre is directly competing only against other super-premium brands, its true competition is limited to Fiji, Evian, and, to a lesser extent, Voss (see Figure 2). Figure 2: US Super Premium Bottled Water Segmentation (2008E) 200/ Fiji Voss 42% 6% Evian 32% Source: Beverage Marketing Corporation and other industry estimates. The super-premium market captures the highest price point for bottled water on a unit revenue basis. Fiji and Evian are selling 500 ml bottles at $5.99-$6.99 per six-pack. Voss actually sells in the ultra-premium category, with its focus on the glass bottle market in restaurants and hotels. As in most other retail categories, bottled water sales are very competitive at the lower end of the price spectrum. Price competition lessens as product quality and differentiation play an increased role in consumer choice in the higher cost categories. Figure 3 shows that Fiji, at the higher end of the price spectrum, has been able to attain spectacular sales growth while passing along cost increases. While Evian has been trying to re-capture share through more aggressive pricing, Evian has limited flexibility because of its high cost structure. In fact, the cost structure for Fiji, Voss and all other imported waters does not allow these companies to compete on price. Figure 3: Fiji Price to Volume Elasticity Analysis Volume Change Vs. Price Change 60.00% - e 60.00% s 40.00% 30.00% irg 20.00% e m00% 00% to 4 4 4 4 4 1, -0 1:4) fb-4) 1<t) 15) N. h.•S) 1O. °O 4) O. CO gypC5) . %A Price Source: MI G/0/Mx. % volume change in Fiji water soles positively correlates to 96 change in price during 2006. Isbre Holding Corp. 13 Confidential EFTA00605044  IS B IkE III. BUSINESS MODEL AND GROWTH STRATEGY Isbre Holding Corp. 14 Confidential EFTA00605045  ISBRE Isbre Holding Corp. is a producer and marketer of super-premium bottled water with a unique capability to ship and sell water in bulk. Exclusive Water Rights Isbre has secured exclusive private and public rights to its water. Private rights are granted by the Osa Valley landowners under a 99-year water rights agreement. Public rights are granted under a water extraction permit issued by the Norwegian government that allows up to 5,000,000 gallons of water to be extracted per day. Isbre's existing water source is a sub-glacier, artesian spring at the end of the Hardanger Fjord in the Osa Valley, in the municipality of Ulvik, on the west coast of Norway. There are numerous other Osa Valley water sources controlled by lsbre. Isbre controls all of the land relevant to these resources by 99-year easement rights. World's Purest Natural Water The water from Isbre's source is the purest natural water ever tested. Hydrogeological research, working and monitoring wells, and environmental studies have confirmed the quality and quantity of the water. Tests of the Isbre water consistently show that, with total dissolved solids ("tds") of not more than 4 ppm (parts per million), Isbre is significantly lower in tds than other super-premium waters (see Table 5). This means that Isbre's water is free of the mineral, metallic or salty tastes found in water of its super-premium competitors. Isbre has registered with the U.S. Patent and Trademark Office and the European Union the trademark "The World's Best Drinking Water®" (see Exhibit II). Table 5: Comparison of Isbre Purity to Key Super-Premium Water Competitors (a) Brand Purity Measure (b) ISBRE 4 Voss 64 volvic 140 Fiji 230 Evian 310 San Pellegrino 990 (a) Lab Tested by Groundwater Analytical, Inc. and Eurofins Norge. (b) Units = tds in Parts Per Million. tds is the total amount of charged ions. minerals. salts or metals dissolved in a volume of water, expressed as (mg/L). also referred to as parts per million. Win the U.S. Market The U.S. is the focus of Isbre's production and distribution plan. This strategy recognizes the uniformity and size of the U.S. super-premium water market. The U.S. opportunity manifests itself in the following ways: The U.S. is the single biggest still water market opportunity. Europe may have more overall bottled water sales, but a vast majority of the market are sparkling and mineral waters. Group Danone, the number one player in Europe, uses multiple brands to navigate the different regions in Europe, showing the market's fragmentation. Isbre Holding Corp. 15 Confidential EFTA00605046  IS B kE U.S. marketing translates more easily across the entire market whereas Europe requires multiple marketing efforts. Germany, Britain, France, Italy, and Spain have regionalized marketing cultures. The U.S. has more opportunity to develop scale efficient bottling (e.g., lower labor costs, more spare bottling capacity) and distribution (lower fuel/transportation costs). Isbre's Plan: Marketing Strategy In the North American bottled water market, the Company's strategy is to be a super-premium water brand. Isbre's key competitors are Fiji (the top and fastest growing brand), Evian (which has been losing share), and Voss (smaller, growing share). The roll-out strategy has been planned as a 4 stage process: Stage 1: Establish an all-channel distribution network across the greater New York/Philadelphia Metropolitan Markets (having a combined population of over 25 million people). This stage has been successfully completed. Stage 2: Achieve widespread, multi-channel retail placement in the Northeast Market. Isbre is now available in over 2,000 supermarkets (over 60% of the supermarkets in the region), 3,000 street accounts, and over 300 restaurants, hotels, etc. This stage has also been completed. Stage 3: Drive case sales through chain or location specific price promotions and other promotional events. This stage is underway. Stage 4: Launch a highly focused PR campaign, targeting the most likely lsbre consumer audiences. This effort will be supported with cost efficient, "rifle shot" specific media spend. Steps 1 & 2 are well along and Isbre is now ready to initiate steps 3 & 4. Placement alone will not achieve high sales per placement on a widespread basis. The introduction of steps 3 & 4 will allow lsbre to take advantage of existing opportunities to dramatically increase sales. Isbre is perfectly poised to continue its rollout and reap the benefits of the widespread placement success achieved to date. Isbre's marketing strategy is aligned with establishing its position as a U.S. super-premium water brand. While lsbre is a new entrant, it will leverage the branding successes of Fiji and Voss. These firms have proven the appeal of imported, premium priced bottled water from an exotic source. Fiji, in particular, has demonstrated that a water brand from a pristine aquifer source is able to attract an audience that is growing faster than the overall water market This leverage gives lsbre greater ability to optimize distribution, since there is now clearly established, broad-based awareness of and demand for super-premium water (no longer the province of the most expensive venues but now demanded by mass market venues such as supermarkets). Isbre will sell into the demand that these brands have created. At the same time, lsbre will provide a high-end alternative to consumers and retailers alike by investing heavily in an optimized delivery channel. While Isbre will spend on traditional marketing efforts, it will focus on promotional marketing, which is much more tactical. PR and media celebrating the unique selling proposition of lsbre will be introduced into each market as critical placement levels have been achieved. Isbre's efforts will initially be directed towards securing shelf space rather than image creation. These efforts will put Isbre into the right stores in the right places to grow its market presence and share from the bottom up. In addition to distribution focused promotional pricing, Isbre will utilize a full range of marketing activities, including media advertising, marketing lsbre Holding Corp. 16 Confidential EFTA00605047  ISBRE communications, display advertising, point-of-sale material, trade show exhibition and web-site development. Isbre's strategy is to optimize its presence in its chosen outlets while creating a campaign that is unique and attractive to the target consumer. Isbre's marketing strategy will highlight significant expenditures for promotional costs (see Table 6: approximately 36% of the total marketing budget). Price promotions are a proven method to optimize sales at chain supermarkets, and align Isbre with chain supermarkets, which are the biggest sellers of super-premium water. Promotional costs cover markdown costs at chain stores (or independent retailers) that will be promoted in weekly chain ads and promotional programs for street accounts and on-premise accounts. For example, a typical promotional schedule for a supermarket chain is comprised of two weeks per quarter of reduced retail price promotion, resulting in a significant sales increase. Price promotions are often accompanied by off-shelf display, using either a "winged" or a lull end" display. Winged displays sell 4-5 times more product, while full end displays bring 10-12 times more sales. The costs of these promotions are shared by the retailer and the distributor, as all take a lower margin during promotional periods. As a result of Isbre's unique bulk water transport economies, Isbre will enjoy a powerful cost advantage versus other imported waters, allowing price promotion at reduced but still profitable pricing levels. Super-premium sector competitors will be unable to match these promotions. Table 6: Isbre Marketing Budget 2010 2011 2012 2013 2014 Promotional Costs S 687.500 $ 1,571,250 $ 2,338,678 $ 3.331,106 $ 4,657.510 Supermarket Slotting Fees S 101.250 $ 202,050 S 314,100 $ 471,150 S 659.610 Trade Advertising S 308.000 $ 764,400 S 974,960 $ 1,403.344 $ 1,868.682 Promotional Activities S 260.000 $ 500,000 S 790,000 $ 1,000.000 $ 1,210.000 Media S 100.000 $ 675,000 $ 2,650,000 $ 3,450.000 $ 4,300.000 Total $ 1,456,750 $ 3,712,700 $ 7,067,738 $ 9,655,600 $ 12,695,802 Illustration 1: Rachael Ray Daytime Talk Show One strategy to gain super-premium market share is via celebrity acceptance. Isbre is the water of Rachael Ray's daytime talk show. Isbre's Plan: US Distribution Model/Approach To date, Isbre's distribution focus has been adding and upgrading distributors in the Northeast. It will soon follow with distribution in the Mid-Atlantic and Southeast. Beverage Marketing Corp. reports that 53% of super-premium PET bottled water in the U.S. is sold in these three regions (see Figure 4A). Isbre has active distributor relationships in all Northeast states, and a growing number of Southeast states and Texas (see Figure 4B). lsbre Holding Corp. 17 Confidential EFTA00605048  ISBRE Figure 4: Regional Analysis of US Super-Premium Market Figure 4A: US Super-Premlum Market by Region Figure 4S: Isbre Current and Planned US Distribution Regional Share as % of US Region Total Volume North East 24% South East 22% Great lake 10% South Central 8% Mid South 7% Plains 5% West 6% California 18% Total US 100% Source: Beverage Marketing Corporation: current lsbre distribution areas are highlighted in yellow. Isbre's regional and state distributors (see Table 7) play a role in warehousing, shipping and delivery, selling and shelf space placement. The distributors purchase lsbre and sell to the supermarkets, street accounts, and other retailers. The distributors buy lsbre water for approximately $12.00 per case and resell it for approximately $17.00 (on average -$5 per case, see Figure 5). Table 7: Isbre's US Distributors to Date Distributor Name Location Capitol Beverage Group DC NKS Distributors DE Chesapeake Beverage Group MD DPI Specialty Distributors Mid-Atlantic Peerless/Crescent NJ Oak & Boening NY Spirit & Sanzone NY Gretz Beer PA Penn Distributors PA Haddon House CT. MD. DE, DC Figure 5: Bottled Water Value Chain (% of the Retail Sales) ---- . Distributor /Retailer Price to Consumer Isbre Corp $5.25 $6 50 $24.00 Sells $12 251Case 22% } 27% 100%} ---7 Isbre has made considerable progress over the last 24 months adding and upgrading distributors and penetrating East Coast markets, and to the lesser extent, the Mid South market (see Table 8): Supermarket — on shelf in over 2,000 locations with approvals for another 300 in place and another 1,000 in negotiation. Isbre Holding Corp. 18 Confidential EFTA00605049  1SB kE 'Street Accounts" — on shelf in over 3,000 locations including convenience stores, delis, gyms, specialty stores, etc. Restaurants & Hotels — at over 250 locations. Within these regions, the Company expects that initially, 70% of its sales will go through supermarkets, and 30% will go through street accounts, restaurants and hotels. This mix will transition to 50/50 as brand awareness increases and alternate channel demand improves. The Company has achieved placement in the three largest Northeast supermarket chains: ShopRite, Stop & Shop, and A&P. ShopRite. 229 stores. Began in January 2008, has progressed to where the Company is now in 177 stores. Expects to be in the remainder by Q2 2010 (ShopRite has 45 different owners requiring an extended roll-out period). Stop & Shop. 561 stores. Roll out began in late June 2008. Isbre is in all divisions. A & P. 390 stores. Includes A&P, Food Emporium, Waldbaums, and Super Fresh. Rollout began in February 2009. Isbre is in all stores. Other notable supermarkets lsbre is in or will be rolling out to and the respective timings are as follows: Whole Foods. 17 New York and New Jersey stores. 2Q 2009. Fresh Market. 91 East Coast stores. 3Q 2009. D'Agostinos. 23 NYC stores. 2Q 2009. Hannaford. 170 Northeast stores. 2Q 2010. Drug/variety retailers who have approved Isbre and when shipments will commence: • Duane Reade. 240 stores. 2Q 2010. lsbre expects to sell 4 cases per store per week in the supermarket chains by the end of 2009. It expects to achieve that sales velocity when it goes through the full marketing/distribution cycle: store placement, promotion (getting the right high volume location in stores) and media/event spending. Anecdotally, lsbre has been able to achieve that success where it has focused its marketing efforts. In the summer of 2008 on Long Island, with no promotion, lsbre sold 9 cases per store per week in IGA, a 10 store chain in the Hamptons. Additionally, in January 2009, lsbre was introduced into the eight New Jersey Whole Foods stores and experienced exceptional results, averaging over 10 cases per store per week in January and February. Of particular note were the great sales achieved in two specific Whole Foods stores. In the Jericho, NY location, Isbre sold 150 cases in the first 10 days from a major lobby display. At the new store in Paramus, NJ, Isbre sold 50 cases during a four hour demo within two weeks of the stores opening. Isbre Holding Corp. 19 Confidential EFTA00605050  ISBRE Table 8: Retail Placement Summary 1-1-2008 6-1-2008 8-1-2008 11-15-2008 6-1-2009 Supermarkets 50 700 1500 1850 2000 Restaurants 50 200 220 230 250 Street 600 2000 2200 2250 2500 Convenience 50 200 200 215 215 Specialty 20 50 60 70 110 Food Stores Hotels 2 20 20 20 30 Golf Clubs 0 8 8 8 8 Some of the key restaurants/hotels are shown in Illustration 2: Illustration 2: Hotels and Restaurants Logos 0 .• Li. THE PRIME RIB T soaratters ( WATEk*diff§ SOON RUTEVS4 J STEAK HOUSE' -almaists Aka t VAKRI DA(Aftl ''Sit anniranes ANJOU : t 1...1 STE AICHOI. St KBRE U.S. Market — Production Plan Isbre's production plan in the U.S. is based on a phased migration from its Norway-bottling factory to the "Tanker to U.S." production model. The "Tanker to U.S." model is an end-game, industry changing, low unit-cost model (see Table 9). In the interim, Isbre will be operating its "Flexitank to the U.S." model, which will dramatically improve near-term economics vs. its Norway production model. Isbre Holding Corp. 20 Confidential EFTA00605051  ISBRE Table 9: Comparison of Unit Profitability ISBRE Norway Flexitank Bulk Tanker Bottling Shipping Shipping Price to Distributor $12.25 $12.25 $12.25 Transportation Cost 3.44 2.25 0.51 Packaging & Bottling Cost 7.79 4.87 3.78 Isbre Gross Margin $1.02 $5.13 $7.96 Note: Estimate of landed cost of 0.5litercase. I. Norway Production Model Isbre formerly owned a bottling facility in Norway at the Osa Valley source (see Illustration 3). • Using this bottling method, Isbre began deliveries of bottled water (1.0 liter and 0.5 liter PET bottles, transported by container) to the U.S. in May 2006. • Isbre completed the construction of a temporary bottling facility at the Osa source in December 2005. The construction of a permanent facility was completed in December 2006 and expanded in October 2008. • In February 2009, the Company entered into a distribution agreement with Norske Glace Limited, a UK company formed to distribute Isbre water in a number of European countries. In May 2009, an affiliate of Norske Glace assumed ownership and operation of the Osa Valley plant. Norske Glace personnel will load Isbre water into flexitanks and tanker ships (see discussion below). Illustration 3: Osa Valley Bottling Plant Isbre Holding Corp. 21 Confidential EFTA00605052  IS B IkE II. Flexitank to U.S. Model — e Quarter 2008 Isbre has outsourced production to existing bottling plants in the U.S. It will get the water to these bottlers using an interim bulk shipping approach: transporting the water in flexitanks. A flexitank is a single-use, heavy-duty plastic bag that is installed in a standard 20-foot container and holds 20,000 - 24,000 liters. Flexitanks are manufactured from FDA approved food grade resins and are widely used for transporting a variety of high-value liquids. Isbre has shipped flexitanks from its Osa source to a bottling plant owned by Leisure Time Spring Water, a licensed bottling company located in Kiamesha Lake, NY. Isbre has also made U.S. bottling arrangements with Union Beverage, a licensed bottling company located in Hillside, NJ. Flexitank shipments first will be used for bottling 1.0 liter product but ultimately will be used for all sizes. Flexit