ANHUI TAIYANG POULTR (GREY:DUKS)

Dear Mr. Chairman Wu:

Please consider this letter as formal notice of my resignation as a member of the Board of Directors and the Audit Committee Chairman of Anhui Taiyang Poultry Co., Inc. (“DUKS.OB”, “DUKSE.OB”, “DUKS.PK”, or the “Company”), effective immediately.

As you know, I have taken on a new role since March time frame this year, and I’ll have very limited bandwidth to be able to fully play a role as a board director of the Company.  Since it went public, I, together with the audit committee of the Company, have repeatedly asked to address several internal control and governance issues, which included but not limited to the following areas:

·  Some lending and business practices
·  Review and approval process
·  Timely and proper disclosure
·  Management integration to enhance internal communication and understanding in two vastly different cultures and languages

I was very glad that we finally had the Board meeting for two days in March to start addressing those issues, and I thanked Chairman and all members of the Board of Directors for putting efforts and making it happen. However since then, the Company management has been unable to close out the open items in the 2011 annual audit, which led to the incompliance of Company’s listing requirement. All those events would require high level of efforts and resources and I cannot continue to serve as a director of the Company with current bandwidth. Accordingly, I resign my position as the director and as Chairman of the Audit Committee, effective immediately.

I thank you for your understanding and ask that you file a copy of this letter as an exhibit in a form 8-K in accordance with the Securities and Exchange Act of 1934.

Very truly yours,

/s/ Michael He

In connection with the preparation of consolidated financial statements for the year ended December 31, 2011 of Anhui Taiyang Poultry Co., Inc. (the “Company”), U.S. management became aware of certain omissions in the quarterly reports on Form 10-Q for the quarters ended June 30, 2011 and September 30, 2011, as amended and filed with the Securities and Exchange Commission (collectively, the “Reports”).

On June 24, 2011, a tornado struck the premises where the Company was constructing a new breeding location called Duck Farm 8, located in Anhui Province in the People’s Republic of China. The total cost of the construction project immediately prior to the tornado was $4,502,103, of which $1,836,752 related to foundation and groundwork and $2,665,351 related to buildings. A substantial portion of the buildings were destroyed by the tornado. As reimbursement for the damage caused, the Company received remuneration from the local Chinese government in the amount of $1,531,018 in December 2011, as well as an insurance settlement from its insurance carrier in the amount of $428,685, of which $76,551 was received in December 2011 and $352,134 was received in February 2012. This information was not disclosed to the U.S. management or the Audit Committee of the Company’s Board of Directors (the “Audit Committee”) by Chinese management, and accordingly,the accounting for this natural disaster and disclosures were not made in the Reports.

The Company estimates the damage to Duck Farm 8 to be approximately between $1.8-2.0 million, based on a loss estimation analysis report completed by the Company on March 23, 2012. Based on this estimate, the net gain or loss from the damage event, when netted with the subsidy and insurance settlements, would range from a loss of approximately $40,000 to a gain of approximately $122,000, Construction in progress would be reduced by $1.8-2.0 million, and subsidies and insurance settlements receivable (current assets) would be increased by approximately $2.0 million. The net impact to the statement of operations would be the estimated net (loss) gain of ($40,000) - $122,000.

Financial results for the three months ended September 30, 2011

Mr. Wu Qiyou, Chief Executive Officer and Chairman of the Board of Directors, stated, “We are pleased with our financial results for the first nine months of 2011 as they have provide a positive trend related to our gross margin improvement. During the nine month period, we experienced a 57.3% increase in revenue of our higher margin Breeding Unit to $12.2 million from $7.7 million in the comparable period in 2010. This portion of our business accounted for 52.4% of total revenue during the 2011 period as compared to 25.1% in 2010. Thus far in 2011, the average price for ducklings in China has improved to $0.86 as compared to $0.60 over the same period in 2010. We foresee market pricing to stabilize in the near term and remain at a financially beneficial level for us to continue operating as we have for the past few quarters of streamlining higher revenue from our Breeding Unit. Our third quarter and year to date results in 2011 include non-cash bad debt reserve charges of $1.2 million charged against certain accounts receivable, loans receivable, supplier prepayments, and sale price receivable from the 2010 sale of our fertilizer plant, which contributed to last year’s revenue and net income results. We are pleased to report that we have increased our shareholder’s equity from $2.52 per share to $2.70 per share, despite the material reserves taken in the third quarter of 2011.”

Second Quarter 2011 Results

Mr. Wu Qiyou, Chief Executive Officer and Chairman of the Board of Directors, stated, "In similar fashion to the first quarter of 2011, the price of ducklings remained relatively high during the second quarter of 2011. We therefore found it financially beneficial to continue to focus our sales effort on our Breeding Unit which resulted in higher gross margins, but contributed lower overall revenue growth. Through our three vertically integrated units, we have the luxury of evaluating market pricing trends and adjusting our business strategy according to the vertical that provides the greatest profit possible for our shareholders."

GeoTeam® Note: First quarter 2011 vs. 2010 EPS was $0.15 vs. $0.06.

Mr. Wu Qiyou, Chief Executive Officer and Chairman of the Board of Directors, stated, "Our business operates through three business units, Breeding, Feed and Food, all of which are vertically integrated. During the 2011 first quarter, we continued to enjoy a high price for ducklings of approximately an average of 7.05 RMB or $1.07 per duckling, and 7.68 RMB or $1.17 per kilogram for processing ducks. For this reason we continued to sell a higher proportion of ducklings through our Breeding Unit, which carried higher margins at current prices than equivalent food product sold by our Food Unit, where prices remain relatively stable. As a result, during the 2011 first quarter, Breeding Unit revenue increased 265%, overall gross profit increased by 54%, and gross profit margins improved to 42% from 20%. Going forward we will continue to monitor industry trends and operate our business in the most profitable manner."

Food Unit revenue was down for the 2011 first quarter as compared to the 2010 first quarter as a result of higher market prices for ducklings, which resulted in ducklings being sold to the market rather than being used internally for Food Unit products. When market prices of ducks is unusually high, on a consolidated basis the Company can make higher profits by selling ducks into the market rather than processing them into food products, which have a more stable market price, and thus will yield lower margins when the input costs increase. Because the total number of ducks produced by the Breeding Unit is fairly constant, the Company can maximize profits by selling more live ducks when their market price is high, and by selling more food products when the market price of ducks is low. Accordingly, sales of Food Unit products decreased substantially from 2010 to 2011 as a larger portion of the ducks produced at our facility were sold directly by the Breeding Unit due to the higher market price in 2011 relative to 2010, rather than being processed and sold as food product.

Our working capital deficiency as of the end of 2009 was alleviated in 2010 by the equity financing, the debt restructuring, and continued profitable operations. As a privately held Chinese company prior to the Reverse Merger Transaction we had limited access to equity capital, and we funded our expansion through bank loans, a substantial portion of which were less than one year in term, but were renewed, repaid, or replaced with new loans on an annual basis. This approach resulted in a working capital deficiency on our balance sheet in past years. While we did not have any contracts or firm commitments to renew, extend or replace such debt, we have historically not experienced difficulty in doing so.

We believe that our current working capital is sufficient to sustain operations for at least the next 12 months

Full Year 2010 Results:

• Revenue increased 44% year-over-year to $41.7 million.
• Gross profit rose 119% to $9.2 million; gross margin totaled 22%, versus 15% a year ago.
• Operating profit increased 39% to $3.9 million.
• Adjusted net income (non GAAP) totaled $7.1 million (see GAAP to non-GAAP reconciliation attached to this press release).
• Net income increased 73% to $4.3 million, versus $2.5 million in 2009

GeoTeam® Note: 2010 vs. 2009 Adjusted EPS

Full Year:  $0.80 vs. $0.35

"2010 was an eventful year for Anhui Poultry as several significant milestones were achieved, while additional growth initiatives were set in motion for 2011 and beyond. Our ability to enact our strategy coupled with the increased industry demand for our duck products and positive pricing trends allowed us to increase revenue 44% to $41.7 million in 2010," Mr. Wu Qiyou, Chief Executive Officer and Chairman of the Board of Directors commented, "Our revenue increase was primarily driven by the increase in our Breeding Unit revenue by 63% to $12.6 million and revenue in our Feed Unit to $13.9 million as compared to approximately $51,000 in 2009. During the third and fourth quarters of 2010, the pricing of ducklings hit a historically high price of over 8 RMB or approximately $1.18 per duckling. As a result we found it more financially beneficial to explore options to sell our ducklings as opposed to raising the ducks to be used for the Food Unit of our business. Thereby revenue in our food business was reduced while increasing the revenue generated through our Breeding Unit. Going forward we will continue to evaluate the industry pricing trends so that we manage our business to maximize our financial results."

Company Snapshot:

Breeds, hatches, and cultivates ducklings for resale and processing.

Post Merger Share Calculation:

•    527,090: Pre reverse merger outstanding shares
•    145,000: Shares cancelled as part of the Share Exchange
• 6,577,551: Newly issued shares of Common Stock
• 2,866,656: Shares from convertible notes associated with private placement
•    847,925: Shares from warrants with an exercise price of $4.00.

GeoTeam® best effort calculation of total post reverse merger shares assuming full conversions:  10,674,222

Financial Snapshot

• Revenues for the years ended December 31, 2009 and 2008 were $28,859,699 and $37,863,219, respectively.

• Revenues for the six months ended June 30, 2010 and 2009 were $19,646,570 and $7,268,909, respectively.

• Net income for the years ended December 31, 2009 and 2008 was $2,489,323 and $5,961,391, respectively. The lower income in 2009 was the direct result of lower external sales by the Feed and Breeding Unit, offset by an increase in Food Unit sales as that unit gained momentum in its second full year of operation.

• Net income for the six months ended June 30, 2010 and 2009 was $3,152,528 and $142,704, respectively. The higher income in 2010 was the result of (i) increased profit from the Food Unit as sales increased and margins improved, (ii) external sales from the Feed Unit in 2010, where no external sales were made in 2009, (iii) a gain on the sale of the fertilizer plant in 2010 in the amount of $877,874, and (iv) a gain from the collection of an account previously written off in the amount of $895,430. These improvements were offset by higher general and administrative expense relating to preparation for Anhui’s merger into a public reporting company in the U.S., and higher interest expense associated with increased debt balances. Anhui intends to continue to market its Feed and Breeding Unit products to external customers, as well as to continue to expand its processed food products.

On the Closing Date of the reverse merger, we entered into a Performance Milestone Shares Escrow Agreement with Laidlaw, on behalf of the Purchasers, and Firm Success International, Ltd., the largest shareholder of the Company, pursuant to which Firm Success agreed to deposit and pledge 1,466,097 shares of the Company’s common stock into an escrow account (the “Pledged Shares”), which Pledged Shares shall represent 30% of Firm Success’ shares, as security for the Company achieving Adjusted Net Income of not less than $6,936,889 for the fiscal year ending December 31, 2010.