Runliang Pharmaceutical is a company incorporated under the laws of the PRC with limited liability, which is a 80%-owned subsidiary of Beijing Outsell, an indirectly wholly-owned subsidiary of the Company. The senior management of Runliang Pharmaceutical is comprised of Mr. Zhao Yixing, who has over 20 years of comprehensive marketing experience, and certain senior management members delegated by Beijing Outsell. Recently, Beijing Outsell received a notice from the original minority shareholders of Runliang Pharmaceutical in relation to the proposed disposal of their 20% equity interest in Runliang Pharmaceutical. To closely link the benefit of the Shareholders and the Company with that of the senior management of Runliang Pharmaceutical and to enhance the proactiveness of the senior management of Runliang Pharmaceutical, Tianrun Diliang, a company controlled by Mr. Zhao Yixing, has agreed to acquire such equity interest from the original minority shareholders, and Beijing Outsell has decided not to exercise its pre-emptive right for such acquisition. Tianrun Diliang will also establish an equity incentive mechanism, pursuant to which the senior management of Runliang Pharmaceutical will receive some equity interests of Tianrun Diliang when specific performance targets are achieved.