Changfeng Energy Inc.

Changfeng Energy Inc.
McBroom Resources Inc.

January 29, 2008 17:09 ET

Changfeng Energy Inc. and McBroom Resources Inc.-Completion of Merger and Listing on TSXV

TORONTO, ONTARIO--(Marketwire - Jan. 29, 2008) - Changfeng Energy Inc. ("Changfeng") and McBroom Resources Inc. ("McBroom"), are pleased to announce that they have concluded their previously announced merger (the "Merger").

It is expected the amalgamated company will commence trading on the TSX Ventures Exchange (the "TSXV") under the symbol "CFY" at the opening of trading on the TSXV on or about February 4, 2008.

McBroom has filed Articles of Continuance effective January 14, 2008 to continue from the Province of Ontario to the federal jurisdiction of Canada, and McBroom and Changfeng have filed Articles of Amalgamation effective January 29, 2008 to complete the Merger, with the amalgamated company issuing one common share for each share of Changfeng and McBroom outstanding on January 29, 2008. The transaction was overwhelmingly approved by the shareholders of both companies at respective meetings held on January 10, 2008.

In connection with the Merger, an aggregate of 12,500,000 outstanding subscription receipts of Changfeng were automatically deemed to be converted into common shares of Changfeng prior to completion of the Merger, each subscription receipt entitling the holder thereof to one common share of Changfeng, and the net proceeds of the subscription receipt offering in the amount of approximately $6,700,000 were released to Changfeng. Research Capital Corporation acted as agent in connection with the subscription receipt offering, and as partial consideration for its services received an aggregate of 1,000,000 compensation options, each such compensation option entitling the holder to acquire one common share of Changfeng (or any successor) at a price of $0.60 per share for a period of 24 months.

In addition, $6,000,000 principal amount of secured subordinated convertible debentures of Changfeng were redeemed by Changfeng immediately prior to the Merger, which redemption payments were satisfied by the issuance of an aggregate of 12,000,000 common shares of Changfeng to the debenture holders at a deemed price of $0.50 per share.

Following the Merger, the amalgamated company has approximately 66,025,000 shares issued and outstanding, of which an aggregate of 36,725,000 such shares will be held in escrow. These escrowed shares will be held by Olympia Transfer Services Inc. as escrow agent and will be released in four equal tranches every six months commencing on the date of issuance of the TSXV bulletin granting final approval of the Merger. The amalgamated company will continue under the name "Changfeng Energy Inc."

In connection with the Merger, Huajun Lin was appointed as the Chief Executive Officer and Chairman, Yahui Liu was appointed as the President, and Graham Warren was appointed as the Chief Financial Officer of the amalgamated company. Mr. Huajun Lin has extensive experience in the natural gas distribution industry, having served as the President and General Manager of Sanya Changfeng Offshore Natural Gas Supply Co., Ltd. ("CF China"), a wholly-owned subsidiary of Changfeng, since its inception in 1995. Mr. Lin is also a member of the People's Political Consultative Conference of Hainan Province and a member of the Standing Committee of the People's Political Consultative Conference of the Municipality of Sanya, and holds a number of positions in social and economic organizations in Sanya and Hainan Province, China. Mr. Yahui Liu has extensive experience facilitating business transactions between China and Canada, and has assisted with the financing of, and provided business advice to, a number of Chinese companies. Mr. Liu previously served as an Investment Advisor at Canaccord Capital Corporation from 2001 to 2007, and is a medical doctor who graduated from Beijing Medical University. Mr. Warren holds a B.Comm. degree and a C.M.A. designation from the Society of Management Accountants, and has extensive experience with public company accounting and reporting matters, having served as a director and officer of a number of junior public companies including Arehada Mining Limited (TSX:AHD), Hanfeng Evergreen Inc. (TSX:HF), Exile Resources Inc. (TSX VENTURE:ERI) and Active Control Technologies Inc. (TSX VENTURE:ACT).

The amalgamated company now has a seven person board of directors comprised of Huajun Lin, Christopher J.F. Harrop, Yahui Liu, Wencheng Zhang, Dan Liu, Hui Cai and Jack Duffy.

A stock option plan has also been adopted for the amalgamated company, pursuant to which an aggregate of 6,000,000 common shares of the amalgamated company may be issued. In connection with the Merger, an aggregate of 3,750,000 outstanding stock options of Changfeng were cancelled and replaced by 3,750,000 options of the amalgamated company. Each such option is exercisable to acquire one common share of the amalgamated company at a price of $0.60 until January 22, 2013.

Changfeng, through CF China, is engaged in the design and construction of natural gas distribution networks and the distribution of natural gas in the greater Sanya region, Hainan Province, China. CF China was founded in 1995 as one of southern China's first privately-owned, independent natural gas utility companies serving residential and commercial customers. Over the past 10 years, CF China has developed a natural gas distribution network including a primary station, two gate stations and over 200 kilometres of pipeline. The principal source of revenue of CF China is from the sale of piped gas and gas connection fees charged to its residential and commercial customers. To date, CF China has secured the exclusive development and supply rights for natural gas to the Sanya region in Hainan province, and also completed major pipelines and commenced the delivery of natural gas to both commercial and residential customers in Sanya City, Hainan Province, China. Further details on the Merger are contained in the joint information circular of Changfeng and McBroom dated November 29, 2007, which is available on SEDAR.

In connection with the Merger, Mr. Huajun Lin (Room 904, 1st Building, No. 52, Xingye Road, Xiangzhou District, Zhuhai City, Guangdong Province, PRC) acquired direct and indirect ownership or control of, and presently owns or controls an aggregate of, 34,175,000 common shares of the amalgamated entity (of which 50,000 such common shares are owned and controlled directly, and 34,125,000 such common shares are controlled), together with convertible securities entitling Mr. Lin to acquire an additional 1,000,000 common shares of the amalgamated entity, pursuant to the exchange of his existing shareholdings and option holdings in Changfeng. These holdings represent approximately 51.8% of the issued and outstanding common shares of the amalgamated entity as of January 29, 2008 (or approximately 52.5% on a partially diluted basis assuming exercise of the convertible securities held by Mr. Lin only). Mr. Lin's holdings in the amalgamated entity were effected for business and investment purposes and Mr. Lin could increase or decrease his investments in the amalgamated entity at any time, or continue to maintain his current investment position, depending on market conditions or any other relevant factor. Mr. Lin acquired his securities in the amalgamated entity through a private transaction and not through the facilities of any market for the securities of the amalgamated entity.

Contact Information

  • Changfeng Energy Inc.
    Mike Liu
    President
    (416) 362-0694
    or
    Changfeng Energy Inc.
    Graham Warren
    Chief Financial Officer
    (416) 362-0694