Grand Power Logistics Group Inc.
TSX VENTURE : GPW

Grand Power Logistics Group Inc.

June 17, 2008 23:59 ET

Grand Power Announces Private Placement Offering

CALGARY, ALBERTA--(Marketwire - June 17, 2008) - Grand Power Logistics Group Inc. ("Grand Power") (TSX VENTURE:GPW) is pleased to announce that it has entered into an agreement to sell, on a private placement basis, a minimum of $5 million and a maximum of $10 million of units (the "Units"). The "best efforts" private placement, which is subject to regulatory approval, will be sold by a syndicate of agents led by Canaccord Adams and GMP Securities L.P., and including Macquarie Capital Markets Canada Ltd. (collectively, the "Agents").

Each Unit will consist of one common share and one-half of one common share purchase warrant. The Offering will be marketed on a "best efforts" basis in Canada, the United States, and Europe. Securities sold under the Offering will be subject to a statutory four month hold period, and will be priced in the context of the market prior to Closing.

The net proceeds from the private placement will be used by Grand Power to grow revenues and expand margins in its core import / export air-freight business, to expand its warehousing and ocean freight business and to initiate the building of, a wholly owned domestic express network in China and for general corporate and working capital purposes.

Historically, almost all of the Company's revenues have been from air freight co-loading, which grew by 68% to $99.6 million in revenues for the year ended December 31, 2007 and is expected to continue its strong growth in 2008, even as the Company is focusing on expanding into higher margin logistics businesses. In the first quarter of 2008, the Company generated gross margins of 15.7% and 30% for direct sales air-freight and warehousing respectively, as compared with gross margin of approximately 7% for air freight co-loading for the year ended December 31, 2007. Since the direct sales business began operations in 2008 and the warehousing business in late 2007, they comprised only 4% of revenues in Q1 2008, but accounted for 16.4% of gross profit due to their higher profit margins. The Company has recently hired approximately 100 new employees to expand these initiatives.

Grand Power intends to use a portion of the net proceeds of the private placement to increase revenues and margins in its core import / export air-freight business, as well as its warehousing and sea freight operations. In the core import / export air-freight business, revenue growth will be achieved by opening new sales offices and hiring experienced local sales people in Chinese cities with major airports, by increasing air freight capacity (including charter flights) and by signing additional airline partnerships. Margin expansion will be achieved by targeting direct sales, thereby eliminating agents and facilitating load optimization, and by expanding its importing business, which generally garners higher margins than exports. Furthermore, as Grand Power has reached a critical mass in the scale of its operations, it is now in a position to attract volume discounts, make long term commitments on the air cargo space it purchases, and achieve economies of scale on its operating expenses.

Grand Power intends to use the remainder of the net proceeds to initiate the building of a domestic express network in China. A domestic express network is a small package door-to-door express courier service within China which targets small and medium sized enterprises. In 2007, China's domestic express network market generated revenues of approximately US$5.9 billion (Booz Allen). Management believes the market is highly fragmented, with over 30,000 companies operating in the space. Despite its scale and fragmentation, the domestic express network market in China is experiencing rapid growth, having grown at a compound annual growth rate of over 28% since 2004 (Booz Allen).

Depending on the size of the private placement, Grand Power intends to enter the domestic express network market by hiring between up to 200 experienced professionals, opening a head office for the domestic express network in Beijing and establishing satellite offices in other major cities in China. Grand Power believes that establishing this business will allow the Company to achieve significantly higher gross margins and will further enhance the Company's growth profile going forward.

Marketing of the Offering will begin immediately and closing is anticipated as soon as practicable thereafter subject to approval of the TSX Venture Exchange and other customary conditions.

About Grand Power Logistics Group Inc.

Grand Power Logistics Group Inc. operates principally through its wholly owned Hong Kong based subsidiary, Grand Power Express International Limited (GP Express) and provides air-freight forwarding and sea-freight services, customs brokerage, logistics, warehousing and distribution, as well as other value added services. GP Express has established operations in various regions, particularly in the Greater Pearl River Delta (GPRD), China's largest economic region. GP Express' Subsidiaries or Branch Offices in this region are located in Macau, Shenzhen, Guangzhou, and Jiangmen. GP Express also operates in other regions through Subsidiaries and Branch Offices or Supporting Offices in Shanghai, Taipei, Bangkok and Los Angeles.

Forward-looking statements: Statements included in this press release that are not historical facts may be considered "forward looking statements". All estimates and statements that describe the Company's objectives, goals or future plans are forward looking statements. Forward-looking statements involve inherent risks and uncertainties where actual results could differ materially from those currently anticipated.

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