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Silverland Capital Corp. Announces Proposed Qualifying Transaction Involving Zhengzhou Zhengli Polymer Technology Co., Ltd. of China

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Oct. 1, 2010) -

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Silverland Capital Corp. (the "Company") (TSX VENTURE:SV.P), a capital pool company, is pleased to announce that it has entered into a letter of intent with Lecho Investment Holdings Co., Ltd. ("Lecho"), a British Virgin Islands company, and its controlling owner, relating to the acquisition of Zhengzhou Zhengli Polymer Technology Co., Ltd. ("Zhengli Polymer") (a private Chinese company) through its holding company Henan Zhengli Green Technology and Development Co., Ltd. (a private Chinese company), and its holding company, Origin Cleantech Investment Co., Ltd. (a private Hong Kong company), (collectively, "Zhengli" and the acquisition, the "Acquisition"). This transaction is intended to constitute the Company's Qualifying Transaction (the "Transaction") and is not a Non-Arm's Length Qualifying Transaction (as defined by the policies of the TSX Venture Exchange (the "Exchange")). The Company and Lecho have entered an engagement letter with PI Financial Corp. ("PI") pursuant to which PI will, subject to completion of satisfactory due diligence and other conditions, act as sponsor in connection with the Transaction. The agreement by PI to act as sponsor should not be construed as any assurance with respect to the merits of the transaction or the likelihood of completion.

Overview of Zhengli

Zhengli was established in 1998 and is a Chinese producer of water-soluble polymers for oil extraction and wastewater treatment in China. Zhengli's product offerings address the key steps in the tertiary oil extraction and wastewater treatment process, such as enhanced oil recovery, viscosity modification, shale inhibition, profile modification for oil extraction and water-sediment separation and flocculation for the wastewater treatment.

Since 2003, Zhengli has developed more than 30 products across four product categories, including the PAMII and PAMIII products that have become Zhengli's main products sold to Chinese oil field operators. In the second half of 2008, Zhengli has started the "Polymethyl Methacrylate (PMMA) Nanosphere" project in cooperation with the Chinese Academy of Science for the next generation oil extraction technology for oil wells with higher temperature and higher mineral complexity. Polyacrylamide ("PAM") is a polymer that is highly water-absorbent, forming a soft gel. One of the largest uses for PAM is to flocculate or coagulate solids in a liquid.

While Zhengli's current primary customer base is in the oil extraction industry, it has targeted a broad base of end-user customers in different industries throughout China, consisting mostly of wastewater treatment plants, paper mill factories, coal and mining factories. By capitalizing on its competitive strengths, such as its strong relationships with major Chinese petroleum companies, its depth of experience in the PAM industry in China, its research and development skills, and its emphasis on customer service, Zhengli is committed to becoming a leading provider of enhanced oil recovery and wastewater treatment solutions in China.

For the year ended December 31, 2009, Zhengli had sales of CAN$18.2 million and net income before taxes of CAN$5.0 million. The following table sets out selected financial information of Zhengli for the year ended December 31, 2009. All financial figures contained in this press release are based on unaudited financial statements of Zhengli prepared in accordance with Canadian generally accepted accounting principles.



For the Year Ended
December 31, 2009
(Unaudited, in CAN$)
--------------------
Sales 18,160,476
Gross profit 7,527,254
Net income 4,274,181
Current assets 11,407,687
Assets 20,912,587
Liabilities 9,551,718
Shareholders' Equity 11,360,869



The Chinese Polymer Industry

Enhanced Oil Recovery

Enhanced oil recovery ("EOR"), also referred to as improved oil recovery or tertiary oil recovery, is most often achieved by injecting a liquid or gas into an oil reservoir, thereby lowering oil viscosity and increasing the amount of oil available for production. Due to the characteristics of Chinese oil fields, PAM EOR is extensively used in China. The Chinese government's interest in EOR has been fuelled primarily by an increase in Chinese oil production.

The "polymer flooding" EOR process has been used for several years in assisting the operator to increase the efficiency of oil recovery of tertiary floods. By the addition of one ton of polymer, typically an extra 100 to 150 tons (approximately 750 to 1,125 barrels) of crude oil can be obtained. Approximately 80% of China's oil fields that require EOR technology are using the polymer flooding method, and with 80% of the oil wells containing a large amount of water, PAM may be the best method for continuing oil extraction in China.

China's crude oil output in 2009 was 189.5 million tons. Presently, over 15% of the total (approximately 28.5 million tons) was extracted by PAM annually. In addition, 20% more oil can be extracted by the application of PAM. According to the SINOPEC Exploration & Production Research Institute, market growth for PAM in oil extraction industry is estimated to increase steadily at 20% to 30% annually in China.

Water Treatment

China is encountering a water shortage and natural water resource pollution due to the rapid growth in population, urbanization and industrialization. In recent years, China has started to address these issues by enacting stricter environmental regulations. With China's heavy investment in its water and wastewater infrastructure, the demand for water treatment-related services and products has experienced, and is expected to continue to experience, rapid growth.

The Chinese government has taken various measures to address the water shortage and pollution concerns. In 2006, China's Ministry of Construction required that by 2010, the municipal wastewater treatment rate should not be lower than 70%, and all cities and counties should establish or plan to establish centralized wastewater treatment facilities. Water supply remains one of the major focuses of the Chinese government. With the improvements in municipal wastewater treatment facilities, it is expected that China will also begin to levy sewage treatment fees throughout the country in the near term. China has also introduced new standards for drinking water quality that increased the number of items classified as pollutants. At the same time, the Chinese government has imposed a higher water tariff. The stricter government regulations and increased water tariff is expected to create opportunities for products and services in the water treatment value chain in China.

The primary water treatment agents used in the Chinese market include scale and corrosion inhibition agents, biocides, and inorganic and organic flocculants. Polymers are being widely accepted in a range of demanding industrial and municipal applications involving process water treatment, wastewater and effluent treatment. Polymers are used as flocculants to make fine particulates clump together into flocs. These flocs may float to the top of the liquid or settle at the bottom before being transported to the sludge process tank. By separating the solids and liquids in wastewater, together with the micro-biological methods, wastewater can be treated properly and be disposed.

The Transaction

Pursuant to the terms of the Acquisition, the Company will acquire control of Zhengli, and as consideration, subject to Exchange approval, the Company will issue such number of common shares representing approximately 97% of the issued and outstanding common shares of the Company after completion of the Acquisition (not including the completion of the Escrowed Shares Transfer (as defined below) and the completion of any Concurrent Offering (as defined below)). The consideration amount for the Acquisition will be determined between the Company and Zhengli prior to executing the definitive agreement for the Acquisition (the "Definitive Agreement") based on the understanding that the current shareholders of the Company will own approximately 3% of Zhengli at the closing of the Transaction (not including the completion of the Escrowed Shares Transfer or any Concurrent Offering).

Subject to the Exchange policies and securities regulation, its is expected that certain founders will sell, and the controlling owner of Lecho, Ms. Fangfang (Echo) Liu, will purchase, an aggregate of 420,000 common shares that are held in escrow under the requirements of the Exchange at a price of CAN$0.24225 (or CAN$0.285 less a 15% discount) per share (the "Escrowed Shares Transfer").

If required for purposes of completing the Transaction under the policies of the Exchange, either the Company or Lecho will complete a concurrent offering prior to or concurrent with the closing of the Transaction, subject to the approval of the Exchange (the "Concurrent Offering"). If a Concurrent Offering is to be completed, it is expected the Company would engage an agent who would be paid customary compensation for such agency services. If appropriate, the Company would also apply for an exemption from the Exchange's sponsorship requirement.

The Company currently has 2,700,000 common shares issued and outstanding and has outstanding options exercisable into 270,000 common shares of the Company at an exercise price of CAN$0.20 per share and outstanding agent's options exercisable into 150,000 common shares of the Company at an exercise price of CAN$0.20 per share.

Upon completion of the Transaction, it is expected that the resulting issuer will meet the public distribution requirements of at least an Exchange Tier 2 issuer. Shareholders of the Company and the resulting issuer will be subject to applicable Exchange escrow policies. It is also expected that Ms. Fangfang (Echo) Liu, a Canadian citizen, who currently controls 100% of Zhengli, will also control the resulting issuer. Ms. Liu is the daughter of Songyin Liu, the current President of Zhengli Polymer and a proposed director and officer of the resulting issuer.

In addition, prior to completion of the Acquisition, it is intended that the Company will continue out of British Columbia and into the Cayman Islands (the "Continuation").

The approval of the Company's shareholders will be required for the Continuation and such other matters in support of the Transaction including, if required, a change of name to be determined by Zhengli (the "Name Change"). The directors and principal shareholders of the Company, including DoubleOcean Financial Group Ltd., Gong (Michael) Chen, Feng (Frank) Jia, Steve Paquin, Charles Desjardin and Da Li, are expected to enter into a voting support agreement to approve the Continuation and such other matters in support of the Transaction (including, if required, the Name Change). The Company intends to call a shareholders' meeting to be held to consider and, if thought fit, to approve such matters.

The completion of the Transaction will be subject to at least the following mutual conditions precedent:

1. the execution of the Definitive Agreement;

2. the approval of the Continuation and other matters in support of the Transaction (including, if required, the Name Change) by the requisite majority of the votes cast by the shareholders of the Company at a properly constituted meeting of the shareholders of the Company;

3. the receipt of all necessary regulatory, corporate and third party approvals, including the approval of the Exchange, and compliance with all applicable regulatory requirements and conditions in connection with the Transaction;

4. the maintenance of the Company's listing on the Exchange;

5. the confirmation of the representations and warranties of each party to the Definitive Agreement as set out in such agreement;

6. the absence of any material adverse effect on the financial and operational condition or the assets of each of the parties to the Definitive Agreement;

7. the delivery of standard completion documentation including, but not limited to, legal opinions from Canadian and Cayman Islands legal counsels, officers' certificates and certificates of good standing or compliance; and

8. other condition precedents customary for a transaction such as the Transaction.

The completion of the Transaction is also subject to, among other things, the following conditions precedent in favour of Zhengli:

1. at closing, except for certain budgeted liabilities and the obligations to a sponsor or agent appointed jointly by the Company and Zhengli in connection with this Transaction, the Company will have no liabilities or obligations (contingent or otherwise) in excess of CAN$5,000, inclusive of liabilities relating to the fees and disbursements of its counsel appointed in connection with this Transaction, as evidenced by an officer's certificate of the Company to be tendered on closing of the Transaction;

2. if required, the completion of the Concurrent Offering;

3. at closing, the Company will have cash of not less than CAN$143,550 (not including the net proceeds of any Concurrent Offering); and

4. the termination of all agreements involving the Company and relating to administration or leases without any further liability to the Company or the resulting issuer.

The conditions precedent in favour of the Company may be waived in whole or in part by the Company and the conditions precedent in favour of Zhengli may be waived in whole or in part by Zhengli.

The completion of the Transaction is expected to occur on the day that is the tenth business day following the satisfaction or waiver of the conditions precedent (other than those conditions precedent to be completed concurrent with the closing) or such other date as mutually agreed to by the Parties, but in any event no later than December 15, 2010 or such later date to be set out in the Definitive Agreement. Generally, each of the Company and Zhengli will bear their own respective costs and expenses associated with the Transaction.

Overview of Management and the Board of Directors

Management

It is expected that the management of the resulting issuer will consist of Songyin Liu as Chief Executive Officer, President and Chairman of the Board; Gong (Michael) Chen as Chief Financial Officer; and certain other officers to be determined.

Songyin Liu is currently the President of Zhengli Polymer. Mr. Liu founded Zhengli Polymer in 1993 in manufacturing PAM products that could be used in water treatment and energy generation with technologies developed by the Chinese Academy of Science ("CAS"). Previously, Mr. Liu was director of the department of electric equipment design at a high technology development company of Zhengzhou Institute of Technology where he made a number of technological breakthroughs in PLC display control and printing systems.

Gong (Michael) Chen is currently the President, Chief Executive Officer, Secretary and a director of the Company. Mr. Chen is also the President and Managing Director of DoubleOcean Financial Group Ltd., a financial advisory company. Mr. Chen has extensive experience with publicly listed companies and has acted in the capacity of Chief Financial Officer of a number of TSX or Exchange-listed public companies including Spur Ventures Inc., Precision Assessment Technology Corporation, and Wex Pharmaceuticals Inc. Mr. Chen received a Bachelor degree in International Finance from Peking University in Beijing, China in 1992 and his MBA degree from the University of Arizona in 1997. Mr. Chen is a Certified Public Accountant in the United States.

Board of Directors

It is the intention of the Company and Zhengli to establish and maintain a board of directors with a combination of appropriate skill sets that is compliant with all regulatory and corporate governance requirements, including any applicable independence requirements. The board of directors of the Company currently consists of four members. Upon completion of the Transaction, the board is expected to be reconstituted to be comprised of seven members to be nominated or approved by Zhengli, subject to the policies of the Exchange and Canadian securities laws. The following are the proposed directors for the resulting issuer: Songyin Liu, Fangfang (Echo) Liu, Feipeng Wu, Ermo Ou, Douglas Betts, John Reynolds, and Yucai (Rick) Huang.

Fangfang (Echo) Liu is currently the director of Zhengli Polymer and its manager of corporate planning. Previously, Ms. Liu was responsible for Zhengli Polymer's wastewater treatment market and after-sales services. Ms. Liu has been involved with Zhengli Polymer since 2008 having helped increase market shares in wastewater treatment and improving customer service quality. Ms.Liu holds a Bachelor of Commerce degree from the University of Toronto.

Feipeng Wu is the head of the functional polymeric materials lab at the Technical Institute of Physics and Chemistry, Chinese Academy of Sciences. He obtained his Bachelor of Science degree from the Department of Chemistry, Beijing Normal University in 1985 and his Ph.D. from the University of Tokyo, Japan in 2000. He became professor at the aforementioned institute since 2001. His research focuses on the development of functional polymeric materials. He has published more than 70 research articles in the scientific journals and applied more than 30 invention patents in China.

Ermo Ou recently joined the SmithStreet Financial Advisory team to lead its business development. Mr. Ou was previously an executive with Zeuspac Capital where he oversaw the portfolio's capital market activities. He was also a founding member of the First Leaside Group of Companies, first as Vice President of F.L. Securities, a limited market dealer in Canada, then as COO of First Leaside Securities, one of Canada's growing full-service retail brokerage. Mr. Ou is also Vice President, Corporate Planning of Cathay Forest Products Corp., an Exchange-listed company. Mr. Ou graduated from the University of Toronto with a Bachelor of Business Administration and an EMBA from Jiaotong University. Mr. Ou is also a Chartered Financial Analyst.

Douglas Betts is the President, CEO and a director of Kingsway International Holdings Limited, a TSX-listed company and has been associated with the Kingsway Group for over 18 years. Mr. Betts co-founded Borealis Funds Management Ltd. where he served from 1997 to 2001 as Managing Director responsible for sourcing and structuring investment transactions. Before joining Borealis, Mr. Betts was a partner with Torys LLP, a Canadian law firm where he practiced business law with an emphasis on securities and real estate. Mr. Betts has a law degree from the University of Ottawa and has been involved in business transactions in Asia for over 20 years.

The Hon. John D. Reynolds, P.C. has been the President of Gainey Consultants Inc. since 1997. He is also a director of a number of Exchange listed companies including Cathay Forest Products Corp., AgriMarine Industries Inc., ARA Safety Inc., Calibre Mining Corp., Catalyst Copper Corp., Rusoro Mining Ltd., Encanto Potash Corp. and Terrane Metals Corp. Since 2006, Mr. Reynolds has been Senior Strategic Advisor to the Canadian law firm of Lang Michener LLP. He has nearly 40 years of experience at the highest levels of Canadian national and provincial government and in a diverse range of cross-border business enterprises.

Yucai (Rick) Huang has served as the Chief Financial Officer of Hanwei Energy Services Corp. since 2007. Mr. Huang previously held various management positions with the Pepsi Bottling Group (Canada), Schering-Plough Canada, and Coca-Cola China. Mr. Huang is a Certified General Accountant in Canada and holds a MBA degree from the Ivey Business School of the University of Western Ontario in Canada and a bachelor degree of economics from the Shanghai International Studies University in China.

About Silverland Capital Corp.

Silverland Capital Corp., a capital pool company within the meaning of the policies of the Exchange, was incorporated in British Columbia on January 7, 2009 and was listed on the Exchange on May 28, 2010. The Company does not have any operations and has no assets other than cash. The Company's business is to identify and evaluate businesses and assets with a view to completing a Qualifying Transaction.

Except for statements of historical fact, all statements in this press release, including, but not limited to, statements regarding future plans, objectives and payments are forward-looking statements that involve various risks and uncertainties.

Completion of the transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and if applicable pursuant to Exchange Requirements, majority of the minority approval. Where applicable, the transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular or filing statement to be prepared in connection with the transaction, any information released or received with respect to the transaction may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative.

The TSX Venture Exchange has in no way passed on the merits of the proposed transaction and has neither approved or disapproved the contents of this press release.

It is expected that PI Financial Corp, subject to completion of satisfactory due diligence, will agree to act as sponsor in connection with the transaction. An agreement to sponsor should not be construed as any assurance with respect to the merits of the transaction or the likelihood of completion.

Disclaimer for Forward-Looking Information

This press release contains forward-looking statements and information that are based on the beliefs of management and reflect the Company's current expectations. When used in this press release, the words "estimate", "project", "belief", "anticipate", "intend", "expect", "plan", "predict", "may" or "should" and the negative of these words or such variations thereon or comparable terminology are intended to identify forward-looking statements and information. The forward-looking statements and information in this press release includes information relating to the business plan of Zhengli including its commitment to becoming a leading provider of enhanced oil recovery and wastewater treatment solutions in China, the Acquisition (including the structure of the Acquisition), the Transaction (including shareholder approval, principal shareholder support, and other terms such as the Continuation, the Name Change, and the completion or termination), the Concurrent Offering (if any), the principal owner, and the directors and management of the resulting issuer upon completion of the Transaction. Such statements and information reflect the current view of the Company with respect to risks and uncertainties that may cause actual results to differ materially from those contemplated in those forward-looking statements and information.

By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following risks: risks associated with the completion of the Transaction and matters relating thereto and the risks associated with the marketing and sale of securities, the need for additional financing, reliance on key personnel, the potential for conflicts of interest among certain officers or directors with certain other projects, and the volatility of the Company's common share price and volume. Forward-looking statements are made based on management's beliefs, estimates and opinions on the date that statements are made and the Company undertakes no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change. Investors are cautioned against attributing undue certainty to forward-looking statements.

There are a number of important factors that could cause the Company's actual results to differ materially from those indicated or implied by forward-looking statements and information. Such factors include, among others, risks related to Zhengli's business such as failure of the business strategy, stable supply prices, demand and market prices for its products, and government regulations; risks related to Zhengli's operations, such as additional financing requirements and access to capital, reliance on key and qualified personnel, insurance, competition, intellectual property and reliable supply chains; risks related to Zhengli and its business generally such as potential exposure to tax under Canadian income tax, Chinese regulations relating to offshore special purpose companies, recent Chinese regulations relating to cross-border mergers and acquisitions, environmental protection, currency exchange rates and conflicts of interest; and risks related to doing business in China such as tax, repatriation of profit and currency conversion, acquisition and appropriation of land use rights, foreign investment, permits and business licenses, employment contracts, government intervention, shareholders' rights and enforcement of judgments and a developing legal system.

The Company cautions that the foregoing list of material factors is not exhaustive. When relying on the Company's forward-looking statements and information to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. The Company has assumed a certain progression, which may not be realized. It has also assumed that the material factors referred to in the previous paragraph will not cause such forward-looking statements and information to differ materially from actual results or events. However, the list of these factors is not exhaustive and is subject to change and there can be no assurance that such assumptions will reflect the actual outcome of such items or factors.

THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS PRESS RELEASE REPRESENTS THE EXPECTATIONS OF THE COMPANY AS OF THE DATE OF THIS PRESS RELEASE AND, ACCORDINGLY, IS SUBJECT TO CHANGE AFTER SUCH DATE. READERS SHOULD NOT PLACE UNDUE IMPORTANCE ON FORWARD-LOOKING INFORMATION AND SHOULD NOT RELY UPON THIS INFORMATION AS OF ANY OTHER DATE. WHILE THE COMPANY MAY ELECT TO, IT DOES NOT UNDERTAKE TO UPDATE THIS INFORMATION AT ANY PARTICULAR TIME EXCEPT AS REQUIRED IN ACCORDANCE WITH APPLICABLE LAWS.


 

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