Liuyang Fireworks Limited Enters into Agreement to be Taken Private at $0.048 per Share in Cash

Toronto, Ontario--(Newsfile Corp. - August 18, 2015) - Liuyang Fireworks Limited (TSXV: FWK) (the "Company") announced that the Company and Great Exploits Development Limited ("Great Exploits"), Better Invention Overseas Limited ("Better Invention") and Bay Tree Enterprises Limited ("Bay Tree" and together with Great Exploits and Better Invention, the "Offerors") have entered into an agreement (the "Agreement") pursuant to which the Offerors will become the remaining shareholders of the Company after the Company has taken action to purchase for cancellation all of the outstanding common shares of the Company not already owned by the Offerors for cash consideration of $0.048 per share (the "Transaction"). The Transaction is proposed to be effected by way of a share consolidation and purchase under Bermuda corporate law. The Company has 55,231,617 common shares issued and outstanding, of which 20,241,202 common shares are not expected to be owned or controlled by the Offerors at the time of completion. The consideration offered under the Transaction represents a premium of approximately 92% over the $0.025 closing price of the Company's shares listed on the TSX Venture Exchange on May 8, 2015, when the proposed Transaction was first announced.

Great Exploits is a company directly owned by Mr. Mingyue Hu, who is a director and the Chairman of the Company. Better Invention is a company directly owned by Mr. Miao Hu, who is a director and the President and Chief Executive Officer of the Company. Bay Tree is a company directly owned by Mr. Peng Peng, who is a former director and Chief Operating Officer of the Company. Great Exploits currently owns, or has control or direction over, 7,026,331 common shares representing approximately 12.7% of the Company's outstanding common shares. Better Invention currently owns, or has control or direction over, 7,024,249 common shares representing approximately 12.7% of the Company's outstanding common shares. Bay Tree currently owns, or has control or direction over, 20,939,835 common shares representing approximately 37.9% of the Company's outstanding common shares.

The Transaction will be effected by way of a 6,000,000-to-1 share consolidation of all of the issued and outstanding shares. Following the consolidation, the Company will purchase for cancellation all of the shares held by shareholders whose aggregate holding is less than one whole post-consolidation share. As a result, upon completion of the Transaction, only the Offerors will remain as shareholders of the Company. Shareholders holding fractional shares, including shareholders holding fractional shares through CDS & Co. or other nominees, following the consolidation, will be entitled to receive a cash payment of CAN$0.048 for each pre-consolidation share on the purchase by the Company of such fractional post-consolidations shares.

In order to complete the Transaction, the Company is required to complete certain pre-consolidation transactions, including amending the Company's Bye-Laws. At the shareholders' meeting to be held in Vancouver, British Columbia on September 18, 2015 at 10:00 a.m. (local time), shareholders entitled to vote at the meeting will be asked to approve two ordinary resolutions: (1) authorizing amendments to the Company's Bye-Laws to include a provision allowing the Company to have regard to shares held beneficially through nominee shareholders in calculating fractional share entitlements arising on any share consolidation and to permit the Company to rely upon such information in this regard as may be provided to them, either specifically or in the aggregate, on behalf of such nominee and certain other provisions of the Bye-Laws that are necessary to provide the Company a right to consolidate the shares or to compel the purchase of its share capital; and (2) authorizing a consolidation of the issued share capital of the Company, on the basis of one post-consolidation share for every 6,000,000 pre-consolidation shares. These two resolutions must each be passed by: (a) at least a majority of the votes cast by shareholders present in person or represented by proxy at the meeting, and (b) a majority of the votes cast by minority shareholders (that is, all shareholders other than the Offerors, their associates and affiliates, and all persons acting jointly or in concert with them) present in person or represented by proxy at the meeting.

Shareholders of record as of August 11, 2015, the record date for the meeting, are entitled to receive notice of and to attend, and to vote at, the meeting or any adjournment or postponement of the Meeting.

As previously announced, a special committee of independent directors (the "Special Committee"), comprised of Robert Wilson (Chair), David Lake and John Nelson, was established to consider and make recommendations regarding the Transaction. The Special Committee engaged Evans & Evans, Inc. as its independent valuator and to prepare a valuation report and fairness opinion with respect to the Transaction. Based on the valuation work and subject to the conditions, assumptions and qualifications set forth in valuation and fairness opinion, in the opinion of Evans & Evans, as at the valuation date of May 31, 2015, the consideration payable under the Transaction is fair, from a financial point of view, to the minority shareholders.

Having undertaken a thorough review of, and carefully considered, the Transaction, including consulting with its legal and financial advisors, the Special Committee has unanimously determined that the Transaction is in the best interests of the Company. Accordingly, the Special Committee unanimously recommended that the Company's board of directors approve the Agreement and recommend that shareholders vote for the Transaction.

The Company's board of directors, following the recommendation of the Special Committee, unanimously resolved (with the abstention of the interested directors) to authorize the Company to enter into the Agreement, submit the pre-consolidation and consolidation matters to a vote of the shareholders, and recommend to shareholders that they vote in favour of the pre-consolidation and consolidation matters to effect the Transaction. A copy of the valuation and fairness opinion, the factors considered by the Special Committee in arriving at its recommendation, and other relevant background information will be included in the management information circular that will be sent to shareholders in connection with the meeting and will be filed on SEDAR at www.sedar.com.

Some of the major factors that the Special Committee and the Board of Directors considered in reaching their recommendation are as follows (which is not intended to be exhaustive): (a) the consideration per share (pre-consolidated) of $0.048 that minority shareholders will receive pursuant to the Transaction represents a premium of approximately 92% over the $0.025 closing price of the Company's shares on May 8, 2015, when the proposed Transaction was first announced; (b) the cash consideration is within the range of the fair market value of shares as set out in valuation and fairness opinion; (c) all of the consideration to be received by minority shareholders is cash, resulting in immediate certainty of value not impacted by market fluctuations; (d) the shares are illiquid and since June 29, 2009, when the Company completed its Qualifying Transaction and the shares began trading, the total volume of trading of the Company's shares is less than the public float, therefore the Transaction provides minority shareholders with a meaningful liquidity event at a significant premium; (e) over the past several years, public questions and concerns involving Canadian public companies with significant business operations in China has had a depressing effect on the Company's share price, increased the cost of maintaining its public listing and financial reporting and reduced the Company's financing alternatives; and (f) the procedural protections in favour of the minority shareholders, including that the matters relating to the Transaction must be approved by a majority of the votes cast by the minority shareholders; however, any registered shareholder who opposes the Transaction does not have dissent rights, but may have other remedies.

If the Transaction is completed, the common shares of the Company will be delisted from the TSX Venture Exchange and the Company will also apply to the applicable Canadian securities regulatory authorities to cease to be a reporting issuer in each province in which it is a reporting issuer.

The Company's board of directors cautions shareholders and others considering trading in shares of the Company that the completion of the Transaction remains subject to a number of conditions including, but not limited to, receipt of all regulatory and shareholder approvals and the availability of financing for the share purchase by the Company. There is no assurance that such financing will be available to complete the Transaction. The completion of the Transaction is subject to the satisfaction of certain other closing conditions customary in a transaction of this nature. If and when these conditions are satisfied, it is expected that the completion of the Transaction will be completed following the meeting and by mid-October 2015.

Trading of the Company's common shares on the TSX Venture Exchange is expected to be voluntarily halted at least three business days prior to the shareholders' meeting scheduled for September 18, 2015 pending approval and completion of the Transaction, such halt is intended to avoid or minimize settlement and entitlement issues.

About Liuyang Fireworks Limited

Liuyang Fireworks Limited is a leading China-based manufacturer of fireworks distributed both domestically and within more than 15 countries in North America, South America and Europe. The Company has more than 17 years of experience in the fireworks industry and is a supplier to the world's top five fireworks wholesalers and retailers. The Company's ISO9001-certified manufacturing facilities are located in the Liuyang area of Hunan, China, where more than half of the world's fireworks are produced.

For further information, contact:

Jacky Long
Chief Financial Officer
Liuyang Fireworks Limited
Telephone: 647.350.8818
E-mail: jackylong@farocean.com

Forward-Looking Statements

This news 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 news 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 news release includes information relating to completion of the going private transaction. The forward-looking information is based on certain assumptions, which could change materially in the future. 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 risk that the necessary regulatory and shareholder approvals are not obtained, the financing for the share purchase is not available, the conditions to completing the transaction may not be met, or the transaction may be terminated or re-negotiated on different terms. These and other risks are further described under "Risk Factors" in the Company's Filing Statement dated May 27, 2009 and in the management information circular for the shareholders' meeting to be held on September 18, 2015, which are or will be available on SEDAR and may be accessed at www.sedar.com. 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 above 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 NEWS RELEASE REPRESENTS THE EXPECTATIONS OF THE COMPANY AS OF THE DATE OF THIS NEWS 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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