Dobhai Ventures Inc.
TSX VENTURE : DOB.P

August 26, 2009 16:18 ET

Dobhai Ventures Inc.: News Release

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 26, 2009) - Dobhai Ventures Inc. ("Dobhai") (TSX VENTURE:DOB.P) is pleased to announce that it has entered into a letter of intent (the "LOI") dated effective August 26, 2009 with Produced Water Solutions Inc. ("PWS"), a company incorporated in Alberta in 2005, for the acquisition of all the issued and outstanding securities of PWS (the "Acquisition"). PWS is a startup company that has developed a proprietary technology to be used for Produced Water cleanup in the oil and gas industry. The LOI has been entered into in conjunction with an Assignment Agreement (the "Assignment") between Dobhai, PWS and Montana Mining Corp ("Montana"), a Nevada Corporation.

It is anticipated that the Acquisition will constitute Dobhai's Qualifying Transaction under the applicable policies of the TSX Venture TSX-V (the "TSX-V"). The principle elements of the Acquisition, which are described in greater detail below, are:

- post-Acquisition, PWS will become a wholly-owned subsidiary of Dobhai and the business of PWS will become the business of Dobhai;

- Dobhai will acquire from the PWS Shareholders all issued and outstanding shares of PWS ("PWS Shares"), free and clear of all encumbrances, in consideration for a total of 9,333,333 Dobhai Shares. The Dobhai Shares to be issued for all of the PWS Shares will represent approximately 40% of the share capital of Dobhai based on the current number of outstanding shares and before taking into account future shares issuances and the exercise of convertible securities;

- the closing of a concurrent private placement financing of Dobhai of $2 million (the "Private Placement");

- the board of Dobhai being reformed to five members, of which one will be a nominee of Dobhai, two of which will be nominees of the PWS Shareholders, and two of which will be independent directors agreed upon by Dobhai and the PWS Shareholders. All Dobhai and PWS Shareholders nominees must be mutually acceptable to Dobhai, PWS and the TSX-V; and

- Mr. Al Radford, the President and CEO of PWS, will become the CEO of Dobhai and the Chief Financial Officer of Dobhai will be appointed by Dobhai's nominee to the board with approval by the other directors;

The principle elements of the Assignment are as follows:

- Montana entered into a share exchange agreement with PWS in November 2008;

- in consideration of the Assignment, subject to the completion of the Dobhai Acquisition of PWS, Dobhai hereby grants to Montana a two and one half percent (2 1/2%) royalty on all net revenue that is actually received by Dobhai or PWS from the "Produced Water" services provided by PWS to the oil and gas industry using PWS' reverse osmosis and ultra-filtration technology during the period ending thirty six (36) months from the date of this Assignment. Notwithstanding the foregoing, the maximum total royalty payment due to Montana is one million United States dollars (US$1,000,000); and

- Within ten (10) days of the completion of the Acquisition, Dobhai shall pay to Montana a cash payment of one hundred and thirty five thousand United States dollars (US$135,000).

PWS has identified a significantly underdeveloped segment within the Oilfield Service industry. Produced Water is defined as "saline water present in an underground formation that is brought to the surface through oil and gas production". Comprising 98% of the total waste volume in the oil & gas industry, produced water is by far the largest by-product or waste stream associated with oil and gas production. PWS has developed and manufactured a processing system, the Produced Water Processing Plant ("PWPP"), housed in mobile units that cost effectively treats produced water to satisfy the need to reuse and recycle an increasingly valuable resource, water. PWS' PWPP is well positioned to serve this segment of the market because of its experienced management team in oilfield service, particularly produced water disposal, and the development of its cost effective PWPP.

In 2008 PWS built a prototype PWPP and conducted a successful pilot test in partnership with Nexen Inc. PWS also received a $115,000 Canadian Environmental Technology Advancement Corporation - West ("CETAC-WEST") grant from the government of Alberta for developing innovative technologies in the oil and gas industry.

Alberta currently disposes of 265 million cubic meters (1) of produced water per year (1.7 billion barrels). In 1999, the worldwide market for produced water treatment was 77 billion barrels, up from 19 billion barrels in 1995. As oil & gas wells age, there will only be more water produced in these wells.

(1) http://www.ptac.org/etalk/dl/HighTDS.pdf pg 8

The PWPP is designed to recycle oil field water (Produced Water) in the field by using special Ultra Filtration and Reverse Osmosis technology, which have been widely and effectively used in desalinization of seawater.

There are several potential market opportunities that PWS has identified:

- Saline Water Source Wells - Desalinating water from saline aquifers for an alternative water supply to oil and gas companies.

- Shallow Gas and Coal Bed Methane Wells - A large volume of produced water is produced in the early stages of wet coal bed methane well development. Additionally, coal bed methane is a fast growing source of natural gas and is a rapidly growing market opportunity.

- Fracturing Flow Back - Applying the PWS' technology in this procedure, allows the oil and gas companies to reuse fracture water that flows back to the surface in other fractures. This eliminates the need to transport large volumes of fresh water in and disposal water out.

PWS' proprietary technology provides oil and gas companies with the ability to reuse 50% to 80% of the water that gets processed by the PWPP. This can translate into significant economic and environmental savings by the oil & gas companies. Produced water transport (trucking) and disposal fees are reduced and companies can brand themselves as being "green", due to less usage of fresh water. There may also be an opportunity for carbon credits due to the fact there will be significantly less CO2 generated in operating the PWPP than in transporting and disposing of the same volume of produced water.

PWS intends to process the produced water to a reusable standard in accordance with the Canadian Council of the Ministers of the Environment (CCME) Aquatic Guidelines. The processed water can have many beneficial uses not only for the oil and gas industry such as underground injection and fracturing, but also for other applications including industrial and agricultural usage (livestock & irrigation) and hydrological purposes.

Additionally, PWS' technology and processing system works within conventional methods of produced water handling; therefore it does not require oil and gas companies to change their current produced water management systems. It will add to them, enhancing the current system in place in order to maximize the reuse and recycling of produced water and to minimize disposal. This will provide for minimal operational disruptions. This environmentally safe technology can be applied anywhere in the world where there is produced water.

Concurrent with the completion of the Acquisition, it is intended that Dobhai will complete a private placement of common shares (each, a "Dobhai Share") at a price (the "Private Placement Price"), subject to the approval of the TSX-V, of $0.25 per Dobhai Share for gross proceeds of approximately $2 million. The net proceeds from the Private Placement will be used by Dobhai to:

(a) fund Dobhai's business plan;

(b) pay for the transaction expenses; and

(c) provide general working capital.

Union Securities Ltd (the "Agent") has been retained as the lead agent for the Private Placement. The Agent has also agreed to serve as Dobhai's Sponsor in accordance with the Policies and rules of the TSX-V. The Sponsor will be compensated by Dobhai on the following basis:

(a) a cash payment in the amount of $25,000.00 (plus GST), which is payable at the time the Sponsor delivers its final Sponsor Report to the TSX-V; and

(b) the issuance of common share purchase warrants at the time of completion of the Acquisition entitling the Sponsor to purchase up to 50,000 common shares of Dobhai at a price equal to the price per share for the Dobhai's next financing for a period of 24 months.

Dobhai currently has 14 million common shares; 1,350,000 director and employee common share purchase options; and 400,000 agent's common share purchase options outstanding. All of these outstanding securities will continue to be outstanding post-Acquisition. In connection with the Acquisition Dobhai expects to issue 9,333,333 common shares and grant additional director and employee and agent's options, the number to be determined prior to closing, all subject to approval by the TSX-V.

Dobhai will be paying, in common shares of Dobhai, the maximum finder's fee permitted under the policies of the TSX-V on the closing of the Acquisition.

The complete agreement for the acquisition will be documented by a definitive agreement ("Definitive Agreement") that is to be negotiated and which will contain the usual representations and warranties for similar transactions. The Definitive Agreement will contain customary conditions to closing such as regulatory approval, the accuracy of representations and warranties, and if required by the TSX-V, shareholder approval, receipt of a sponsorship report, receipt of a valuation opinion, and review of a business plan. The Acquisition is subject to the following conditions, which will be referenced in the Definitive Agreement,

(a) receipt of all required regulatory and shareholder approvals;

(b) the raising of sufficient financing to meet the requirements of the TSX-V to complete the purchase of the PWS Shares;

(c) the settlement for common shares of PWS of all shareholders loans of PWS and debt owed to any related party of PWS;

(d) completion of a due diligence review of PWS' business and financial matters, to Dobhai's satisfaction;

(e) completion of a due diligence review of Dobhai' business and financial matters to PWS' satisfaction;

(f) no adverse material change, as defined under the Securities Act (British Columbia) or in the Definitive Agreement, having occurred in the affairs of PWS or Dobhai;

(g) the board of Dobhai being reformed to five members, of which one will be a nominee of Dobhai, two of which will be nominees of the PWS Shareholders, and two of which will be independent directors agreed upon by Dobhai and the PWS Shareholders. All Dobhai and PWS Shareholders nominees must be mutually acceptable to Dobhai, PWS and the TSX-V;

(h) Mr. Al Radford, the President and CEO of PWS, will become the CEO of Dobhai and the Chief Financial Officer of Dobhai will be appointed by Dobhai's nominee to the board with approval by the other directors;

(i) except as contemplated under Part 2, no debt or obligation having been incurred or guaranteed by PWS, other than that owed to Dobhai or incurred in the normal and ordinary course of business, without Dobhai's prior written consent, which consent will not be unreasonably withheld;

(j) no material agreements, other than in the normal and ordinary course of its business, having been entered into by PWS with any third party other than Dobhai after August 26, 2009 without Dobhai' prior written consent, which consent will not be unreasonably withheld; and

(k) if requested by Dobhai, PWS makes reasonable efforts to obtain the confirmation of certain shareholders of PWS, as determined by PWS and Dobhai, acting reasonably, that they will support the Acquisition at any shareholder meeting of PWS.

Concurrent with the signing of this letter agreement, Dobhai has taken an assignment of the interest of Montana in a share exchange agreement dated November 20, 2008 among Montana, PWS and the PWS Shareholders. Dobhai, PWS and the PWS Shareholders have agreed that the Montana share exchange agreement is terminated and none of Dobhai, PWS and the PWS Shareholders have any obligations or liability to the other in respect of the Montana share exchange agreement.

The Dobhai Shares issued to the PWS Shareholders will be subject to "hold periods" and escrow requirements under applicable Canadian securities laws and the policies of the TSX-V.

Dobhai is currently proposing that the Definitive Agreement for the Acquisition be entered into by September 15, 2009, and that the Closing Date for the Acquisition be September 30, 2009. Firm dates for entering into the Definitive Agreement and for the Closing Date of the Acquisition will be determined following completion of due diligence and TSX-V review.

Concurrent with the issuance of this news release, Dobhai will advance $25,000 to PWS for use in its business. This advance will be evidenced by a demand promissory note that can not be called while the LOI or the Definitive Agreement is in effect.

Dobhai understands that before the Acquisition is completed, PWS will require a loan of up to $200,000 (the "Loan") for working capital. Subject to TSX-V approval of the Loan and the entering into of a mutually acceptable loan agreement, Dobhai will provide the Loan to PWS, as funds are reasonably required, on the following terms:

(a) interest on the principal will accrue at a rate of 5% per annum;

(b) principal and interest will be payable on demand and on default;

(c) Dobhai being satisfied as to its position as a secured party and PWS providing such security as Dobhai deems advisable, including a general security agreement over all assets; and

(d) PWS will agree to work within an operating budget acceptable to both parties, and will agree to certain reasonable restrictions on PWS' ability to make financial commitments or expenditures without our consent.

Dobhai contemplates being able to provide funds to PWS as soon as practicable after receiving TSX-V approval for the Loan, provided PWS' corporate records are in order, the loan and security agreements have been executed and PWS has delivered the necessary security documents.

The following summary financial information is taken from PWS' most recent fiscal year-end financial statements as at May 31, 2009:

(a) PWS has not generated any revenues since inception;

(b) Total assets were $269,507;

(c) Total liabilities were $495,263, of which $297,863 was owed to shareholders and will be converted to shares prior to the Acquisition;

(d) Accumulated deficit since inception was $225,766

(e) Shareholders' deficiency was $225,766.

The financial statements were unaudited and prepared in $CAD.

The corporate address of PWS is 19 Fawn Close, PO Box 8938, Sylvan Lake AB, T4S 1S6. PWS is owned by the following shareholders:



- Canadian Prestige Ltd, an Alberta company - 50% shareholder PWS
19 Fawn Close, Sylvan Lake, AB T4S 1X4
Al Radford - 100% owner
Sylvan Lake, AB

- Maple Leaf Development Corp, an Alberta company - 50% shareholder PWS
RR1, Blackfalds AB, T0M 0J0
Ken Weenink - 50% owner of Maple Leaf Development Corp.
Blackfalds AB
Bryan Gossen - 50% owner of Maple Leaf Development Corp.
Qingdao, China


Upon closing of the Acquisition the board of directors of Dobhai will consist of five directors. Minaz Devji, the current CEO and a director of Dobhai will remain as a director and be appointed the Chairman of the Board. Al Radford, the current CEO of PWS will be appointed a director and CEO of Dobhai. The remaining three directors and CFO have not been determined at this time and will be appointed in conjunction with the closing of the Acquisition. Mr. Radford is presently acting on a consulting basis as the General Manager of a $90 million per year oil field service company with 125 employees, in Red Deer AB, specializing in produced water hauling and fracturing. He has been a consultant with this company since 2000. He has worked in senior management roles with numerous companies in the transportation, oil field services, road construction and forestry industries for the past 17 years. Prior to that he owned and operated his own businesses. Al is the original designer and developer of the PWPP technology.

Dobhai, a capital pool company within the meaning of the policies of the TSX-V, was incorporated in December 2006 and was listed on the TSX-V in October 2007. Dobhai does not have any operations and has no assets other than cash. Dobhai's business is to identify and evaluate businesses and assets with a view to completing a Qualifying Transaction under the policies of the TSX-V. Trading in the common shares of Dobhai has been halted on the TSX-V since August 26, 2009 and will resume trading on the completion of the Acquisition.

Except for statements of historical fact, all statements in this news 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, TSX Venture Exchange acceptance and, if applicable pursuant to TSX Venture Exchange requirements, majority of the minority shareholder 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 upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this news release. Union Securities Ltd., has agreed to act as agent and 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.

FORWARD LOOKING INFORMATION

Certain information in this news release is forward-looking within the meaning of certain securities laws, and is subject to important risks, uncertainties and assumptions. This forward-looking information includes, among other things, information with respect to Dobhai's beliefs, plans, expectations, anticipations, estimates and intentions, the completion of a private placement of Dobhai Shares by Dobhai, Dobhai's acquisition of PWS Shares in exchange for Dobhai common shares pursuant to prospectus and registration exemptions, the execution of a definitive agreement for the Acquisition, the establishment of a new Dobhai board of directors, and the activities of Dobhai after the Acquisition. The words "may", "could", "should", "would", "suspect", "outlook", "believe", "anticipate", "estimate", "expect", "intend", "plan", "target" and similar words and expressions are used to identify forward-looking information. The forward-looking information in this news release describes Dobhai's expectations as of the date of this news release.

The results or events anticipated or predicted in such forward-looking information may differ materially from actual results or events. Material factors which could cause actual results or events to differ materially from such forward- looking information include, among others, risks arising from general economic conditions and adverse industry events, risks arising from operations generally, reliance on contractual rights such as licences and leases in the conduct of its business, reliance on key personnel, market acceptance of Dobhai's products and services, the need to protect intellectual property and other proprietary rights, possible failure of the business model or business plan or the inability to implement the business model or business plan as planned, fluctuations in the cost of materials, competition, environmental matters, and insurance or lack thereof.

Dobhai cautions that the foregoing list of material factors is not exhaustive. When relying on Dobhai's forward-looking information to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Dobhai 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 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 DOBHAI 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 DOBHAI MAY ELECT TO, IT DOES NOT UNDERTAKE TO UPDATE THIS INFORMATION AT ANY PARTICULAR TIME.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Dobhai Ventures Inc.
    Wayne Smith
    Chief Financial Officer
    604 684-4691
    604 684-4601 (FAX)
    wayne.smith@ipm.bc.ca