Nile Industries Ltd.
TSX VENTURE : NLE.P

November 09, 2007 12:55 ET

Nile Industries Ltd. and Tiles From the Nile Ltd. Enter Into Definitive Agreement Regarding Proposed Qualifying Transaction

CALGARY, ALBERTA--(Marketwire - Nov. 9, 2007) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

Nile Industries Ltd. (TSX VENTURE:NLE.P) ("Nile"), a capital pool company pursuant to the policies of the TSX Venture Exchange (the "Exchange"), announced that it has signed a non-arm's length binding pre-acquisition agreement dated effective October 29, 2007 (the "Acquisition Agreement") with Tiles From The Nile Ltd. ("Tiles"), a non-reporting Alberta corporation, and certain management shareholders of Tiles, regarding the proposed acquisition of all of the issued and outstanding common shares ("Tiles Shares") of Tiles (the "Acquisition"). Upon execution of the Acquisition Agreement, Niles has agreed to provide, subject to Exchange approval, a refundable deposit of $100,000 to Tiles in accordance with the provisions of Policy 2.4 of the Exchange regarding capital pool companies. The deposit is refundable upon demand by Nile in the event the Acquisition is not completed by April 30, 2008 and, if the Acquisition is completed by such date it is to be retained by Tiles. The Acquisition, when completed, will constitute Nile's qualifying transaction pursuant to the policies of the Exchange (the "Qualifying Transaction"). Nile commenced trading on the Exchange as a capital pool company on February 19, 2007 and is required to complete a qualifying transaction within 24 months of such date of listing.

As part of the Acquisition and pursuant to an engagement letter between Tiles and Blackmont Capital Inc. ("Blackmont") dated effective October 18, 2007, Nile has agreed to issue, pursuant to a commercially reasonable best efforts private placement led by Blackmont, up to 7,500,000 Nile Shares (as defined herein) at a price of $0.10 per Nile Share (the "Financing"). The Financing is expected to be completed on or prior to the completion of the Acquisition. It is a condition of the Acquisition that a minimum of $500,000 be raised pursuant to the Financing. The net proceeds raised from the Financing will be used by Nile for the further development of its business and for general working capital purposes. Blackmont will be paid a cash commission of 10% of the proceeds raised and issued agent's options (the "Options") entitling Blackmont to acquire up to 10% of the number of Nile Shares sold pursuant to the Financing. Each Option will entitle the holder to purchase one Nile Share for a period of 12 months following the closing date of the Financing at a price per Nile Share equal to the offer price.

Pursuant to the Acquisition Agreement, Nile has agreed to acquire all of the issued and outstanding Tiles Shares, subject to certain conditions, by way of take-over bid. Pursuant to the terms of the Acquisition Agreement, Nile has agreed to issue common shares in the capital of Nile ("Nile Shares") on the basis of 0.7619 Nile Shares for each issued and outstanding Tiles Share for a total of 13,098,070 Nile Shares. The Nile Shares are to be issued at a deemed value of $0.105 per Nile Share.

The Acquisition has the unanimous support of the board of directors of both Nile and Tiles. The board of directors of Tiles has concluded that the Acquisition is in the best interests of Tiles and its shareholders and will recommend that shareholders tender their Tiles Shares to the offer by Nile to acquire the Tiles Shares.

The resulting entity upon completion of the Qualifying Transaction (the "Resulting Issuer") will continue operations under the name of "Nile Industries Inc." and will be a provider of floor covering, countertops, window treatments, upholstery, furniture and home decor products. Nile's current auditors and board of directors will be the auditors and directors of the resulting issuer.

Upon completion of the Qualifying Transaction former Tiles shareholders will hold approximately 77% and the existing Nile shareholders will hold approximately 23% of the issued and outstanding Nile Shares (before taking into account the Financing or the exercise of any options, warrants or other rights to acquire Nile Shares.

Completion of the Acquisition is subject to a number of conditions including, but not limited to, $500,000 being raised pursuant to the Financing, the employment of certain current employees of Tiles with the Resulting Issuer, the satisfaction of the minimum listing requirements of the Exchange, Exchange acceptance of the Acquisition as Nile's Qualifying Transaction pursuant to Exchange policies, shareholder approval as applicable and any other necessary approvals or consents (including majority of the minority shareholder approval requirements), the completion of definitive documentation, the filing of a sponsorship report by the sponsor with the Exchange, and completion of satisfactory due diligence. In addition, the Acquisition is subject to the conditions in favour of Nile that holders of at least 90% of the outstanding Tiles Shares shall have executed lock-up agreements with Nile whereby they agree to tender their Tiles Shares to the offer by Nile to acquire the Tiles Shares.

Matters requiring the approval of Nile shareholders will include, at a minimum, approval of the above noted change of name and the Acquisition. There can be no assurance that the Acquisition will be completed as proposed, or at all.

Pursuant to an engagement letter dated September 13, 2007, Blackmont has agreed to act as Nile's sponsor of the Acquisition as Nile's Qualifying Transaction, subject to completion of satisfactory due diligence. Nile has agreed to pay to the sponsor a sponsorship fee and to pay for the sponsor's reasonable legal and other expenses. An agreement to sponsor should not be construed as any assurance with respect to the merits of the Qualifying Transaction or the likelihood of completion.

The Acquisition is not a "non-arm's length qualifying transaction" within the meaning of Policy 2.4 of the Exchange. However, the Acquisition is a related party transaction pursuant to Ontario Securities Commission Rule 61-501 ("OSC Rule 61-501") (which rule has been adopted by the Exchange) due to the fact that: (i) Nile is purchasing or acquiring an asset (the Tiles Shares) from related parties for valuable consideration; and (ii) Nile will issue a securities to a related parties. For the purposes of OSC Rule 61-501, Dr. Hatim Zaghloul, Mohamed Mokled and Abdul Hamadiya, each being directors and officers of Nile are related parties of Nile. These individuals are also directors, officers and shareholders of Tiles. As the Acquisition is a related party transaction pursuant to OSC Rule 61-501, Nile shall not carry out the Qualifying Transaction unless it has obtained minority approval for the Acquisition. For the purposes of OSC Rule 61-501, minority approval is determined by excluding the votes attached to Nile Shares that, to the knowledge of Nile or any interested party or their respective directors or senior officers, after reasonably inquiry, are beneficially owned or over which control or direction is exercised by: (i) Nile; (ii) an interested party (as defined in OSC Rule 61-501); (iii) a related party of an interested party (unless the related party is only a related party by virtue of being a director or senior officer of one or more entities that are neither interested parties nor issuer insiders of Nile); and (iv) a joint actor with a person or company referred to in (ii) or (iii) in respect of the Acquisition. Nile believes that a majority of the minority shareholder approval is required in order for the Acquisition to be completed because Mohamed Mokled is considered an interested party because his salary is expected to increase upon the completion of the Acquisition and is therefore entitled to receive a "collateral benefit" as such term is defined in OSC Rule 61-501.

An information circular in respect of the Acquisition shall be prepared and filed with the Exchange and, once approved by the Exchange, sent to the Nile shareholders. Concurrently with the sending of the information circular, an offer to purchase and take-over bid circular will be sent to the holders of Tiles Shares. Closing of the Acquisition is expected to occur on or about March 1, 2008.

The Nile Shares will remain halted pending the satisfaction of the initial filing requirements of the Exchange.

Business of Tiles

Tiles, a company which offers unique and distinctive floor covering, granite countertops, window treatments, upholstery, furniture and home decor products has been operating in Calgary since 2002. With three Calgary locations, Tiles is able to service North American customers from coast to coast. Tiles has grown its sales by acquisition and organic growth over the past 5 years by over 500% with sales growth of over 300% during the last 6 months. The sales from March 1, 2007 until August 31, 2007 was approximately $1,019,225 comparing to $334,599 in the same period during 2006.

In the past year, Tiles acquired Chinook Upholstery, Drapery and Flooring Ltd., a flooring, drapery and upholstery store in Calgary. In addition, Tiles acquired the AL Fayed Gallery furniture store in 2007. Recently, Tiles bought the inventory, furniture and displays of a retail-flooring store that had closed down in anticipation of the opening Tiles' fourth Calgary location.

Tiles has 22 employees, including designers, salespersons, warehouse workers and administrative staff. Tiles is dedicated to providing complete customer satisfaction, while maximizing operating efficiencies.

Tiles Financial Information

Tiles has audited financial statements for the 2006, 2005 and 2004 fiscal years. On the basis of the estimate valuation report dated September 26, 2007 by Evans & Evans, Inc., as at August 31, 2007, Tiles had a fair market value between $1.3 to $1.5 million, total net tangible assets of $650,000, accounts receivable of $487,016, accounts payable of $311,147, revenues of $1,068,782 and income before tax of $(95,370).

Capitalization

Tiles currently has 88 shareholders holding 17,191,217 Tiles Shares. There are no securities issued which are convertible into Tiles Shares.

Without giving effect to the Financing, there are currently 4,000,000 Nile Shares issued and outstanding. In addition, there are an aggregate of 400,000 stock options of Nile held by directors and officers, and agents' options entitling the holders thereof to acquire an aggregate of 200,000 Nile Shares at an exercise price of $0.10 per Nile Share.

Without giving effect to the Financing, assuming that Nile acquires all of the Tiles Shares, there will be approximately 17,098,070 Nile Shares issued and outstanding (on a non-diluted basis) following completion of the Acquisition, consisting of approximately 13,098,070 Nile Shares held by former Tiles shareholders and approximately 4,000,000 Nile Shares held by former Nile shareholders.

Directors, Officers and other Insiders

Subject to Exchange acceptance, as part of the completion of the Acquisition, Mohamed Mokled, Tile's President and Chief Executive Officer, will assume management responsibilities for Nile as Nile's Chief Operating Officer. In addition, Dr. Hatim Zaghloul will assume the role of President and Chief Executive Officer of Nile. Accordingly, the following individuals are expected to comprise Nile's directors and officers immediately following completion of the Acquisition. One or more additional directors may be added to the board of directors as Tiles nominees at the time of closing of the Acquisition, which, if applicable, will be set forth in the requisite management information circular. Upon completion of the Qualifying Transaction, Nile intends to grant stock options in amounts to be determined by the board of directors of Nile at such time to its directors and officers at an exercise price of $0.10 per Nile Share pursuant to Nile's stock option plan.

Dr. Hatim Zaghloul, Director, President and Chief Executive Officer

Dr. Zaghloul is in the field of spread spectrum radio technology. He received his Ph.D. in physics in 1994 from University of Calgary. In 1994, Dr. Zaghloul became the founding President of Wi-LAN Inc., a Calgary-based wireless communications company. Wi-LAN Inc. is involved in the design, development and global distribution of wireless modems and wireless Ethernet bridges. Dr. Zaghloul is currently the Chairman of the board of Wi-LAN Inc., the Chief Executive Officer and Chairman of Ittihad Capital Inc., a Canadian investment fund, the Chief Executive Officer and Chairman of Innovative Products for Life Inc., a consumer products marketing company and the Chairman of Solutrea Inc., a private Delaware data communications networks company.

Mohamed Mokled, Director and Chief Operating Officer

Mr. Mokled is an Architect and has been member of the Royal Architectural Institute of Canada since 1994 and the Alberta Association of Architects since 1995. Mr. Mokled received his Bachelor of Science in architecture and engineering from the University of Alexandria, Egypt in 1988. Mr. Mokled was the principal of an architectural company, Cubit Design Ltd., from 1997 to 2005. Included in Mr. Mokled's design portfolio are resorts, single and multi family residences, educational projects and other commercial and industrial projects. Mr. Mokled has also been a principal of Tiles since 2003.

Sayed-Amr El-Hamamsy, Director

Dr. Sayed-Amr El-Hamamsy is currently the COO and VP of Engineering of Innovative Products for Life Inc. Previously Dr. El-Hamamsy was a Director, President and CEO of Wi-LAN Inc. Dr. El-Hamamsy received his B.Sc. in Electrical Engineering from Cairo University in 1979 and his M.Sc. and Ph.D. in Electrical Engineering from the California Institute of Technology in 1982 and 1986, respectively. He subsequently worked at GE Corporate Research and Development in several positions. Dr. El-Hamamsy has several publications and has received more than 40 US Patents.

Abdul S. Hamadiya, Director

Mr. Hamadiya holds a Business Administration/Marketing diploma from St. Clair College in Windsor Ontario, which he obtained in 1978. Mr. Hamadiya is currently the President of Best View Realty and Management Inc. of Calgary, Alberta a private real estate investment company. Mr. Hamadiya was previously the President and General Manager of Supreme Security Inc., a private alarm security company, from 1991 to 2004.

Ghalib Abdulla, Chief Financial Officer

Mr. Abdulla is a Chartered Accountant and has been a member of the Canadian Institute of Chartered Accountants since 1997. Mr. Abdulla received his Bachelor of Commerce in accounting from the University of Calgary, Alberta in 1993. Mr. Abdulla is the principal partner of a chartered accounting firm, GMA Professional Corporation, since 2001.

Upon completion of the Acquisition, Abdulrahman Abbas, Mohamed Charanek, Donna Rudy, Marzouk Souraya and Marshall Toner, all current officers of Nile, will resign as officers of Nile.

Following the completion of the transactions and other steps outlined above, the above-named individuals will be insiders of Nile by virtue of being a director and/or officer thereof. In addition, each of the following current shareholders of Tiles is an insider of Tiles and, other than Joud Doumat, will be an insider of Nile following the Acquisition:



Approximate
Number of
Number of Common Shares of
Common Shares Nile Following
Name of Shareholder Name(s) of Control of Tiles (1) Acquisition (1)
(Jurisdiction of Person(s) of (Percentage (Percentage
Incorporation) Shareholder Ownership) Ownership)

Dr. Hatim Zaghloul N/A 1,250,000 1,152,381
(7.27%) (6.74%)

Sayed-Amr El-Hamamsy N/A 0 200,000
(0.00%) (1.17%)

Cubit Design Ltd.(2) Mohamed Mokled 2,145,332 1,848,039
(Alberta) (12.48%) (10.81%)

Joud Doumat N/A 2,000,000 1,533,810
(11.63%) (8.97%)

Abdul Hamadiya N/A 1,250,000 1,192,381
(7.27%) (6.97%)

Gillian's Marketing Ghalib Abdulla 0 200,000
Inc. (3) (0.00%) (1.17%)

Notes:
(1) Prior to giving effect to the Financing.
(2) Cubit Designs Ltd. is a company controlled by Mohamed Mokled. Cubit
Designs Ltd. owns 881,237 Tiles Shares and, together with these shares
Mohamed Mokled controls or directs an additional 1,264,095 Tiles Shares.
Mohamed Mokled is also the registered and beneficial owner of 213,500
Nile Shares.
(3) Gillian's Marketing Inc. is a company controlled by Ghalib Abdulla.


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 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 Inc. has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.

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

Contact Information

  • Nile Industries Ltd.
    Mohamed Mokled
    (403) 291-6806
    Email: mohamed@tilesfromthenile.com
    or
    Nile Industries Ltd.
    100, 3605 - 29th Street N.E.
    Calgary, Alberta T1Y 5W4
    (403) 291-4569 (FAX)